MN Summer Book Club Choice- Stiglitz and Klein

I'm here 905. That's an amazing swan. I'm an eclairholic. Which Stiglitz are you reading?

Which book? I'm still on the first one about 180 pages in .. though I have the second one too.

So what do you think of Stiglitz so far?

Auditor #9 wrote:

Which book? I'm still on the first one about 180 pages in .. though I have the second one too.

So what do you think of Stiglitz so far?

905 - I'm away from the shack and my books - would you give us a bit of a summary of the last chapter you read ?

The last chapter I read was on that perennial villain of globalisation, the multinational corporation. He avoids the blanket condemnations of MNCs, instead he treats them like globalisation itself. Instead of being totally for or against them, we should treat them as an inevitability and then work towards improving them.

He details the basic Smith dogma: that MNCs should be only about profit, and then details how MNCs have responsibilty for wider areas such as society and the environment, responsibilities that are often ignored. Unlike Jared Diamond he doesn't think the corporation's sole responsibility is towards the shareholders and profit.

He ends the chapter as always by describing how MNCs shoyld be changed to improve globalisation. He argues that relying on a company's conscience isn't enough and that stronger regulatuions should be brought in to ensure better social behaviour. He descibes how damaging monopolies are and how they should be opposed,as the EU often does. He also talks about reducing the scope for corruption.

You're on the second book - Fixing Globalisation. I have Globalisation and its Discontents anyway and I'm on chapter 7 in that book too and it's about fixing Russia. Maybe you have read that one already?

He's fairly orthodox in his ideas I think - he believes in the classical economics of Smith and Keynes. His own theories involve how information can deliver better knowledge of the market - sounds reasonable.

He could be the successor the John Kenneth Galbraith who I found logical, equitable, human and very easy to read.

The only company that can take on a broad social responsibility is a publicly owned one that can be subsidised. National legislation and regulations to require more responsibility go by the lowest common denominator in the EU and WTO set up.

MNCs often have become MNCs precisely because they want to evade regulation by moving to the least regulated environment.

Henry Ford tried to share profit by raising wages but shareholders took him to court and he lost the case. I think Stiglitz underestimates the amount of political change that would be needed to control the MNCs.

Very easy to read, I'd agree with that. I haven't read the first one I'm afraid. In the chapter on MNCs he certainly argues that Smith is misunderstood by many of his advocates, meaning of course that Stiglitz knows what he really meant. That's a dangerous line to take if you ask me. I don't like this fighting over dead people. A lot of his stuff on information goes against Smith's invisible hand; he argues that information disparities mean that the hand can't exist.

cactus flower wrote:

The only company that can take on a broad social responsibility is a publicly owned one that can be subsidised. National legislation and regulations to require more responsibility go by the lowest common denominator in the EU and WTO set up.

MNCs often have become MNCs precisely because they want to evade regulation by moving to the least regulated environment.

Henry Ford tried to share profit by raising wages but shareholders took him to court and he lost the case. I think Stiglitz underestimates the amount of political change that would be needed to control the MNCs.

I wouldn't agree that private companies can't be socially responsible. I remember Diamonmd talking about shareholders sueing the managers and I thought, surely the state should be able to sue the shareholders in that scenario? Anyway Stiglitz is talking about a global governance system which, if operable, would have enough political clout take on MNCs.

Someone else made this point about the free market:

Quote :

Markets generally deal very efficiently with private goods and services, but underprovide public goods like knowledge, drinking water, and clean air. The WTO has advocated the commodification [privatization] of drinking water, clean air, and some living ecosystems -- ostensibly to provide better access, but clearly also to generate profit. Are fresh water, clean air, and biodiversity part of a global commons -- a fundamental human right? Or are they commodities, to be exchanged for capital? If they are privatized, what will be the fate of the one billion-plus humans with no access to capital, who live near starvation, with less access to food and water than they did a decade ago?

The US itself is very far from a free market. It uses free market ideology through the IMF and WTO to open up markets to exploit.

