Another commission on globalization, whose deliberations are just beginning, has been set up by INET, cochaired by Michael Spence (who shared the 2001 Nobel Memorial Prize in Economics) and me. Even at this early stage, I should acknowledge the insights from Spence and Andrew Sheng, who, after working with me at the World Bank, went on to become chairman of the Hong Kong Securities and Futures Commission (SFC) and chief adviser to the China Banking Regulatory Commission.
I should mention some other international commissions, whose deliberations have shaped my thinking and which I cochaired. The first is the Commission on the Measurement of Economic Performance and Social Progress (cochaired by Jean-Paul Fitoussi of the Institut d’Études Politiques de Paris, with Amartya Sen of Harvard University serving as chief advisor) and its successor, the High-Level Expert Group on the Measurement of Economic Performance and Social Progress at the OECD (the official think tank for advanced countries). Though its deliberations focused on measurement issues, by identifying what was not being measured by GDP—such as the growing sense of insecurity—we identified some of the reasons that globalization could simultaneously have increased GDP and decreased the well-being of large fractions of society.5 A second group centered around a topic to which I devote too little attention in this book—global warming. With Nick Stern, I cochaired the High-Level Commission on Carbon Pricing, identifying the level of pricing of carbon necessary to achieve the ambitions of the world in curtailing climate change set forth in the Paris Agreement of December 2015.6
One of the darker sides of globalization has been the opportunities it affords for individuals and corporations to avoid taxation. I have served as a member the Independent Commission for the Reform of International Corporate Taxation (ICRICT), trying to ensure that multinationals pay their taxes fairly, especially in developing countries. The commission was chaired by José Antonio Ocampo, and among its members was Winnie Byanyima, the head of Oxfam (where I serve as an honorary adviser), from whom I have learned a great deal.
The Panama Papers showed an even darker side of globalization, and when, in response, Panama asked me to cochair a committee to give guidance on how they could best reform to become a good global citizen, I thought it would both give me insights into how the global system of tax avoidance works and provide an opportunity to outline a framework to deal with it. But when Panama refused to even be transparent in its seeming drive for transparency, Mark Pieth and I resigned and wrote our own report.7 I am deeply indebted to Mark for his legal and economic insights into these issues, and I suppose I should be indebted to Panama, and especially its vice president, Isabel Saint Malo, for the opportunities they provided for me to delve deeply into these aspects of globalization.
I am deeply indebted to all the members of these commissions whose active engagement and willingness to share their perspectives helped shape mine, as articulated in this book.
In the early years of this century, many political leaders were deeply engaged in the task of making our global system work better, and my service as chief economist of the World Bank, and GAID itself, gave me unusual opportunities to interact with them and see globalization from the perspectives of the leaders of both developed and developing countries. Of the long list of those from who I learned so much, I should mention a few in particular: I repeatedly interacted with Gordon Brown, former prime minister of the UK, as he tried to guide the G-20 in developing a coordinated response to the Great Recession; Nicolas Sarkozy, former president of France when that country chaired the G-20, as he tried to push for a more stable global financial system; and also Kevin Rudd, Australia’s prime minister (2007–10, 2013), George Papandreou (Greece’s prime minister, 2009–11); Ricardo Lagos (Chile’s president, 2000–2006), Cristina Fernández de Kirchner (Argentine president, 2007–15), Nestor Kirchner (Argentine president, 2003–7), Manmohan Singh (India’s prime minister, 2004–14), Zhu Rongji (China’s premier, 1998–2003), Wen Jiabao (China’s premier, 2003–13), Li Keqiang (China’s premier 2013 to present), Kemal Dervis¸ (former head of the UNDP, 2005–9, and minister of economic affairs of Turkey, 2001–2), and Fernando Henrique Cardoso (president of Brazil, 1995–2002). More recently, I have benefited from extensive discussions with Canada’s current foreign minister, Chrystia Freeland (previously its trade minister), and four of the U.S. trade representatives (equivalent to U.S. trade minister; I did not always agree with them), Mickey Kantor and Charlene Barshefsky (both of whom served with me in the Clinton administration), Robert Zoellick (who later became president of the World Bank), and Michael Froman (Obama’s trade representative).
