Development is about transforming lives, not just economies: Joseph Stiglitz

The Hindu, January 5

India should continue to maintain programmes for the weaker sections and the poor

CHENNAI: If India and other developing countries "keep a broad vision of development," then globalisation would live up to the promises made "15-20 years ago," Nobel prize-winning economist Joseph Stiglitz said here on Thursday.

Globalisation was not just about growth in Gross Domestic Product but was about sustainable, democratic and equitable development.

Development was about transforming the lives of people, not just transforming economies, he said, delivering a lecture on `Making globalisation work,' organised by The Hindu.

While India and China had the resources to take advantage of the opportunities offered by globalisation, many other developing countries were not in a position to do so.

Prof. Stiglitz underlined the importance of India continuing to maintain its programmes for the weaker sections and the poor, health and education projects and rural development measures and said the state should not withdraw from these sectors.

The "unfair" Uruguay round of trade negotiations, the insistence on liberal flow of capital across countries, the lack of significant progress in the climate negotiations, the banking sector reforms imposed on developing countries, Trade-Related Aspects of Intellectual Property Rights designed to ensure higher priced medicines, and lack of will on the part of the G-8 countries to address core problems such as those relating to the increasing debt burden of most poor countries, were among the issues that symbolised the fact that globalisation had not worked well for most countries, he said.

The experience of Mexico offered crucial evidence that opening up the banking sector did not work well for developing countries. Foreign banks, which took over local banks, were not interested in lending to small and medium enterprises. They preferred to lend to multinational corporations, said Prof. Stiglitz, who is currently Professor of Finance and Economics at Columbia University.

Crises

Pointing to the many financial crises that poor nations have faced in the past, he said that in the last 30 years alone there have been about 100 such crises. The United States was borrowing $3 billion a day. Capital flow was not from the rich countries to the poorer ones; it was the other way round. Quoting an example, he said that countries in Latin America had recorded growth in the 1950s, 1960s and the 1970s, "before they were taught how to grow." But the economies crumbled in the 1990s when they followed the models that were dictated by the international financial institutions.

"We have not democratised globalisation... Globalisation has impeded the ability of nations to confront problems posed by globalisation," said Prof. Stiglitz, who was Chief Economist at the World Bank till January 2000. The metaphor of the rising tide lifting all boats did not hold good when it came to the effect globalisation had on countries; the tides had ended up knocking over some of the smaller boats. It has increased the divide between the rich and the poor countries and further widened the gap between the rich and the poor in the Third World countries. The number of poor in Africa has doubled, said Prof. Stiglitz, who has also served as Chairman of U.S. President Bill Clinton's Council of Economic Advisers.

Calling for changes in the "rules of the game" that governed the process of globalisation, and for changes in individual countries managing globalisation, he said that international institutions had to be democratised to ensure that all countries got a fair deal.

Functions of the media

In his welcome address, Editor-in-Chief of The Hindu N. Ram said the newspaper was proud to present the lecture, as part of its commitment to the core values of serious, quality journalism — truth-telling, freedom and independence, justice, humaneness, and contributing to the social good.

Serious, quality news media also performed the functions or roles that were invaluable and indispensable to a democracy that sought, against the odds, to be a just society. "These are the credible-informational, the critical-`adversarial'-investigative, the educational, and the agenda-building functions," he said.

Noting that influential sections of the mainstream media in India as much as elsewhere seemed to be moving away from these core values and functions, Mr. Ram said journalism in India seemed to be on the cusp of a transformation that was hard to comprehend by those caught up in it.

"The key question that needs asking now more than ever before is: do our news media contribute, in substantial measure, to empowering ordinary people — or are they interested mainly in empowering and enriching themselves? We believe that promoting these values and performing these functions of serious, quality journalism necessarily involves a commitment to promoting informed public discussion of issues that matter."

Introducing the Nobel prize winner, Editor of The Hindu N. Ravi said Prof. Stiglitz was an advocate of justice among and within nations, and the voice of conscience that spoke with the authority of solid, Nobel prize winning research. As an economist he helped create a whole new branch, the economics of information. Much of his work showed that markets did not work well under many circumstances, such as when externalities exist. Prof. Stiglitz' ideas challenged the general belief that free markets lead to efficient outcomes, and that the role of governments should be limited, Mr. Ravi said.