Download Ethics and the Economics of Globalization

Survey
yes no Was this document useful for you?
   Thank you for your participation!

* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project

Document related concepts

Economic calculation problem wikipedia , lookup

Icarus paradox wikipedia , lookup

International economics wikipedia , lookup

Microeconomics wikipedia , lookup

Globalization and Its Discontents wikipedia , lookup

Transcript
ETHICS AND THE ECONOMICS
OF GLOBALIZATION
Joseph E. Stiglitz
2004 Tanner Lectures
Oxford
OUTLINE
•
•
•
•
•
•
•
IS THERE AN ETHICAL DIMENSION TO
ECONOMIC BEHAVIOR?
THE RIGHTS PERSPECTIVE
ETHICAL DIMENSIONS OF GLOBALIZATION:
PRINCIPLES
ETHICAL DIMENSIONS OF GLOBALIZATION:
TRADE
ETHICAL DIMENSIONS OF GLOBALIZATON:
FINANCE
ETHICAL DIMENSIONS OF GLOBALIZATION:
ADVICE
CONCLUDING REMARKS
IS THERE AN ETHICAL
DIMENSION TO ECONOMIC
BEHAVIOR?
ADAM SMITH’S INVISIBLE HAND:
INDIVIDUAL’S, IN PURSUING SELFINTEREST, PROMOTE GENERAL
INTEREST
– Arrow and Debreu showed sense in which
(“Pareto efficiency”) and conditions under
which Adam Smith was correct—Fundamental
Theorem of Welfare Economics
ADAM SMITH’S INVISIBLE HAND
• IMPLICATION: INDIVIDUAL’S ONLY
NEED TO THINK ABOUT SELFINTEREST
• BUT ONLY LEADS TO EFFICIENCY:
ETHICAL ISSUES REMAIN ABOUT
DISTRIBUTION OF INCOME
MARKET FAILURE AND THE
FAILURE OF ADAM SMITH’S
INVISIBLE HAND
• WHEN THERE ARE “MARKET
FAILURES” THE PURSUIT OF SELFINTEREST WILL NOT LEAD TO
ECONOMIC EFFICIENCY
• MARKET FAILURES ARE PERVASIVE
MARKET FAILURES ARE
PERVASIVE
– Externalities—environmental pollution
– Lack of competition—exploiting the use of
market power
– Incomplete markets—poor countries bear risk,
rather than risk being transferred to those
most able to bear it
– Information problems
MARKET FAILURES ARE
PERVASIVE
• WHEN INFORMATION IS IMPERFECT
AND MARKETS INCOMPLETE—THAT IS
ALWAYS—REASON THAT INVISIBLE
HAND OFTEN APPEARS INVISIBLE IS
THAT IT IS NOT THERE
WHEN INFORMATION IS
IMPERFECT INVISIBLE HAND
FAILS
Greenwald-Stiglitz theorem: market economy is
essentially never constrained pareto efficient—taking
into account costs of information
--trade liberalization may lead to Pareto inferior
outcomes (Newbery Stiglitz)
--capital market liberalization increases risk and lowers
welfare
American corporate CEO’s pursuit of greed (stock
options, IPO’s, etc.) did not enhance economic
efficiency; lead to bubble which burst, at great cost to
American economy
WHEN INFORMATION IS
IMPERFECT INVISIBLE HAND
FAILS
PRINCIPLE AGENT PROBLEM
– Agent has opportunity to act in ways which
are not in interests of those for whom he
works
– Not motivated by “moral obligation”
– Only by incentives
– Economic problem is to find best incentive
schemes
PRINCIPLE AGENT PROBLEM
BUT GENERAL WELFARE MAY BE ENHANCED
IF INDIVIDUALS’ BEHAVIOR IS GUIDED BY
NORMS AND VALUES, NOT JUST BY SELFINTEREST
– Norms can be “enforced” by social sanctions
– But is this just a broader definition of acting in “selfinterest”?
– Still, goes well-beyond narrow Smithian conception
– Particularly clear in case of externalities (littering)
– And in case of agency: “fiduciary responsibility”
GLOBALIZATION MAY HAD ADVERSE
EFFECTS ON EFFICIENCY
• BEYOND MARKET FAILURES ASSOCIATED WITH
INCOMPLETE MARKETS AND IMPERFECT
INFORMATION
• NON-MARKET INSTITUTIONS PLAY AN IMPORTANT
ROLE
• AND GLOBALIZATION MAY WEAKEN THESE NONMARKET INSTITUTIONS
– Families provide insurance and other non-market services
