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Stiglitz, globalization, welfare state « Previous | |Next »
April 4, 2006

Joseph Stiglitz, writing in the The Nation, says that:

Globalization is often viewed as posing a major threat to "capitalism with a human face." Trade liberalization puts downward pressure on unskilled wages (and increasingly even skilled wages), increasing inequality in more developed countries. Countries trying to compete are repeatedly told to increase labor-market flexibility, code words for lowering the minimum wage and weakening worker protections. Competition for business puts pressure to reduce taxes on corporate income and on capital more generally, decreasing funds available for supporting basic investments in people and the safety net.

Isn't that what is in happening in Australia today? One of the great political achievements of the twentieth century, a social contract between capital and labour that provided far more economic security and prosperity for working Australians is being torn up in response to the pressures of global capitalism? And we have this scenario

How do we become highly integrated into the global economy, remain a highly successful economy that still provide strong social protections and make high levels of investments in people? Is this possible? Is the social democratic project?

Stiglitz thinks so. He says:

Coping with globalization entails recognizing both the consequences of globalization and the limitations in the standard responses. Increased education is important, but it is not enough. At this time we should make taxation more progressive in order to offset the economic forces increasing inequality, not decrease the degree of progressivity as we have done in the past five years. We should strengthen our safety nets, not weaken them.

| Posted by Gary Sauer-Thompson at 8:33 PM | | Comments (2)


I just printed this off today for bedtime reading so I might get back to you later on it. Stiglitz is interesting, as he had a road to Damascus conversion sometime during his stint at the IMF, which was probably the principal enforcer of Washington Consensus 'remedies' as part the conditionality attached to economic bailouts. Must have been a bloody big blinding flash.

Gary, I'm probably too much a captive of current ideology (or more than I'd like to admit, perhaps!) but I think there must be better ways to make markets work in service of people, rather than (a) the opposite or (b) some centralised mechanism. As an example, Marcellus Andrews' Opportunity Fund. Too fraught with moral hazard and he skates over administration costs (and is naive, in my view, about it being non-politically influenced). Why not better design tax/welfare rates so that individuals are induced to save more, rather than consume so much? I know I'm being simplistic, but I don't claim to be an economist.