The Foreign Service Journal, April 2004

ment decided to go to war with Iraq. The Globalization Bubble The Roaring Nineties: A New History of the World’s Most Prosperous Decade Joseph E. Stiglitz, Norton, 2003, $25.95, hardcover, 336 pages. R EVIEWED BY P AULO A LMEIDA The advocates of free-market eco- nomics often justify their policy pref- erences with the old saw that a rising tide raises all boats. Well, the tide of the 1990s has ebbed, exposing the rocks and shoals that wrecked some of those boats. Who better to comb the beaches than Joseph Stiglitz, first a member and then the chairman of the Council of Economic Advisers in the Clinton White House, before he closed out the decade as chief econo- mist of the World Bank? The Roaring Nineties: A New History of the World’s Most Prosper- ous Decade is refreshing because, rather than touting the spectacular economic successes of the Clinton administration (in contrast to its be- sieged successor), Stiglitz thoughtfully picks through the flotsam and jetsam for clues to the causes of the wreck. He places much of the blame on the administration he served, and the president he still evidently admires, for allowing narrow, short-term inter- ests to undermine the long-term health of the economy. Furthermore, he contends that these failures in domestic economic policy undermine international support for globaliza- tion. It is worth noting that his previous book, the bestselling Globalization and Its Discontents (2002), was to some extent a memoir of an academic economist who comes to Washington to try his hand at public service and wryly professes to be shocked, shock- ed to find politics going on. The new book is likewise more personal than dryly analytical, but is still substantial enough to satisfy those with an appetite for recreational economics. In a nutshell, Stiglitz contends that, by setting aside its campaign platform of “Putting People First” and focusing instead on deficit reduction as the means to restart the economy, the Clinton administration made a “lucky mistake” that succeeded in doing just that — but for reasons that were unique and probably not repro- ducible. Accordingly, exporting the U.S. model of market orthodoxy will not save developing countries, and may actually exacerbate their distress. The main problem with the U.S. approach to globalization, Stiglitz argues, is that it diminishes the ability of governments to mitigate the inevitable market failures that result from “asymmetries of information,” a new branch of economics research that he developed in his academic career. In his own words, this means that “different people know different things,” allowing the better informed to speculate at the expense of the vul- nerable, and encouraging the poorly informed to take dangerous risks. In addition, he declares that the U.S. interest in free trade and market liberalization often serves rather nar- row financial interests. Why else, for example, would our negotiators press for the opening of foreign markets to trade in derivatives, which does not create significant employment in the U.S. and leaves foreign currencies more vulnerable to manipulation? A few months after the World Bank sent him packing in 2001 (reportedly following pressure from the Treasury Department’s new lead- ership), Stiglitz won the Nobel Prize for Economics. He has no need, therefore, to seek the consolation of a vindictive or self-justifying political memoir, but rather invites us to comb the beach with him. Although the latter part of his book seems a trifle rushed (as if trying to keep up with the headlines), it is a pleasure to listen to his war stories. But these stories have morals: That the action of the marketplace should be balanced by judicious government regulation; that the government should protect the public interest by ensuring that the economy supports — or at least does not erode — social welfare; that economic globalization will only succeed in conjunction with the globalization of a political agenda that advances social equity; and that the U.S. must participate in that process as a partner, not as a specula- tor. Paulo Almeida was an FSO from 1985 to 1992, serving in Lisbon, Oporto, Harare and Washington, D.C. From 1992 to 2003, he was an international affairs specialist at the U.S. Environ- mental Protection Agency. He now 68 F O R E I G N S E R V I C E J O U R N A L / A P R I L 2 0 0 4 B O O K S Stiglitz argues that exporting the U.S. model of market orthodoxy will not save developing countries, and may actually exacerbate their distress.