[Kabar-indonesia] BW/Stiglitz: Free Trade Can Be Too Free [+WSJ: Global Trade Talks Stalled]

[Joyo at aol.com]

also: WSJ: Global Trade Talks Show No  Sign Of
Progress on Eve of Key Meeting

Business Week 
Issue cover dated July 3, 2006

Economics: Strong Voices

Free Trade Can Be Too Free

Economist Joseph Stiglitz makes the  case against
unfettered globalization

By Peter Coy

As an economist, Joseph E. Stiglitz has credibility
galore. The Columbia University scholar shared a Nobel
prize in 2001 for helping develop the influential
field of ``information economics.'' Before that, he
was President Clinton's top economic adviser and then
the chief economist at the World Bank.

Now, though, using his full intellectual firepower,
Stiglitz is attacking the Economic Establishment from
within. The key issue: Would the economy benefit from
more government intervention? Mainstream economists,
by and large, are uncomfortable with the idea of
expanding the government's economic role. Even those
who think of themselves as liberal tend to favor
markets wherever possible.

But Stiglitz argues that targeted government action
would improve the functioning of the economy. In his
view, information economics -- the field that he
helped create -- demonstrates that unfettered free
markets can often break down, leading to problems
ranging from unemployment to inadequate basic research
to underlending by banks.

``He's a strong voice and conscience for what true
economics says about things, rather than the snippets
of economics that are convenient for one party at one
moment,'' says New York University visiting scholar
Jason Furman, a past Stiglitz collaborator who was
director of economic policy for the 2004 Presidential
campaign of Senator John Kerry (D-Mass.).

Stiglitz' arguments have been finding receptive ears
in the U.S. and abroad. It's not just his ideas: He
speaks and writes in a way that resonates with
ordinary people. ``He's read by students, by
policymakers, by media. He definitely is one of the
most influential economists globally, all over the
developing world particularly,'' says Turkey's Kemal
Dervis, administrator of the United Nations
Development Program.

GAMMA QUADRANT?

At the moment, Stiglitz' No. 1 issue is trade. He
attacks the so-called Washington Consensus, which
prescribes privatization, fiscal discipline,
deregulation, and free trade as the cure for the
developing world. He says that approach can rip the
delicate social fabric of developing countries,
provoking unrest. Instead, he says rich countries
should lower tariffs and let the poorest countries
keep their barriers mostly in place for now to protect
jobs and develop domestic industries. Rich countries,
he says, should help poor ones build the institutions
and infrastructure they need before they can open
their markets.

Stiglitz' arguments are stiffening the resistance of
developing countries to concessions in the Doha Round
of global trade talks, which are threatening to
collapse. Pascal Lamy, director-general of the World
Trade Organization, says Stiglitz underestimates the
benefits that poor countries get from trade. But he
acknowledges Stiglitz' influence. Says Lamy: ``Many
places on this planet would love to have him as a
speechmaker.''

The rap on Stiglitz is that the agenda he's pushing
has little to do with his Nobel prize-winning work.
Kenneth Rogoff, a former chief economist of the
International Monetary Fund, once accused Stiglitz of
being out of touch with reality -- or as he put it,
living in ``the Gamma Quadrant.'' Olivier J.
Blanchard, a leading macroeconomist at Massachusetts
Institute of Technology, once said that Stiglitz'
warnings to Eastern European nations about the dangers
of privatization were ``more often than not
catastrophic.''

Stiglitz responds that his policy prescriptions do
flow out of his academic research. The essential
insight of information economics is that markets often
misbehave when one party to a transaction knows more
than the other, or when critical information is hard
to get.

Small businesses, for example, often have a hard time
getting bank loans. The reason? Lenders don't have
enough information to distinguish between creditworthy
small businesses and those that are more likely to
fail.

According to Stiglitz, Adam Smith himself -- the
patron saint of antigovernment economists -- was no
doctrinaire believer in markets.

``Smith had a very nuanced view,'' says Stiglitz. ``He
was very aware of market failures.''

