Posts Tagged ‘world-bank’
|Joseph E. Stiglitz|
Joseph Eugene “Joe” Stiglitz (born February 9, 1943) is an American economist and a member of the Columbia University faculty. He is a recipient of the John Bates Clark Medal (1979) and the The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel (2001). Former Senior Vice President and Chief Economist of the World Bank, he is known for his critical view of globalization, free-market economists (whom he calls “free market fundamentalists“) and some international institutions like the International Monetary Fund and the World Bank. In 2000 Stiglitz founded the Initiative for Policy Dialogue (IPD), a think tank on international development based at Columbia University. Since 2001 he has been a member of the Columbia faculty, and has held the rank of University Professor since 2003. He also chairs the University of Manchester‘s Brooks World Poverty Institute and is a member of the Pontifical Academy of Social Sciences. Stiglitz is the most cited economist in the world, as of June 2008.
- Whenever there are “externalities”—where the actions of an individual have impacts on others for which they do not pay or for which they are not compensated—markets will not work well. But recent research has shown that these externalities are pervasive, whenever there is imperfect information or imperfect risk markets—that is always.
- The real debate today is about finding the right balance between the market and government. Both are needed. They can each complement each other. This balance will differ from time to time and place to place. 
In the opening remarks for his prize acceptance “Aula Magna” , Stiglitz said:
- “I hope to show that Information Economics represents a fundamental change in the prevailing paradigm within economics. Problems of information are central to understanding not only market economics but also political economy, and in the last section of this lecture, I explore some of the implications of information imperfections for political processes.” Stiglitz, Aula Magna
In an interview, Stiglitz explained further:
- “The theories that I (and others) helped develop explained why unfettered markets often not only do not lead to social justice, but do not even produce efficient outcomes. Interestingly, there has been no intellectual challenge to the refutation of Adam Smith’s invisible hand: individuals and firms, in the pursuit of their self-interest, are not necessarily, or in general, led as if by an invisible hand, to economic efficiency.” 
Stiglitz resigned a month before his term expired at the World Bank, and left the Bank on January 2000. The Bank’s president, James Wolfensohn, announced Stiglitz’s resignation in November 1999 and also announced that Stiglitz would stay on as “special advisor to the president”, and would chair the search committee for a successor.
- “Joseph E. Stiglitz said today [Nov. 24, 1999] that he would resign as the World Bank’s chief economist after using the position for nearly three years to raise pointed questions about the effectiveness of conventional approaches to helping poor countries”.
In this role, he continued criticism of the IMF, and, by implication, the US Treasury Department. In April 2000, in an article for the New Republic, he wrote on the IMF:
- “They’ll say the IMF is arrogant. They’ll say the IMF doesn’t really listen to the developing countries it is supposed to help. They’ll say the IMF is secretive and insulated from democratic accountability. They’ll say the IMF’s economic ‘remedies’ often make things worse – turning slowdowns into recessions and recessions into depressions. And they’ll have a point. I was chief economist at the World Bank from 1996 until last November, during the gravest global economic crisis in a half-century. I saw how the IMF, in tandem with the U.S. Treasury Department, responded. And I was appalled“.
The article was published a week before the annual meetings of the World Bank and IMF and provoked a strong response. It proved too strong for Summers and, yet more lethally, Stiglitz’s protector-of-sorts at the World Bank, Wolfensohn. Wolfensohn had privately empathised with Stiglitz’s views, yet this time Wolfensohn was worried for his second term, which Summers had threatened to veto. Stanley Fisher, deputy managing director of the International Monetary Fund, called a special staff meeting and informed at that gathering that Wolfensohn had agreed to fire Stiglitz. Meanwhile, the Bank’s External Affairs department told the press that Stiglitz had not been fired, his post had merely been abolished (see US Hegemony and the World Bank, pp 222-223, by Wade in 2002, Review of the International Political Economy). 
As food and fuel prices continue to increase the world must look to new patterns of consumption and production
Around the world, protests against soaring food and fuel prices are mounting. The poor – and even the middle classes – are seeing their incomes squeezed as the global economy enters a slowdown. Politicians want to respond to their constituents’ legitimate concerns, but do not know what to do.
In the United States, both Hillary Clinton and John McCain took the easy way out, and supported a suspension of the gasoline tax, at least for the summer. Only Barack Obama stood his ground and rejected the proposal, which would have merely increased demand for gasoline – and thereby offset the effect of the tax cut.
