[A-List] US imperialism: Stiglitz analysis

["Michael Keaney" <michael.keaney@xxxxxx>]

New world potion that was poison to Dr Sam

Clinton adviser Joseph Stiglitz tracks the genesis of anti-Americanism in
our second extract from his new book

Thursday September 25, 2003
The Guardian

With the end of the cold war and the coming of globalisation we had the
opportunity to create a new international order based on American values,
reflecting our sense of the balance between government and markets, one
which promoted social justice and democracy on a global scale.

The Clinton administration had some notable successes in our efforts to
create a new international economic order. But as we look back on these
achievements, as we see the protests around the world, as we feel the pulse
of anti-Americanism, it becomes clear that something again had gone wrong,
badly wrong.

Underlying the protests there were deeper symptoms. Globalisation had often
not produced the benefits that were promised. Except in Asia - which had
largely not followed the prescriptions for growth and development the United
States had put forth - poverty was up, in some places dramatically so. With
growth in Latin America during the reform and globalisation decade of the
nineties just over half of what it had been in the fifties, sixties and
seventies, no wonder there was dissatisfaction.

The gap between the haves and have-nots - both between the United States and
the developing world, and between the rich and the poor within the
developing countries - was growing.

Even many of those who are better off feel more vulnerable. A decade of
unparalleled American influence over the global economy was also a decade in
which one economic crisis seemed to follow another. We survived these
crises. We may have even benefited as a result of the lower prices at which
we could buy some imported goods, and our investment banks may have
profited. But they caused untold hardship in the countries that suffered
them.The heralded transition of ex-communist countries to a market economy,
which was supposed to bring unprecedented prosperity, brought unprecedented
poverty.

The transition turned out to be such a disaster that by the summer of 1999,
the New York Times was asking, "Who lost Russia?" And even if Russia was not
ours to lose, the statistics were sobering: with efficient capitalism
replacing moribund and decadent communism, output was supposed to soar.

In fact, output declined 40% and poverty increased tenfold. The results were
similar in the other economies making the transition who followed the advice
of the US treasury and the International Monetary Fund. Meanwhile, China
showed there was an alternative path of transition which could succeed in
bringing the growth that markets promised and reducing poverty.

Clearly, something had gone wrong in the way we were leading the world into
the new international order. At the very least, we had not addressed the
fundamental problems of instability. There was enormous talk of reforming
the global financial architecture but no real action.

Wall Street imperative

The international agreements reflected our concerns, our interests: we
forced those abroad to open up their capital markets to our derivatives and
speculative capital flows, knowing how destabilising they could be. But Wall
Street wanted it, and what Wall Street wanted, it more than likely got.
Developing countries were told to open their markets to every form of
import, including the things corporate America was best at, such as
financial services and computer software.

Meanwhile, we maintained stiff trade barriers of our own on behalf of US
agribusiness, thereby denying our market to the farmers of the third world.
To a country fallen on hard times and having trouble paying its debts, our
standard advice was to slash spending - even though we had routinely relied
on deficit spending to get us out of economic downturns.

These were not the only examples of what struck those abroad as blatant
hypocrisy. Even in the budget balancing nineties, we maintained robust trade
deficits - over a billion dollars a day - even as we preached to others that
they should keep their trade deficits down; evidently, it was understandable
if the rich could not live within their means; what was not to be forgiven
was for the poor to do so. We scolded the developing nations about their
disrespect for intellectual-property laws that we, too, had scorned in our
days as a developing nation.

Clinton's palliatives

Especially strange was the contrast between the Clinton administration's
palliatives abroad and its battles at home. There, we defended our public
social security against privatisation, lauding its low transactions costs,
the income security it provided, how it had virtually eliminated poverty
among the elderly. Abroad, we pushed privatisation. At home, we argued
strongly that the Federal Reserve should keep a focus on growth and
unemployment, as well as inflation - with a president elected on a jobs
platform we could do nothing less. Abroad, we urged central banks to focus
exclusively on inflation.

One of America's great glories had been the growth of its middle class.
Still, we almost completely ignored the equity implications of policies we
urged on other nations - and the increasingly inescapable fact that
globalisation, as it was actually practised, tended to make poor societies
more rather than less unequal.

Some of our problems abroad were caused by how we interacted with other
countries, especially weaker developing nations. Acting as if we had come up
with a unique, guaranteed formula for prosperity, we - sometimes with other
advanced industrial countries - bullied other nations into doing things our
way.

Both through our own economic diplomacy, and through the influence of the
US-dominated IMF, Uncle Sam became Dr Sam, dispensing prescriptions to the
rest of the world - cut that budget, lower that trade barrier, privatise
that utility.

Like some physicians, we were too busy and too sure of ourselves to listen
to patients with their own ideas. Too busy, sometimes, even to look at
individual countries and their circumstances. The economists and development
experts of the third world were sometimes treated like children. Our bedside
manner was dreadful; and, as one patient after another couldn't help
noticing, the medicine we dispensed abroad was, in important respects, not
the same stuff we drank at home.

We in the Clinton administration did not have a vision of a new post-cold
war international order, but the business and financial community did: they
saw new opportunities for profits. To them, there was a role for government:
helping them gain access to markets.

The policy framework we pushed abroad was the one that would help our
businesses do well abroad. At home, there was a check on these policies,
caused by concern for consumers and workers. Abroad, there was none. At
home, we resisted pressure for changes in the bankruptcy law that would
unduly hurt debtors. Abroad, a primary concern in any foreign crisis seemed
the promptest and fullest repayment of debts to US and other western banks,
even to the point of supplying billions of dollars to ensure that they
happened. The deregulation mantra that we pushed too far at home we pushed
even further abroad.

Not surprisingly, the policies we pushed and the way we pushed them
generated enormous resentment. The already visible results include growing
anti-Americanism in Asia and Latin America. Today, in many countries, the
endorsement of a policy by the US government is almost certain to lead to
its defeat.

Even if our economy had not faltered, our global strategy was not likely to
succeed. It was based on forcing countries in the third world to adopt
policies that were markedly different from those we ourselves had adopted.
It was based on our putting aside principles - principles of social justice,
equity, fairness, that we stressed at home - to get the best bargain we
could for American special interests.

The fact is that the world has become economically interdependent, and only
by creating equitable international arrangements can we bring stability to
the global marketplace.

This will require a spirit of cooperation that is not built by brute force,
by dictating inappropriate conditions in the midst of a crisis, by bullying,
by imposing unfair trade treaties, or by pursuing hypocritical trade
policies - all of which are part of the hegemonic legacy that the US
established in the 1990s but seem to have become worse in the next
administration.

· Extracted from The Roaring Nineties: Seeds of Destruction, Joseph
Stiglitz; published by Allen Lane, October 2; £18.99 Copyright Joseph
Stiglitz 2003