There is no one in the Obama administration that I am more indebted to than Jason Furman, who had worked with me when I was chair of the Council of Economic Advisers (CEA), and who later became chair of Obama’s CEA. Central to his concerns were the changing American economy, in which globalization inevitably played an important role.
I owe an especial debt to Leif Pagrotsky, Sweden’s former trade minister, and to Kalle Moene of the University of Oslo for providing me insights into the Nordic model, and how they have maintained an open economy without experiencing the adverse effects experienced by so many others.
I was fortunate to be followed as chief economist of the World Bank by a sequence of chief economists who broadly shared my views—Nick Stern, François Bourgignon (now at the Paris School of Economics), Justin Yifu Lin (now at Peking University and founding director of the Center for New Structural Economics), and Kaushik Basu (now at Cornell). Stern established an advisory council, continued by his successors, which provided an opportunity to periodically reassess developments in globalization and development. Each of these people—and the other members of the advisory council, including Nobel Prize economist Angus Deaton (at Princeton University)—in different ways has contributed greatly to my understandings of globalization.
As I note especially in the afterword, the last two decades have been a period of rapid change at the World Bank’s sister institution, the IMF (International Monetary Fund), and I am particularly indebted to discussions with Christine Lagarde and Dominique Strauss-Kahn (the current and the previous managing director, respectively, 2007–11); Olivier Blanchard (the previous chief economist, who asked me to work with him to organize two conferences at the IMF trying to absorb the lessons of the global financial crisis);8 Tharman Shanmugaratnam, Singapore’s deputy prime minister since 2011, who served as chair of the IMF’s policy committee, called the International Monetary and Financial Committee, from 2011 to 2015; Jonathan Ostry, who served as deputy director of research and was instrumental in the research that led to rethinking the role of inequality and capital controls; Sergio Chodos, the IMF’s executive director from Argentina, who was especially engaged in issues of debt restructuring; and Zhu Min, who served as one of the deputy managing directors from 2011 to 2016, and is now president at the National Institute of Financial Research at Tsinghua University.
Given all the concerns about globalization, it is not surprising that there are frequent conferences to enhance understanding of what is going on, many with an annual cycle, and interactions with the participants of these too have given me insights into globalization that I might not otherwise have had. These include the World Economic Forum in Davos, Switzerland, every January, the China Development Forum in Beijing every March, and meetings surrounding the General Assembly of the UN every September and surrounding the biannual meetings of the World Bank and IMF every spring and fall.
Globalization, as Globalization and Its Discontents and this sequel make clear, has many dimensions, and in each of them I have had the benefit of discussions and insights from colleagues and coauthors over the past two decades. In trade globalization, I should single out Andrew Charlton (now director at AlphaBeta Advisors), with whom I coauthored Fair Trade for All.9
On the investment agreements which have taken on an increasing role in trade negotiations, I should mention Todd Tucker at the Roosevelt Institute, Lisa Sachs Johnson
and Karl P. Sauvant at Columbia, Richard Kozul-Wright at UNCTAD, Kevin Gallagher of Boston University, and Lori Wallach, director and founder of Global Trade Watch.
Another issue that has been at the center of debate in globalization is intellectual property. Here, I should note again my indebtedness to coauthors Dean Baker (codirector of the Center for Economic and Policy Research), Arjun Jayadev (at Azim Premji University and the University of Massachusetts Boston), Claude Henry (at Sciences Po Paris and Columbia University) ,10 Ugo Pagano (at the University of Siena), and Giovanni Dosi (at the Scuola Superiore Sant’Anna in Pisa), among others.11
A third issue I touch upon is sovereign debt crises and their resolution. Here (as in many other areas in this book) I need to express a special acknowledgment to Martin Guzman, at Columbia, who has coedited a volume12 and coauthored several papers on the subject; to the Centre for International Governance Innovation, with whom we collaborated extensively, including Domenico Lombardi (director of the Global Economy program) and Paul Martin (Canada’s prime minister, 2003–6), who showed a special interest in this aspect of globalization; to Mike Soto-Class (founder and president of Puerto Rico’s Center for a New Economy, CNE) and to other members of CNE and their Growth Commission, who worked diligently to contain the economic effects of the island’s debt crisis. Brad Setser, formerly at the U.S. Treasury and now at the Council on Foreign Relations, also provided important insights.