– Market insurance weakens role of family
– General equilibrium analysis (converse of Arnott-Stiglitz which
showed how non-market institutions may weaken market
institutions and lower social welfare)
– Globalization may undermine other forms of social capital
BEYOND EFFICIENCY TO
SOCIAL JUSTICE
– Rawls—behind veil of ignorance (though not
necessarily max-min)
– ethical aspects of the exploitation of market
power
– motivated concerns about usury
– Particularly important when considering
intergeneration equity—environment
SOCIAL JUSTICE FOCUSES NOT
JUST ON OUTCOMES, BUT ON
PROCESSES
OPPORTUNITY
PROCESSES
Difficulty of ascertaining and ensuring
fairness of outcomes
May be easier to ascertain fairness of
process
Includes participation, voice in decision
Helps mitigate agency problems
OPPORTUNITY
Way of reconciling concerns about
incentives, individual responsibility
CAPITALISM/MARKET ECONOMY
“WORKS” BECAUSE UNFETTERED
CAPITALISM IS TEMPERED
By
– Awareness of market failures
– “Social contract” ensures modicum of social
justice
II. THE RIGHTS PERSPECTIVE
INCREASING EMPHASIS ON RIGHTS
– Include economic rights
– Not just property rights
– Debate about whether rights are just, or at
least largely, instrumental: property rights
important because they enhance economic
efficiency
HOW DOES ONE RECONCILE “RIGHTS”
PERSPECTIVE WITH TRADITONAL
ECONOMICS PERSPECTIVE?
– Is there a lexicographic ordering?
– With rights given “priority”?
– What is nature of “economic rights”—right to
medicine, education, housing?
– Standard economics emphasizes trade-offs, no
absolutes
– Can’t be “absolute rights” (at least with respect to
economic rights): Poor countries cannot afford
standards that would be viewed as below “minimal” is
advanced developed country
IN PRACTICE, ECONOMIC RIGHTS ARE OFTEN
TREATED AS PRIOR TO OTHER RIGHTS
– Intellectual property rights “trumps” right of
access to life-saving medicines
– But public policy inconsistent: Anthrax and
Ciprio
– Emphasis on certain economic rights
(property rights, rights of free capital mobility)
over other rights and values (right to
medicine, environmental rights, labor rights)
part of objection to globalization
III. ETHICAL DIMENSIONS OF
GLOBALIZATION: PRINCIPLES
Will take a look at “practical ethics”
Based on principles of social justice
 Economic institutions, rules, practices which
disadvantage the poor will be viewed as
unethical
 Ethical behavior requires “progressivity”: the
poor should benefit disproportionately
As well as other ethical principles
 Hypocritical behavior viewed as unethical
 Advisers who are not “fully honest” viewed as
unethical
GLOBALIZATION OF POLITICS, SENSE OF
SOCIAL JUSTICE NOT KEPT PACE WITH
ECONOMIC GLOBALIZATION
Adam Smith’s invisible hand only applied to market
behavior
– Globalization debate involves political behavior
– Choice of institutions, policies, rules to govern
globalization
Neither politics nor “morals” temper unfettered
capitalism—recognition of market failures and social
contract
• Failure of democracy at international level, lack of voice of
poor, makes emphasis on “morals” all the more important
• But there is a moral failure as well as a political failure
But there is a moral failure as well
as a political failure
Think differently about poor abroad, at home
• Job destruction at home bad, even if more job
creation abroad, among people who are poorer
• Not consistent with any “anonymous” equalitarian
