Globalization and its Discontents
In the last chapter of the book “Globalization and its Discontents” Joseph E. Stiglitz describes weaknesses, opportunities and threats of globalization for countries and world’s poor. From the very beginning, Stiglitz gives a detailed characteristic of IMF and its relations with global political and economic leaders-powers. Nations throughout the world seem much more closely connected to each other, but fragility of the global market may have increased. Thus, there is an increased need to understand how this new capital market works, including is informational asymmetries, and how recent developments have affected investment, management decisions, and the real sectors of the global economy.
Stiglitz admits that East Asia is in a process of system transition, and faces serious financial problems. A clearer analysis of bank crises, and a better policy design for bank bailouts certainly help regulators to tackle these problems. That is, many East Asian economies are in serious economic trouble. Many of these countries seem to be characterized by the authoritarian nature of their governments which, having a tight grip over the private sector, heavily intervened in inter-industry resource allocation, and controlled competition among private firms. Still, Stiglitz admits that, globalization “brought huge benefits… especially on trade, and increased access to markets and technology, better health, as well as an active global civil society” (Stiglitz 2002, p. 214). This was once thought to be a factor behind the region’s economic successes, because governments successfully coordinated the economy to direct resources towards growing export industries, often by creating rents in the financial sector. The ultimate form of resource allocation will depend not only on the country’s resource endowments, level of technological development, and consumer preferences, but also on how the country’s economic system is organized. Because long-term relationships are prevalent across the economy, the outside option is low and each individual wants to retain current long-term relationships as much as possible. In a sense, people are captured by all long-term relationships, whether it is an employment, financial, or government-business relationship.