Not only is Stiglitz a free trader, he also appears to be a Georgist. You'll recall he said the most important thing that could be done for the third world is to introduce land reform to the billions of peasant farmers who must contribute 50% of their production to a landlord - and get nothing in return.
That's the perfect demonstration of a privilege - you know, the "one-way exchange".
Combine this with Ricardo's Iron Law of Wages which suggests that wages will continually be pressed down and - in many parts of the world you have - reality!
Give the peasants machines - the rent goes up. Provide them with miracle crops that grow if you spit on them - the rent goes up. Teach them new techniques to get maximum return for the least effort (sorry about hat) and their rent will rise.
Free trade and its great production benefits will be swallowed in increasing rents.
Ricardo suggests that rising rents will press down wages to a bare level of subsistence.
The rest is Rent.
So, what incentive is there to produce more? They get nothing back from it.
When production is very high such as in the Mekong Delta, rents reached 90% of the crop. During the war, American troops would clear the area of Viet-Cong.
Right behind them would come the cousins of the landlords to get their rent - nine sacks of rice from every ten.
That's how America won the "hearts and minds" of the people.
When the communists come back, they explain how the peasants will keep the rent and the landlords will be no longer be able to use peasant labor to educate their kids in the best Swiss schools.
This looks good, so the peasants become instant communists. Then, a few weeks later, the village commissar calls a meeting to explain the new system. Instead of the villagers keeping their rice, from now on, they'll pile the harvest in the village square, and after a large portion is sent to Saigon for necessary government expenses, the rest will be shared among the villagers.
As he leaves, a machete catches him in the small of the back.
(This is the small counter-revolution that takes place after a communist takeover.)
I wish reformers would stop concentrating on the negatives and start asserting the positives. If the power to produce in billions of peasants were unleashed, we would have a glut of food (which happy circumstance happened in Taiwan, where peasant farmers would pull five separate crops out of their five hectare plots.).
However, as Stiglitz also said, the IMF and the others won't confront the real power in these countries - not when they can simply give them money and get promises in return.
If I were a ranking member of the IMF or WTO, I think I would long since have given up in frustration.
But, then, perhaps they already have.
Harry
====================
Keith wrote:
Hi Thomas,
In your posting you referred to my recent comment:
(KH)
<<<<
Those who have been protesting on economic grounds (and supposedly on
behalf of the poor of the world) at Prague, Quebec, Geneva and other places
want to scrap these institutions [World Bank, etc] altogether. But, as I
have tediously repeated on FW many times, what else do they suggest to help
the poor countries of the world? I haven't come across one single proposal
so far.
>>>>
There is a saying: "You can lead a horse to water but you can't make him
drink".
Joe Stiglitz and some other economists have been saying that it's no use
the World Bank (and Government aid, etc,) continuing to pour large tranches
of money into developing countries as they have been doing for years.
Immediately, the anti-globalisers 'recruit' Joe Stiglitz onto their side,
and then go on to say that he, like them, is against the World Bank, is
against free trade, and so on.
This is far from the truth. Joe Stiglitz is a convinced free trader. In his
recent statements he is expressing publicly the conclusion that the World
Bank have been coming to more privately in recent years and only just
beginning to emerge in their latest annual report. This is that a great
deal of the aid that has been given to many developing countries in the
last few decades -- many trillions of dollars' worth -- has ended up in
prestige projects, private bank accounts of politicians and government
officials, and armaments (usually for the personal armies of dictators).
Indeed, the World Bank is now gingerly venturing into projects which are
similar to the Grameen Banks of Bangladesh and a few other places -- trying
to spread credit at the lowest possible level among the poor themselves.
But this sort of policy, although more promising, is extremely difficult to
apply. Far more difficult than writing large cheques and giving them to
Prime Ministers and Presidents. Large numbers of distributors are needed,
and large numbers of trustworthy and energetic local people need to be
identified among the recipient populations. The problems are immense
because corruption in most of the developed countries is endemic and runs
from the top people down to the lowest levels of local officials who also
want their cut when there is the smell of money around.
The World Bank is coming to the same conclusion that others, such as David
Landes (in "Wealth and Poverty of Nations") and Francis Fukuyama (in
"Trust"), have been coming to. This is that there has to be a threshold
level of trust and co-operation among local populations before worthwhile
enterprises, however small, can get started. And, for economic development
to take off more extensively within a country, then there also has to be an
overarching system of justice which can prosecute corruption and also
arbitrate fairly on matters of contracts. The latter is lacking in almost
all underdeveloped countries.
The culture of a country is predominantly important as to whether it can
make use of the huge amounts of aid and loans which have so far been spent,
and which are still potentially available.
Here's a personal story to end with. In the late 70s, I started a
job-training organisation for young unemployed people in my home town of
Coventry. I had some dealings with a fiesty and charismatic young lady,
Claire Short, who was also starting a similar, but nationally-based,
organisation. From the mid-80s, my life took a different turn while Claire
Short took her concern into conventional politics. She is now the Minister
for Foreign Aid in the present Labour Government. Hitherto, such a
ministerial post was the lowest ranking seat in the inner Cabinet of the
Government. She often puts her foot in it but I'd be right in saying that
her forthrightness has made her the most respected government minister in
the present lot.
What is Claire Short saying? She is saying that all government aid to
underdeveloped countries must now be applied at the lowest possible level.
She would scrap all government aid except that which is spent on local
health projects and schools. She's not getting all her own way because a
lot of government aid is still unfortunately tied to projects that are
useful to businesses in the donor country, but her policy is gradually
becoming influential.
Good local schools and health clinics, while desirable and essential,
expose a larger problem -- that is, the subsequent eruption of an
articulate and often-angry young generation (such as we now see in
Palestine, or Nepal, or Pakistan, for example) who want to see far more
reforms in their country. So we're back to the problem that the World Bank
faces. How do you encourage the culture of trust within a recipient country
which enables economic development to take place?
Keith
******************************
Harry Pollard
Henry George School of LA
Box 655
Tujunga CA 91042
Tel: (818) 352-4141
Fax: (818) 353-2242
*******************************