But if Clinton and McCain were wrong, what should be done? One cannot simply ignore the pleas of those who are suffering. In the US, real middle-class incomes have not yet recovered to the levels attained before the last recession in 1991.
When George Bush was elected, he claimed that tax cuts for the rich would cure all the economy’s ailments. The benefits of tax-cut-fuelled growth would trickle down to all – policies that have become fashionable in Europe and elsewhere, but that have failed. Tax cuts were supposed to stimulate savings, but household savings in the US have plummeted to zero. They were supposed to stimulate employment, but labour force participation is lower than in the 1990s. What growth did occur benefited only the few at the top.
Productivity grew, for a while, but it wasn’t because of Wall Street financial innovations. The financial products being created didn’t manage risk; they enhanced risk. They were so non-transparent and complex that neither Wall Street nor the ratings agencies could properly assess them. Meanwhile, the financial sector failed to create products that would help ordinary people manage the risks they faced, including the risks of home ownership. Millions of Americans will likely lose their homes and, with them, their life savings.
At the core of America’s success is technology, symbolised by Silicon Valley. The irony is that the scientists making the advances that enable technology-based growth, and the venture capital firms that finance it were not the ones reaping the biggest rewards in the heyday of the real estate bubble. These real investments are overshadowed by the games that have been absorbing most participants in financial markets.
The world needs to rethink the sources of growth. If the foundations of economic growth lie in advances in science and technology, not in speculation in real estate or financial markets, then tax systems must be realigned. Why should those who make their income by gambling in Wall Street’s casinos be taxed at a lower rate than those who earn their money in other ways? Capital gains should be taxed at least at as high a rate as ordinary income. (Such returns will, in any case, get a substantial benefit because the tax is not imposed until the gain is realised.) In addition, there should be a windfall profits tax on oil and gas companies.
Given the huge increase in inequality in most countries, higher taxes for those who have done well – to help those who have lost ground from globalisation and technological change – are in order, and could also ameliorate the strains imposed by soaring food and energy prices. Countries, like the US, with food stamp programmes, clearly need to increase the value of these subsidies in order to ensure that nutrition standards do not deteriorate. Those countries without such programmes might think about instituting them.
Two factors set off today’s crisis: the Iraq war contributed to the run-up in oil prices, including through increased instability in the Middle East, the low-cost provider of oil, while biofuels have meant that food and energy markets are increasingly integrated. Although the focus on renewable energy sources is welcome, policies that distort food supply are not. America’s subsidies for corn-based ethanol contribute more to the coffers of ethanol producers than they do to curtailing global warming. Huge agriculture subsidies in the US and the European Union have weakened agriculture in the developing world, where too little international assistance was directed at improving agriculture productivity. Development aid for agriculture has fallen from a high of 17% of total aid to just 3% today, with some international donors demanding that fertiliser subsidies be eliminated, making it even more difficult for cash-strapped farmers to compete.
Rich countries must reduce, if not eliminate, distortional agriculture and energy policies, and help those in the poorest countries improve their capacity to produce food. But this is just a start: we have treated our most precious resources – clean water and air – as if they were free. Only new patterns of consumption and production – a new economic model – can address that most fundamental resource problem.
Jun 16 08, 01:54pm
I find your article to be interesting, but how can one correct the problems, using the tools that helped to create them in the first place?
You proclaim a need for a ‘new economic model’ but then base this ‘new model’ on ‘patterns of consumption and production.’ This assumes that equilibrium in food prices and oil prices is possible. If not, then equilibirum’s deviant cousin raises its head – ‘dis-equilibirum.’
Questions that should be asked: Has there ever been an equilibirum in food prices? If so, how can one measure this equilibirum?
Once we do away with the concepts of equilibirum, patterns of consumption and production, only then will we be able to build a new economic model.
Jun 16 08, 02:17pm
‘To start with , rich nations can impose a green tax or consumption tax on the natural resources their citizens consume – things like water, oil, coal, et al. The tax could be used to build a fund that will invest in renewable energy sources (solar/wind et al) in poorer nations.’
That’s oversimplistic. There are plenty of poorer people in your ‘rich’ nations who are already unable to afford fuel and transport. A blanket tax would make life much worse for them, and the rich would just be able to get around it by paying their way out. And there are plenty of ‘poorer nations’ which, in their current state, would be absolutely incapable of handling any energy-systems we gave them simply because they are so badly misgoverned.