905 wrote:

cactus flower wrote:

The only company that can take on a broad social responsibility is a publicly owned one that can be subsidised. National legislation and regulations to require more responsibility go by the lowest common denominator in the EU and WTO set up.

MNCs often have become MNCs precisely because they want to evade regulation by moving to the least regulated environment.

Henry Ford tried to share profit by raising wages but shareholders took him to court and he lost the case. I think Stiglitz underestimates the amount of political change that would be needed to control the MNCs.

I wouldn't agree that private companies can't be socially responsible. I remember Diamonmd talking about shareholders sueing the managers and I thought, surely the state should be able to sue the shareholders in that scenario? Anyway Stiglitz is talking about a global governance system which, if operable, would have enough political clout take on MNCs.

The motivation of a company is to make a profit. Environmental and social regulation reduces profit, to the extent that the company may not be viable.

cactus flower wrote:

The motivation of a company is to make a profit. Environmental and social regulation reduces profit, to the extent that the company may not be viable.

And if a company is not viable then it is overtaken by companies that can cope; this is competion 101, no? if a company cannot deal with vital social and environmental regulation then it simply shouldn't be running. If social and environmental legislation is ignored in the name of profit then it society and the environment that is operating at a loss, and that loss is shared by all of us.

905 wrote:

cactus flower wrote:

The motivation of a company is to make a profit. Environmental and social regulation reduces profit, to the extent that the company may not be viable.

And if a company is not viable then it is overtaken by companies that can cope; this is competion 101, no? if a company cannot deal with vital social and environmental regulation then it simply shouldn't be running. If social and environmental legislation is ignored in the name of profit then it society and the environment that is operating at a loss, and that loss is shared by all of us.

Externalities?

Does he talk much about the information theories in that book because he says nothing about it in the Discontents book... only how the IMF fecked everything up, the thick basterds.

In yours and cactuses discussions above - is there the Stiglitz assumption that human nature is self-preserving (in the vein that humans generally look for the best bargain i.e. the mechanism through which competition functions) an instinct that instinctively extends to the environment? A dog will not dirty it's own blanket yet we seem to do so, but if we had perfect information then maybe we'd be buying Ecover® not Daz® ?

905 wrote:

cactus flower wrote:

The motivation of a company is to make a profit. Environmental and social regulation reduces profit, to the extent that the company may not be viable.

And if a company is not viable then it is overtaken by companies that can cope; this is competion 101, no? if a company cannot deal with vital social and environmental regulation then it simply shouldn't be running. If social and environmental legislation is ignored in the name of profit then it society and the environment that is operating at a loss, and that loss is shared by all of us.

Good point.

Stiglitz got his Nobel for work on the disadvantage of lack of information.
The WTO and IMF operate behind closed doors, as does the EU Commission.

There's very little in Makig Globalization Work about his information work, he basically mentions it to remind us that he's a nobel laureate. I think the gist of it is that a truely even market would have equal access to information, info being a useful tool. Heres what Wiki say: http://en.wikipedia.org/wiki/Stiglitz#Information_Asymmetries

905 wrote:

There's very little in Makig Globalization Work about his information work, he basically mentions it to remind us that he's a nobel laureate. I think the gist of it is that a truely even market would have equal access to information, info being a useful tool. Heres what Wiki say: http://en.wikipedia.org/wiki/Stiglitz#Information_Asymmetries

Quote :

...there almost always exists schemes of government intervention which can induce Pareto (win/win) superior outcomes, thus making everyone better off [3]. Although these conclusions, and the pervasiveness of market failures, do not at all warrant the state intervening broadly in any economy, it makes clear that the "optimal" range of government recommendable interventions is definitely much larger than the traditional "market failure" school recognizes [4] For Stiglitz there is no such thing as an "invisible hand" [5].

Stiglitz and Klein are both Keynesians who think that the market can and should be intervened in, on grounds of efficiency as well as public good?

Whatever about Klein, who I'd agree with cookie about a lot of the time, Stiglitz is what I'd call a practical idealogue. He'll go with an idea as far as it's possible to go within reason. Generallty that idea is Kenes with him though. I wouldn't say he's a die-hard zealot though.