Contrary to Trump, it is not the United States but Africa in which globalization has had perhaps the most ambiguous effects. Over the past fifteen years, I have kept close links especially with Ethiopia—the first country in the continent which I visited when I became chief economist of the World Bank in 1997 and the last before my departure; and with South Africa. I owe an especial gratitude to Meles Zenawi, Ethiopia’s president from the overthrow of the despotic Mengistu regime in 1991 until 1995, and its prime minister from then until his premature death in 2012, who spent days with me discussing that country’s economy and history, and development strategies in general, and helped me see so much of what was going on there. South Africa has been lucky in having a strong economics team, many of whom I have come to know well and who have shared with me their insights into globalization—in particular Trevor Manuel (finance minister, 1996–2009); Pravin Gordhan (finance minister, 2009–14), Rob Davies (trade minister from 2009 to the present), and Ebrahim Patel (economic development minister from 2009 on).13
As I tried to understand better the ongoing effects of globalization on Africa, it was often in small countries that one can best see the whole picture, and a visit to Namibia in 2015 was particularly instructive. I should acknowledge the valuable interchanges both before, then, and after with Calle Schlettwein, its finance minister (from 2015; previously, he had been its trade minister); Hage Gottfried Geingob, its president since 2015, and David Smuts, a member of its High Court since 2010.
Above all, I should acknowledge the influence in my understanding Sub-Saharan Africa of Akbar Norman, my Columbia colleague, who previously worked with me at the World Bank.14
As I explain in my book The Euro, many of the issues raised by globalization arise, with even greater intensity, in the economic integration that has been occurring in Europe. The Greek crisis in particular provided an opportunity to see what can happen when economic integration goes awry. There is a long list of those to whom I am indebted for insights into that crisis, but the list would include Yanis Varoufakis (a Greek economist, academic and politician, who served as the Greek minister of finance from January to July 2015), Jamie Galbraith (at the University of Texas), and Richard Parker (at the Harvard Kennedy School).
Earlier, I acknowledged my indebtedness to the Initiative for Policy Dialogue (IPD) for its work exploring how the 2008 crisis changed our understandings of globalization. IPD’s work has gone into every area of globalization, including in trade and investment agreements, intellectual property, and sovereign debt. The more than thirty volumes of research and proceedings of the conferences we have sponsored has, I hoped, helped move the dial a little bit in creating a better globalization. I would be remiss if I failed to mention a few others who have been particularly influential in my thinking on globalization, including those who have headed some of IPD’s taskforces or been active in them. These include Ravi Kanbur of Cornell University (who served as my chief adviser while I was at the World Bank); Dani Rodrik of Harvard; Erik Berglöf of LSE (formerly chief economist of the European Bank for Reconstruction and Development, EBRD); Célestin Monga, now chief economist of the African Development Bank; Narcís Serra, who coedited a book with me on global governance;15 Jomo Kwame Sundaram, who served as assistant secretary-general for Economic Development in the United Nations Department of Economic and Social Affairs and assistant director-general and coordinator for cconomic and social development at the UN’s Food and Agricultural Organization (FAO); and Shari Spiegel, who served as the executive director of IPD and now is chief of the Policy Analysis and Development Branch in the Financing for Development Office of the Department of Economic and Social Affairs at the United Nations (UN DESA).