We need a more multifaceted approach to the whole problem.
As Stiglitz comments, we need brakes on financial markets.
Then we need more rational ways of distributing food – for example, rather than having luxury out-of-season vegetables grown in Africa and feed Africans on imported Chinese rice, we need Africans feeding themselves.
We also need to step on countries like Zimbabwe where it’s futile to bother growing food because it either gets confiscated or burned.
And we need to get rid of the idea that goods should be built shoddily and frequently replaced. That’s one of the main environmental sins of modern commerce.
And finally, we need to make international aid dependent on the acceptance of proper contraceptive education and use.
The winner of the 2001 Nobel prize for economics was in London last week for a financial conference near Paddington – and was decidedly bearish about the US, British and global economies. Here are edited highlights of his conversation with the Sunday Times
by F. William Engdahl
Global Research, July 10, 2008
A secret study by the World Bank, which reportedly has not been made public on pressure from the Bush Administration, concludes that bio-fuel cultivation in especially the USA and EU are directly responsible for the current explosion in grain and food prices worldwide. The US Government at the recent Rome UN Food Summit claimed that “only 3% of food prices” were due to bio-fuels. The World Bank secret report says that at least 75% of the recent price rises are due to land being removed from agriculture—mainly maize in North America and rapeseed and corn in the EU—in order to grow crops to be burned for vehicle fuel. The World Bank study confirms what we wrote more than a year ago about the madness of bio-fuels. It fits the agenda described in the 1970’s by Henry Kissinger, namely, ‘If you control the food you control the people.’
According to the London Guardian newspaper which has been given a copy of the suppressed report, the World Bank study was completed in April, well before the June Rome Food Summit, but was deliberately suppressed as “embarrassing to the position of the Bush Administration.” The President of the World Bank, Robert Zoellick, is a former top Bush Administration official. Washington is trying to use a crisis which its bio-fuel subsidies created, since a new Farm bill passed in 2005, to advance the spread of Genetically Manipulated Organisms such as GMO maize, soybeans, rice and other crops patented by Monsanto and other “gene giants.”
Their strategy is to use the explosive rise in grain prices worldwide, a rise fuelled by hedge funds and troubled US and European banks and investment funds pouring billions of dollars into speculation that grain prices will continue to soar. In other words, the food “crisis” is a crisis of speculation in food futures. The planned EU and USA bio-fuel acreage quotas and the periodic droughts and floods in key growing regions such as the USA Midwest then provide backdrop for speculative price run-ups. But the main driver is that tens of millions of hectares of prime agriculture land in the world’s two largest food export regions—the USA and the EU– are being permanently removed from food production in order to grow raw material to be burned for vehicle fuel.
The suppressed study
The World Bank study, the most detailed analysis of the global food crisis so far, concludes that bio-fuels have forced “food prices up by 75%.” That is far more than previous estimates. That is a damning refutation of the politically-motivated US Department of Agriculture estimate that plant-derived fuels add only 3% to food prices. The report is expected to increase pressure on the European Union governments as well as Washington to change their present bio-fuel subsidy and support policies.
The report has been leaked just days before the important annual Group of 8 industrial nation leaders’ summit held in Hokkaido Japan. The food crisis will be a major topic there as pressure on governments grows to do something.
The World Bank report estimates that doubling and tripling of world food prices in the past three years have forced an added 100 million people below the poverty line. That has triggered food riots from Bangladesh to Egypt.
The report as well calculates that even the successive droughts in Australia and other major food regions have had only a “marginal” impact on food prices.
Within the EU, for example, as of April all vehicles in the UK must contain fuel with at least 2.5% bio-fuel. The EU has in place a target of mandatory 20% by 2020, a staggering amount.
George W. Bush has cynically claimed higher food prices are merely due to higher demand from India and China. The leaked World Bank study refutes that: “Rapid income growth in developing countries has not led to large increases in global grain consumption and was not a major factor responsible for the large price increases.”
“Without the increase in bio-fuels, global wheat and maize stocks would not have declined appreciably and price increases due to other factors would have been moderate,” the World Bank report states. The basket of food prices examined in the study rose by 140% between 2002 and February 2008. Higher energy and fertiliser prices accounted for an increase of only 15%. Bio-fuels have been responsible for a 75% jump over that period.