He's very big on the global regulation though, as long as it works. I think that's why he hates the WTO and the IMF so much, they devalue his stance.

905 wrote:

Whatever about Klein, who I'd agree with cookie about a lot of the time, Stiglitz is what I'd call a practical idealogue. He'll go with an idea as far as it's possible to go within reason. Generallty that idea is Kenes with him though. I wouldn't say he's a die-hard zealot though.

He's very big on the global regulation though, as long as it works. I think that's why he hates the WTO and the IMF so much, they devalue his stance.

You're a bit cynical about him 905 - he says he is concerned about people who are poor and who can't develop their countries because of bad policies and indifference. Do you think he is just a careerist dressing it up?

**** cactus has a post before this one

cactus flower wrote:

Stiglitz and Klein are both Keynesians who think that the market can and should be intervened in, on grounds of efficiency as well as public good?

905 wrote:

Whatever about Klein, who I'd agree with cookie about a lot of the time, Stiglitz is what I'd call a practical idealogue. He'll go with an idea as far as it's possible to go within reason. Generallty that idea is Kenes with him though. I wouldn't say he's a die-hard zealot though.

He's very big on the global regulation though, as long as it works. I think that's why he hates the WTO and the IMF so much, they devalue his stance.

Would you say the market is free? I wouldn't - therefore making intervention necessary to undo the trouble we get ourselves into.

He's pissed at those organisations alright but for me it makes the thing easier to read there being a big bad wolf in it. I wonder what they all say to him in his office when a new book comes out though.

Ok maybe he's not working there anymore.

cactus flower wrote:

905 wrote:

Whatever about Klein, who I'd agree with cookie about a lot of the time, Stiglitz is what I'd call a practical idealogue. He'll go with an idea as far as it's possible to go within reason. Generallty that idea is Kenes with him though. I wouldn't say he's a die-hard zealot though.

He's very big on the global regulation though, as long as it works. I think that's why he hates the WTO and the IMF so much, they devalue his stance.

You're a bit cynical about him 905 - he says he is concerned about people who are poor and who can't develop their countries because of bad policies and indifference. Do you think he is just a careerist dressing it up?

I think he talks himself up a small bit, and discusses how he'll single-handedly solve the world's problems if only they'd listem to him. I'm probably being very unfair on him. But I generally quite like him and his policies. Certainly the poor come before careerism I would think. There's nothing wrong in how I described him as above, a practical person is exactly who should be running things. Look where dogmatic Friedmanism got us.

Thanks for the discussion. I have to go now. I'd be very interested in having a go at the Russian Chapter next time, if anyone is interested.

Well Cactus Flower, tell us all about Russia from Klein's point of view. All I can recall is that Jefrey Sachs gets his hands dirty.

I finished Making Globalization Work today, yipee!

Woopee! I'll be very interested to know if you are convinced that the free market needs more controls, and if it would work if it was controlled.

I'm very interested in the fall of the USSR and introduction of free market measures at the moment because of Georgia: also it is one of the big issues that's been demanding my attention for quite a while.

Jeffrey Sachs was certainly by this account in the room in the Kremlin when Yeltsin announced that he had made an alliance with two other Soviet republics and thus broke up the Soviet Union.

Sachs was there as an adviser to Yeltsin. Yeltsin was hopeful that
I am reminded of how Trostky tried to raise loans for the embryonic Workers State from the government of Ramsay McDonald.

Yeltsin asked for and got from the new Parliament one year of government by decree in late 1991 he would "remake" the economy. At that stage he was seen as the protector of the people's democracy, and got what he asked for.
Poland had had a big western bail out and Russia expected the same.

Yeltsin, Klein said, had a team of Russian Friedmanite economic advisers, including Yegor Gaidar, known as "The Chicago Boys". At the same time he put in Yury Sokov in charge of the army and state security.

A Russian newpaper is quoted as saying "It will come as no surprise if they attempt to construct something like a homegrown Pinochet system, in which the role of the Chicago Boys will be played by Gaidar's team".