Discontent & its globalization: Stiglitz's less-than-Nobel theory. (Of Several Minds).

Amazing what a Nobel Prize plus an axe to grind can do for your book sales. Columbia University economist Joseph Stiglitz's recent Globalization and Its Discontents (W. W. Norton) is not a particularly original work. A reflection on Stiglitz's years as chairman of the U.S. Council of Economic Advisors in the Clinton administration and as World Bank chief economist during the 1990s, the book actually builds off an article the author wrote for the New Republic back in April 2000. Moreover, the Nobel winner concludes many of his critiques of the global economic policies of the International Monetary Fund by admitting that there is now widespread consensus about his views, begging the question of why he raises them now. (Perhaps he simply wishes to assure readers that he thought of them first.)

Nevertheless, at this writing, the book is in its fourteenth week on the Washington Post's bestseller list and shows no signs of slowing; Stiglitz, meanwhile, has become ubiquitous on the op-ed pages of the world's leading newspapers. Indeed, the key to the book's success seems to be not what it says, but who is saying it. When the 2001 Nobel economics laureate speaks, people listen.

And listen they should, since Stiglitz tackles a fascinating issue: What factors caused or exacerbated the severe financial turmoil in Asia, Russia, and Latin America during the 1990s? Unfortunately, the author falls into two reductionist traps. First and foremost, he seems to blame all problems in the global economy on a single culprit, the International Monetary Fund, which he accuses of blindly peddling "market fundamentalism" to poor countries. (No matter that some of the harshest criticisms of the IMF tend to come from conservative, free-market economists.) Second, the book purports to discuss the phenomenon of globalization, but it offers a purely economic definition of globalization, as if this concept could be reduced to trade and investment, and did not also encompass a complex series of cultural, social, technological, and political connections among peoples and regions.

Throughout the book, Stiglitz appears to suffer a chronic case of what one might call Tautological Adjective Syndrome (TAS). He incessantly argues that for economic reforms to work, they must be "proper" or "balanced" or "adequate." Consider this typical passage: "Land reform, done properly, peacefully, and legally ... could provide an enormous boost to output." Of course, it is impossible to disagree--after all, who favors land reform that is improper, violent, and illegal? Similarly, he maintains that countries can benefit if they open their markets to trade "in the right way and at the right pace." And Stiglitz takes the IMF to task for not ensuring that poor countries install "adequate" competition and regulatory frameworks before liberalizing their economies. By definition, such critiques never fail, since Stiglitz can point to poor economic performance in any developing nation and conclude that the economic policies must have been improper or inadequate or premature. Presto! It must be nice to always be right.

Stiglitz's unfortunate bout of TAS would not matter so much if he offered clear policy prescriptions on how to promote economic development in poor nations. But the book is littered with a series of small but maddening inconsistencies that cast doubt on what Stiglitz would do differently if he were running things. Early on, for example, he criticizes international financial institutions for encouraging poor countries to sell off state-owned enterprises without taking care to create jobs to offset the unemployment that privatization initially causes. For privatization to work, he writes, "macroeconomic policies, including low interest rates, that help create jobs, have to be put in place." But later on, Stiglitz disparages the job-creating power of low interest rates, declaring dramatically that "people do not live off exchange rates or interest rates. Workers care about jobs and wages." Similarly, UC-Berkeley economist Brad DeLong has noted Stiglitz's contradictory opinions of IMF policy toward Indonesia, pointing out how Stiglitz alternates between criticizing the IMF for supporting the corrupt Suharto regime, blasting the Fund for not doing enough to help Suharto, and attacking it for encouraging investment in Indonesia. "It seems as though Stiglitz switches back and forth between different positions at blinding speed," writes DeLong, "so I cannot figure out what his critique of IMF policy in the 1990s is--or what policy changes follow from it."

Unfortunately, many reviews of the book do little but stake out predictable positions within the prickly community of international economic policy wonks. One can almost imagine Stiglitz & Co. tallying up a scorecard: Harvard economist Benjamin Friedman serves up a favorable review in the New York Review of Books. Score one for Joe. But then UC-Berkeley economist Barry Eichengreen offers only a lukewarm appraisal in Foreign Affairs. Brink Lindsey of the Cato Institute calls the book "deeply disappointing," while Michael Mandel praises it in the pages of Business Week.

Ultimately, if the firestorm over Stiglitz's book proves anything, it is that the world's leading economists still disagree over the most basic issues of economic development. Such disputes make for fascinating academic debates, no doubt. Unfortunately, they offer precious little consolation for policymakers in developing countries who must contend with the competing, contradictory, and constantly changing solutions proffered by bickering experts. n

Carlos Lozada is senior editor of Foreign Policy magazine.