Global Economics
Economic globalization will clearly be one of the drivers of the longer-range human condition – for better or worse. There is a growing consensus that economic development is the best way to achieve improvements in personal income (and, from there, improvements in the human condition) and proponents argue that economic globalization is the best route to economic development. There are cogent counterarguments to the unalloyed good of economic globalization, which is what makes it an important topic to understand when thinking about the longer-range future. There are three books here on economic globalization, which is probably too many in a list of only 50 books. I could easily argue that Friedman’s book is covered by the books by Bhagwati and Stiglitz, so this may be an opportunity to include an additional book on the list of 50 without slighting economic globalization.
Globalization and Its Discontents — 2003
Stiglitz, a Nobel Prize-winner in Economics, argues that economic globalization has been done wrong. He argues that the “Washington Consensus” (basically fiscal austerity, privatization, and market liberalization) enforced by the IMF structural adjustment policies has led to hunger and riots in many countries and he urges a reformation of the international economic architecture in order to “make globalization more humane, effective, and equitable.” Stiglitz makes detailed arguments against each of the three pillars of the Washington Consensus. He says the IMF has gotten away from its traditional Keynesian role as deficit financier, committed to maintaining economies at full employment, and “has taken the pre-Keynesian position of fiscal austerity in the face of a downturn.” He says that privatization requires significant preconditions before it can work and even then should be part of a more comprehensive program which entails, for example, creating jobs to offset the job destruction that often accompanies privatization. He says that capital market liberalization is a dangerous game and that even trade liberalization needs to be done carefully.
Stiglitz backs up his arguments with extended examples from both the East Asian monetary crisis and Russia. He then gives the examples of Poland and China, both of whom have taken a different path than the Washington Consensus and have done well. Finally he deals with how to fix things. He first sets out the non-economic goals of globalization: “[c]aring about the environment, making sure the poor have a say in the decisions that affect them, promoting democracy and fair trade.” The general problem to be fixed is market fundamentalism as the approach to economic globalization and the fix is global public institutions to prevent market failures. He then lays out several options, including changing the voting rights at the IMF and the World Bank. Several options are in line with the general longer-range problem of global governance for the purposes of ensuring global public goods.
Learn more (W. W. Norton and Company)
In Defense of Globalization — 2004
In his defense of the broader concept of globalization, Bhagwati begins by trying to understand the sources of anti-globalization and finds among them attitudes that are anti-capitalism, anti-corporations, and anti-Americanism. He finds fears that globalization will lead to “accentuation of poverty in both rich and poor countries, erosion of unionization and other labor rights, creation of a democratic deficit, harming of women, imperiling of local mainstream and indigenous cultures, and damage to the environment.” He then spends the better part of the book arguing that economic globalization is on balance socially benign – which he finds to have important implications for appropriate governance.
Bhagwati finds examples where trade led to less poverty (in the East Asian tigers), where child labor was reduced (increased incomes led to more children being sent to school), where women were helped (particularly in Export Processing Zones), where democracy was encouraged (through the rise of the middle class), where wages and labor standards improved (e.g., thanks to global pressure on multinational companies), where the environment has not degraded (e.g., due to a shift in the economy from primary production to services), where corporations were socially responsible (thanks to shareholder pressure), and so forth. He recognizes the downsides of each of these, but his argument is that economic globalization is what we make of it. His recipe for success is appropriate governance and, more specifically, promoting international labor standards, putting in place institutional mechanisms to cope with the occasional downsides, and managing transitions to globalization. Bhagwati thinks that the two great forces of the 21 st century are economic globalization and the growth of civil societies, and he feels that the latter can be harnessed in the service of governance over managing the former.
Learn more (Oxford University Press)
The Lexus and the Olive Tree: Understanding Globalization — 2000
This is a nice readable introduction to economic globalization from Pulitzer Prize-winner and New York Times columnist Friedman. He talks about a previous globalization in the last half of the 19 th and start of the 20 th century and contrasts that one with the new one. The previous one was built around falling transportation costs and was overseen by Britain. This one is built around falling telecommunications costs and is overseen by the United States. He argues that the enabling infrastructure of globalization is the Internet and that it was the democratization of finance, technology, and information that gave the Internet its power in this arena. He defines the “electronic herd” in capital markets that can move large amounts of money around the world with electronic speed. And it is the stampedes of the electronic herd that can trigger financial crises.