social welfare function
• Hard to Reconcile with, say, Rawlsian principles of
social justice
• Ideals of social justice, social solidarity
stop at the border
RELATIONS BETWEEN COUNTRIES DICTATED
BY PRINCIPLES OF ECONOMIC POWER, NOT
ETHICAL PRINCIPLES
Trade ministers instructed to get best deal for
special interests in their country, not to get
“fair” agreement
“RULES OF GAME” ARE SET BY COUNTRIES,
NOT BY MARKET FORCES:
CANNOT IGNORE ETHICAL DIMENSION, EVEN
IF THERE WERE NO MARKET FAILURES
– Lack of social justice even in processes by which
rules are set
– Market failures are pervasive
• Poor countries forced to bear risk of exchange rate and
interest rate fluctuations
– And ethical globalization ought to deal with the
consequences of these market failures on the poor
PRINCIPLES OF ETHICAL
GLOBALIZATION
– Fair procedures for determining the rules of
the game
– Fair outcomes
– Rules, institutions, outcomes which
disadvantage poor (poor countries, poor
people within country) should be viewed as
unethical
PRINCIPLES OF ETHICAL
GLOBALIZATION
CENTRAL THESIS: CURRENT RULES,
INSTITUTIONS, PRACTICES
DISADVANTAGE THE POOR
IV. ETHICAL DIMENSIONS OF
GLOBALIZATION: TRADE
PROCEDURES DISADVANTAGE POOR
COUNTRIES
– “Green room” bargaining behind closed doors
– Arm twisting, threats, etc.
REFLECTED IN PAST OUTCOMES
REFLECTED IN PAST
OUTCOMES
– Average tariffs by developed countries against
developing country products higher than
against developed country products
• Even with “preferences”
– Uruguay round: poorest region of world, Subsaharan Africa actually worse off
– Developed countries allowed to continue
agricultural subsides, restrictions, harming
poor agricultural producers, but developing
countries were circumscribed in their
development strategies
MORE FUNDAMENTAL ISSUES RAISED BY
TRIPS (INTELLECTUAL PROPERTY REGIME)
– Effectively transfer of income from developing
countries to developed
– Research public good—should be paid for by rich
– Denied access to life saving drugs to poorest people
in world
– Lead to bio-piracy
– Contrast: Western governments strive to ensure
access to health care
– Contrast: During Anthrax scare, U.S. uses
compulsory licensing
BROADER ISSUES RAISED BY
TRADE AGENDA
Agenda itself shows ethical lapse
Defined by what is in interests of advanced industrial
countries, regardless of impact on poor
– Labor market liberalization would contribute more to
global economic efficiency
– Yet capital market liberalization remains at center of
agenda
– Even though there are questions whether capital
market liberalization even contributes to economic
growth
– And there is strong evidence that it contributes to
instability and poverty
BROADER ISSUES RAISED BY
TRADE AGENDA
• Dumping duties argued for on basis of
“fair competition”
• Yet double standard: fair competition
among domestic firms and foreign firms
• Should be single standard
V. ETHICAL DIMENSIONS OF
GLOBALIZATON: FINANCE
 OTIOSE DEBTS
 BANKRUPTCY (STANDSTILLS)
 GLOBAL RESERVE SYSTEM
OTIOSE DEBTS
Western governments and financial institutions helped
sustain repressive dictators (Megistu in Ethiopia,
Mobutu in Congo)
– But today country’s face burden of paying back debts
incurred
– Even when money went, effectively, to suppress fight
for democracy and human rights
Lenders should be put on notice—positive incentive
effects
Many difficult cases: Russia in 1997/1998
BANKRUPTCY (STANDSTILLS)
Excessive payments abroad
Lender is as much at fault at debtor