IPD is only one of several Columbia University organizations focusing on globalization, and I have benefited enormously from my colleagues at the Committee on Global Thought, CGT (of which I served as founding chair), and at the Center on Global Economic Governance, chaired by Jan Švejnar, to whom I am particularly indebted. One of the projects of CGT was a conference on security and globalization, conducted jointly with Mary Kaldor of LSE.16 Some of the ideas developed there are reflected in the following discussion.
For almost two decades, Columbia University, and especially its Graduate School of Business, along with its School of International and Public Affairs and the Department of Economics, has provided me an intellectual home, with stimulating colleagues and students, from which I have benefited greatly. Its intellectual liveliness is especially evident in areas touched upon in this book.
And for the last several years, I have been especially engaged with the Roosevelt Institute, a think tank growing out of the Presidential Library of Franklin Delano Roosevelt, and dedicated to advancing the ideas and ideals for which he and his wife stood. We have been especially concerned about the growth of inequality, and the role that globalization has played in the increase in inequality. Grants from the Ford Foundation, Bernard L. Schwartz, and the MacArthur Foundation that have helped support work in this area are gratefully acknowledged, as is the encouragement and vision of Darren Walker, the Ford Foundation’s president. Thanks also for the intellectual support of Felicia Wong, president and CEO of the Roosevelt Institute; Nell Abernathy, vice president, Research and Policy; and the many other fellows of the Institute.
As always, I owe my greatest indebtedness in my understanding of globalization to my coauthor and Columbia colleague, Bruce Greenwald, with whom I have taught a graduate course on globalization for seventeen years.
The production of any book such as this requires enormous efforts on the part of a large number of individuals. The team at Norton once again worked with me, from the inception of the project with discussions with Drake McFeely, to Jeff Shreve, who edited it; to Nathaniel Dennett, for his editorial assistance; to Fred Wiemer, who did the copyediting. My UK editor, Stuart Proffitt, once again provided insightful comments.
In my office, I am indebted to Debarati Ghosh and Eamon Kircher-Allen for editorial assistance; to Paul Bouscasse, Matthieu Teachout, and Andrew Kosenko for research assistance; to Gabriela Plump for the management of IPD; to Caleb Oldham for administrative support; and to Sarah Thomas for overall management.
Seventeen years ago, I had a rough manuscript describing some of my reflections on globalization as I left the World Bank. My wife, Anya Schiffrin, now director of the Technology, Media, and Communications program at Columbia University’s School of International and Public Affairs, helped me convert that manuscript into a global bestseller, inspiring and teaching me in so many ways in the proce
ss. She has continued to be an intellectual companion and a soulmate, for which I am ever grateful.
Part I
Globalization and the New Discontents
WHEN I WROTE Globalization and Its Discontents (GAID) in the beginning of this century, I was writing about the discontents in the developing world. But now discontent with globalization has gone global. Even as I wrote GAID, one of the striking aspects of globalization was the globalization of the anti-globalization protests and of civil society protesting globalization. In 2002, the protestors were mainly those worried about what globalization would do to the environment, how it would affect the poorest people in the poorest countries, or how it was interfering with access to life-saving medicines. There was ample room for grievance. But the newly discontented are not just student activists and environmentalists. They are the middle and working classes throughout the advanced countries. They are expressing their discontent in the ballot box. And a host of populist leaders—Trump in the United States, Farage in the UK, Le Pen in France, Wilders in the Netherlands, the list goes on—are giving voice to and exploiting this discontent.
There is much that those in the middle and working classes have to be unhappy about. The market economy has not been working for them. But they have turned their ire not on the market economy, not on capitalism, but on a particular aspect of today’s market economy—globalization. Opinion polls show that trade is among the major sources of discontent for a large share of Americans. In one careful study done right before the 2016 election, 59 percent of those polled said that they were in favor of trade reform—by which they meant some form of protectionism.1 Similar views are apparent in Europe. These discontented citizens have translated their views into political action. The UK voted to leave the European Union, and Donald Trump—running on an antiglobalization platform, promising to bring manufacturing jobs back to America, build a wall with Mexico, and impose massive 45 percent tariffs against China—was elected president of the United States.2
Globalization and Its Discontents Revisited Page 5