In a very colloquial manner, Friedman discusses the promise of globalization and what is required to become plugged into the process (e.g., “The Nine Habits of Highly Effective Countries”) and he discusses some of the potential problems of globalization (e.g., growing inequality through the “winner take all” nature of globalization, and environmental degradation). In general, however, he is a clear supporter of globalization and has an entire section on the wrong-headedness of the backlash against globalization. He says, “[M]y sense is that it is “almost” irreversible.” Some of his examples are already dated (such as the “relentless, coherent, well-funded and efficient business plans” of Enron), but his argument for the persistence of globalization is an important viewpoint in thinking about the longer-range future.
Learn more (Anchor Books)
Economic Development — 2003
This is the eighth edition of a popular textbook on economic development (with the 9th edition due out soon). The authors point out that development economics goes beyond traditional economics and political economics, and must also deal with the economic, social, political, and institutional mechanisms, both public and private, necessary to bring about rapid (at least by historical standards) and large-scale improvements in levels of living for the masses of poverty-stricken, malnourished, and illiterate peoples of Africa, Asia, and Latin America.” (emphasis in the original) The book is split into four major parts. The first part covers the principles and concepts of economic development. It covers the common characteristics of developing countries and the limited relevance of Western economic growth for contemporary developing nations and it covers the classical theories of development and contemporary models of development and underdevelopment. The second part deals with domestic problems and policies, including poverty, inequality and development; population growth; urbanization and rural-urban migration; education and health; agricultural transformation and rural development, and the environment. Part three deals with international problems and policies, including trade theory; the trade policy debate; balance of payments, developing-country debt, and macroeconomic stabilization; and foreign finance, investment, and aid.
The fourth part covers possibilities and prospects. It begins by discussing the role of governments in development and the limited success that development planning has had in the last three decades. The section on finance and fiscal policy for development is equally guarded on prospects. It is only in the section on critical issues that some clarity comes to the problem of global economic development. The critical issues are the global environmental threat (greenhouse gases and ozone depletion), the economic crisis in sub-Saharan Africa, and globalization and international financial reform. The authors conclude with the observation that whereas three decades ago the interdependence between developing and developed countries was perceived primarily in terms of the dependence of poor nations on rich ones (with developing countries being the fastest-growing export market for developed countries), rising concerns about unpredictable energy prices and mineral scarcities, fears of global environmental damage, ethnic conflicts, and floods of illegal immigrants pouring across the borders of developed countries, that the future welfare of developed countries increasingly depends on the economic performance and social achievements of the developing countries.
Learn more (Pearson/Addison Wesley)
The End of Poverty — 2005
Sachs is an economist and Special Advisor to United Nations Secretary-General Kofi Annan on the Millennium Development Goals (MDGs). This book is a companion piece to the recently published “A Practical Plan to Achieve the Millennium Development Goals” and reports from each of thirteen task forces looking at separate aspects of the MDGs. This book is basically an argument that we can end poverty by 2025. By poverty, he means ending extreme poverty (people living on less than $1/day PPP) and ensuring that all of the world’s poor, including those in moderate poverty, have a chance to “climb the ladder of development.” His approach is based on what he calls “clinical economics” to allow a differential diagnosis of what policies and investments each country needs to achieve the MDGs. Clinical economics treats a country’s economic situation the way a doctor would treat a sick patient – comparing symptoms against a checklist of diseases and coming to a diagnosis for that individual patient based on the patient’s symptoms. The heart of the book is extended examples of treating poverty in Bolivia, Poland, Russia, China, India, and a general look at Africa. Sachs finishes up with an argument for the feasibility of a poverty elimination project. He discusses on-the-ground solutions for poverty reduction, the six types of capital that the poorest of the poor lack (human, business, infrastructure, natural, public institutional, and knowledge), and the kind of “global compact” that would be required between developed and developing countries. He then does a rough calculation of what it would take to eliminate poverty by 2025 and finds it well within the amount of aid (.7% of GDP) that developed countries have already agreed to supply to developing countries. He finishes up his argument by tackling the common myths about why it isn’t possible to eliminate global poverty.
Learn more (The Penguin Press)
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