A New World View?
Joseph Stiglitz, one-time Drummond Professor of Economics at Oxford, has had a busy decade. He served on Bill Clinton's Council of Economic Advisors between 1993 and 97, including two years as Chairman, and was Chief Economist and Senior Vice-President of the World Bank from 1997 to 2000.
However, he came to truly global public prominence in 2001, when he both won the Nobel Prize for Economics and published the international bestseller Globalization and its Discontents, a powerful critique of the simple-minded recourse to unregulated free market economic policies. We meet for conversation over bacon and eggs 25 years to the day after Margaret Thatcher's first General Election victory. The following year her soulmate Ronald Reagan would be elected President of the USA, and a new economic era would begin.
Looking back, how does he see Reagan's time in office?
"I think that, from an economic point of view, it was a failure. It was an interesting experiment. He deregulated the banking industry and we had the Savings and Loan crisis, with over a hundred billion dollars of bail out. He lowered taxes, we had this huge deficit - which by the end of the Bush administration was up to five per cent of GDP - and he undermined our investment. But he did not get faster growth. If you look at the growth rate the big demarcation came in 1994, after taxes were raised. The evidence is, I think, overwhelming, that the strategy was not good for the economy."
Stiglitz pauses, puts his fork down and winces. "I have to say, in retrospect, that I don't think any of us could have imagined that things could have been so worse than Reagan. So I think Bush led us to appreciate a conservative President who's not actually malevolent."
Stiglitz is damning in his description of the younger Bush. He suggests that he stands out from the succession of modern-day Republican Presidents - "even Nixon had a lot of social programmes. Bush Senior was more moderate, in many ways." So why does he think George W. Bush is different? In part, it's a consequence of the people around him: "I think neither Bush nor Reagan were of the thoughtful, policy-wonk nature that Clinton was, so both of them are highly reliant on their advisors. And there is a difference between an advisor like George Schultz, who was running the State and Treasury of Reagan, and Cheney and Rumsfeld. But it may be we couldn't have had Cheney without going through the Reagan era."
His criticisms are not limited to the making of economic policy. "It's hard to fathom the lack of sensitivity that exists about civil rights in the Bush administration. His economic policy has been a disaster - but that's just incompetence. I think that the real problem comes with a President who does not understand the rule of law. It's deeply troubling that the Constitutional guarantees we've had since the founding, even in the Civil War, have just been walked over. Whether the Supreme Court allows it or not is not the issue. You don't expect a President to be pushing the issue of how much arbitrariness he can exercise."
This concern with wider issues of social justice is a defining feature of Stiglitz's recent work. He was in Oxford to give the Tanner Lectures on Human Values, and as such is specifically considering the ethical aspects of globalisation. His analysis follows directly from the arguments he advances in Globalization and its Discontents concerning the inefficiencies created by giving unregulated markets free rein.
"Markets by themselves are often characterised by market failures. And there are social injustices. But within our Western democracies, such as the US and the UK, we've learnt how to temper markets. We now have institutions that regulate markets, make them work better and also deal with some of the broken eggs that are inevitably produced when you make omelettes."
This, Stiglitz argues, is partly a result of democratic pressure in the West. "The citizens in democracies won't stand for what happened in corporations in the United States, with investment bankers stealing money. Markets can't work in that way." But such pressure has thus far only been forcefully applied in a domestic context: "At an international level we don't have those checks and balances."
As a result, Stiglitz is an advocate of the development of what he calls "ethical globalization." His experience of the Clinton administration was that domestic policy makers were concerned with the fairness of government action, but that this was not extended to foreign policy: "The mandate of US trade representatives is to get the best deal for America. You don't ask: "What's fair for the developing country? What's a fair rule?" You go from a social rhetoric to a national interest rhetoric."
Thus the Clinton administration sought to make access to healthcare its hallmark at a domestic level, but internationally advocated stronger intellectual property rights for drugs companies. This had the effect of denying the poorest countries of the world access to medicine. In part, he suggests that this is a problem of our political values: "For a variety of reasons, our notions of social justice often stop at the border. So we worry about American boys being killed in Iraq. We don't talk about the Iraqis who are dying. There's a different weighting for life between Americans, Britons and others. In economic areas it's the same thing."
Of course, the idea that national governments prioritise the interests of those who elect them is not a new one. But Stiglitz's argument, which he describes as "democratic idealism" in his most recent book, The Roaring Nineties, goes further than this.
His suggestion is that the selfish pursuit of national interest is not just wrong, but undemocratic, and represents a breakdown in our systems of political representation.
"If you had put clearly the issue of access to drugs to a vote in the United States or the UK - 'Should people in Africa who have AIDS have access to drugs at a price they can afford?' - 95 per cent of people would have said yes. "They would say that it's outrageous to condemn these people to die. They have a moral right to the drug."
So although a degree of compassion beyond the national border does exist, this isn't reflected in the outcomes of democratic polities - largely, Stiglitz suggests, as a result of the exaggerated influence of particular special interests, such as multinational drugs companies.
His hope is that democratic pressure to moderate the effects of globalisation is growing as citizens of the West come to understand the workings of international economic policy. "Historically, it was too complicated and not of specific concern to most people. That's changing." So his perspective on globalisation is both critical and optimistic.
The great unanswered question is, of course, just how much concern the citizens of the West can be persuaded to show for the less fortunate elsewhere. The answer is likely to deter-mine just how ethical a process globalisation turns out to be.
Joseph Stiglitz was addressing the Oxford Lyceum
20th May 2004