Stiglitz, 63, imbibed New Deal thinking from his
parents while growing up in the steel town of Gary,
Ind. His office is furnished with mementos of his
travels, including a photo of him looking like Yul
Brynner (with hair), resplendent in a gold costume and
upturned shoes as he sits on a throne in Thailand. He
comes across as rumpled and affable, but he has a
streak of combativeness.

Stiglitz resigned from the World Bank in 2000 after
clashing with then-Treasury Secretary Lawrence
Summers. In 2002 he trashed Treasury and the IMF in
Globalization and Its Discontents. More than 1 million
copies were sold, and the book was translated into 37
languages, from Azeri to Sinhala. Now much of his
energy goes into the Initiative for Policy Dialogue,
which devises ``policy alternatives'' for developing
countries. In recent weeks, his name has been in
headlines in Indonesia, Cuba, Italy, India, and
Kyrgyzstan, and he wrote op-eds for papers in Pakistan
and Taiwan.

Many American politicians aren't eager to embrace him.
Senator Hillary Rodham Clinton's (D-N.Y.) press office
failed to respond to repeated calls for comment for
this article. But Stiglitz did have an influence on
Kerry's campaign, says Furman. Stiglitz says that
helping poor countries will be good for rich ones:
Americans would pay lower taxes if subsidies to U.S.
farmers were eliminated. And more wealth in the
developing world will increase demand for U.S. exports
while making poor countries less of a ``fertile
feeding ground for terrorism,'' he says.

The anger over globalization is widespread. That alone
ensures Stiglitz, an eloquent and credentialed critic,
of long-lived influence.

---------------------------------------

The Wall Street Journal 
June 29, 2006

Global Trade Talks Show No Sign Of Progress on Eve of
Key Meeting

By SCOTT MILLER

Global trade talks slipped deeper into trouble ahead
of a pivotal meeting starting Friday, as top players
rejected a basis for compromise suggested by the head
of the World Trade Organization, Pascal Lamy.

Trade ministers from about 60 of the WTO's 149 member
countries are gathering in Geneva in an attempt to
save the negotiations, known as the Doha Round for the
Qatari capital where they launched 4½ years ago. The
hope going into the meeting was to forge the outline
of a new global trade deal that could be formally
concluded by early next year, delivering a boost to
global economic growth, particularly in the developing
world.

But on the eve of the talks it looked unlikely that
ministers would achieve any measurable progress. A
group of 10 rich nations including Japan, Switzerland
and Norway, rejected Mr. Lamy's proposals. Shoichi
Nakagawa, Japan's agriculture minister, said Mr.
Lamy's proposal was "out of the question," at a news
conference in Geneva, Reuters reported.

Confusion also grew about the European position, after
agriculture and trade ministers from France and
Austria among others rebuffed suggestions that the
25-nation bloc might be willing to compromise by
cutting farm tariffs further.

"I have the impression that the gaps have actually
widened or at least have become more rigid" than a
couple of months ago, Brazil Foreign Minister Celso
Amorim said in Geneva, adding he didn't yet see any
"elements for an agreement."

Mr. Lamy had hoped to bridge differences between the
U.S. and the European Union on agriculture, saying a
"landing zone" for the talks might be middle ground
suggested by the G-20 group of industrial and
developing nations. The plan envisions an average
farm-tariff reduction of around 54%. Such a compromise
would require the U.S. to relent on its demand that
average farm tariffs be cut by as much as 66% and
would require the EU to increase its proposed average
tariff cut of around 39%.

The EU's top trade negotiator, Peter Mandelson, says
Europe is willing to move in the direction of the G-20
proposal. But several EU nations said Thursday that
there was little room for compromise. "No
authorization was given to move towards the G-20
position, be it 50% or 54%," French Trade Minister
Christine Lagarde told reporters after EU ministers
met Mr. Mandelson. Austrian Agriculture Minister Josef
Proell said moving toward the proposal of the G-20,
led by Brazil and India, "is not possible for EU
farmers."

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