– Especially when lender is supposed to have more
expertise—failed development project
Many problems due to market failure—developing
countries are forced to bear brunt of exchange rate
and interest rate risk
•
•
•
•
With enormous adverse consequences
Latin American lost decade
Moldova
International institutions and developed countries had a
moral obligation to help markets work better
BANKRUPTCY (STANDSTILLS)
Principle of “fresh start” well established
– More “humane” that debtor prisoners, military
interventions of earlier period
– But IMF has often left countries more
indebted through bail-outs
– IMF finally recognized importance of
sovereign debt restructuring mechanism
IMF finally recognized importance
of sovereign debt restructuring
mechanism
But failed to recognize that creditor institution (IMF)
could not play impartial role
And failed to recognize important difference between
public and private restructurings (chapter 9 vs.
chapter 11 of U.S. Bankruptcy code)
• With importance of implicit creditors (pensioners,
education. Etc)
GLOBAL RESERVE SYSTEM
Allows richest country in world to live well
beyond its mean
– Borrowing almost $2 billion a day
And entailing large transfers from developing
countries to U.S.
And contributing to global instability
– The costs of which are largely borne to poor
VI. ETHICAL DIMENSIONS OF
GLOBALIZATION: ADVICE
SHOULD BE “IMPARTIAL” “SCIENTIFIC” “HONEST”
• PROVIDING ASSESSMENT OF RISKS
• AND IDENTIFYING LIMITATIONS OF KNOWLEDGE
YET MUCH OF ADVICE PROVIDED BY IFI’S HAS
• NOT INDICATED UNDERLYING ASSUMPTIONS,
• NOT IDENTIFIED LIMITATIONS OF KNOWLEDGE,
• NOT DESCRIBED RISKS ASSOCIATED WITH ALTERNATIVE
POLICIES,
• NOT DESCRIBED POTENTIAL ADVERSE EFFECTS ON POOR,
• NOT EMPHASIZED DISTRIBUTIONAL CONSEQUENCES
MORAL DIMENSIONS OF ADVICE
PROBLEM IS NOT JUST THAT THE
PREDICTIOINS HAVE BEEN WRONG
• BY FAILING TO CALL ATTENTION TO
DISTRIBUTIVE CONSEQUENCES HAVE
EFFECTIVELY CONTRIBUTED TO
WORSENING OF WELL-BEING OF
POOR
MORAL DIMENSIONS OF ADVICE
ABUSE OF POLITICAL POWER:
• THE POLITICAL POWER OF THE IMF
(OTHER DONORS WILL NOT PROVIDE
AID IF IMF WITHHOLDS; CRITICISM BY
IMF MAY HAD ADVERSE EFFECTS ON
ACCESS TO PRIVATE CAPITAL) MAKES
“MORAL SHORTFALL” OF IMF EVEN
MORE SERIOUS
CONCLUDING COMMENTS
• GLOBALIZATION HAS NOT LIFE UP TO
ITS POSITIVE POTENTIAL
• GLOBALIZATION MAY HAVE EVEN HAD
ADVERSE EFFECTS ON MANY POOR
COUNTRIES, AND, MORE BROADLY,
ON THE POOR WITHIN DEVELOPING
COUNTRIES
WHY THE FAILURES?
KEY EXPLANATION: DOMINANCE OF
DOCTRINES OF “MARKET
FUNDAMENTALISM”
• A BELIEF IN AN ALMOST UNFETTERED
CAPITALISM
• UNTEMPERED BY THE FORCES
WHICH MAKE CAPITALISM WITHIN
COUNTRIES WORK
UNTEMPERED MARKET
FUNDAMENTALISM
A FAILURE TO RECOGNIZE
• THE PERVASIVENESS OF MARKET
FAILURES
• THAT EVEN WHEN MARKETS ARE
EFFICIENT, THEY DO NOT ENSURE
SOCIAL JUSTICE
UNTEMPERED MARKET
FUNDAMENTALISM
• THERE IS AN IMPORTANT ROLE OF
GOVERNMENT
• THERE IS A ROLE FOR “MORALS” AND
ETHICS IN ECONOMIC LIFE WITHIN
COUNTRIES
• BUT THERE IS EVEN A GREATER NEED
FOR MORALS AND ETHICS TO
GOVERN MARKET RELATIONS THAT
GO ACROSS BORDERS
NEED FOR MORALS AND ETHICS TO GOVERN
MARKET RELATIONS THAT GO ACROSS
BORDERS
• BUT IN FACT, ETHICAL FAILINGS ARE EVEN
GREATER
• UNLESS WE RECOGNIZE THESE FAILINGS,
THE DISCONTENT WITH GLOBALIZATION
WILL PERSIST
• GLOBALIZAITON WILL CONTINUE TO FAIL TO
LIVE UP TO ITS POTENTIAL
• AND WILL CONTINUE TO HAVE THE
ADVERSE EFFECTS THAT HAVE BEEN SO
WIDELY CRITICIZED