The study demonstrates that production of bio-fuels has distorted food markets in three main ways. First, it has diverted grain away from food for fuel, with over a third of US corn now used to produce ethanol and about half of vegetable oils in the EU going to production of bio-diesel. Second, farmers have been encouraged to set land aside for bio-fuel production. Third, it has sparked financial speculation in grains, driving prices up higher.
The real agenda behind the food crisis
The World Bank study is the first to include all three factors. What is missing from the World Bank study however is the longer-term geopolitical agenda behind the present global food and energy crises. As I document in great detail in my book, Seeds of Destruction: The Hidden Agenda of Genetic Manipulation, the long term agenda of powerful leading circles in the West, particularly represented in tax exempt private foundations such as the Rockefeller, Ford and Gates foundations and the private wealth behind them, is a long term agenda of population reduction, in the interests of the global economic and financial elites.
Food scarcity, higher prices for basic foods in developing countries as well as control of food seeds through patent and Terminator suicide seed sales by Monsanto, Syngenta, DuPont, Dow, BASF, Bayer and a few select agriculture chemical seed giants—the “horsemen of the GMO Apokalypse,” have been developed to advance the agenda of massive depopulation of the developing world.
The policy goes back, as the book documents in detail, to the early years of the 20th Century when Rockefeller, Carnegie, Harriman, Gamble, H.G. Wells, Margaret Sanger, and other wealthy circles backed the development of eugenics research. The Rockefeller Foundation financed the eugenics and forced sterilization research at the Berlin Kaiser Wilhelm Institute (today’s Max Planck Institute) until it became too politically hot in 1939.
. After the end of the war, Rockefeller and others in the eugenics movement decided for political reasons to change the name of eugenics. The new name they chose was “genetics.” GMO is a project, based on wrong science, financed with over $100 million of private money from the Rockefeller Foundation. The ultimate aim is for the first time in history to control life on the planet. As Henry Kissinger put in during the 1970’s food crisis, “control the food and you control the people.”
In this light it is worth noting that as a solution to a crisis which it deliberately created by its massive government subsidies to farmers to grow bio-fuels instead of food, the Bush Administration made and continues to make a major pressure at the Rome Food Summit in early June and after, to open the doors to GMO as the alleged “solution” to world hunger.
On June 13, just after the Rome UN Food Summit, John Negroponte, US Deputy Secretary of State, stated, “”We therefore are strongly encouraging countries to remove barriers to the use of innovative plant and animal production technologies, including biotechnology,” adding, “Biotechnology tools can help speed the development of crops with higher yields, higher nutrition value, better resistance to pests and diseases, and stronger food system resilience in the face of climate change.” Washington and the GMO companies now use the more deceptive term, “biotechnology” instead of the controversial GMO term, in a linguistic ploy to overcome opposition.
Independent scientific studies and countless farmer reports have shown that long-term planting of GMO or bio-tech crops as the gene giants prefer to call it, far from giving higher crop yields, lowers the yields and development of resistant “super-weeds” usually mean more, not less Roundup or other GMO-paired chemical herbicides and pesticides are needed. In short the glorious claims for GMO are marketing fraud.
According to highly informed reports, Washington had been told that Pope Benedict XVI would endorse the spread of GMO, something the Vatican until now has been strongly opposed to on moral and other grounds, as a solution to world hunger. At the last minute that endorsement did not happen for reasons only the Pope perhaps knows. Groups like Greenpeace and the London Independent newspaper in the days before the Rome UN summit reported interviews with senior Church figures stating that the policy reverse was expected.
There is strong circumstantial evidence that the entire Rome UN Summit was orchestrated by Washington, London’s Gordon Brown and other Malthusian governments in part to try to convince the Pope to reverse its policy on GMO. The Roman Catholic Church today stands as one of the most important moral barriers to widespread acceptance of GMO in many developing countries such as the Philippines and Latin America.
The leak of the World Bank report adds a dramatic new element into what is becoming one of the major political issues along with oil price manipulation.
F. William Engdahl is a leading analyst of the New World Order, author of Seeds of Destruction, Global Research,2007 [see below], and the best-selling book on oil and geopolitics, A Century of War: Anglo-American Politics and the New World Order,’ His writings have been translated into more than a dozen languages.