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| Reference Material |
| RP warned of risks in globalization, told to go slow on IMF-prescribed policies By E. de La Cruz July 5, 2001, Today The former chief economist of World Bank warned yesterday of risks associated with trade globalization that the Philippines is embracing, albeit at a slow pace, upon recommendation of the International Monetary Fund and the western world. Speaking at a forum sponsored by the Philippine Economic Society, Professor Joseph Stiglitz of Stanford University propounded that although such risks can be managed, they may be greater than the benefits to be reaped from globalization. In his view, globalization is �not inevitable� as he counted China and Malaysia among the countries that opted for a restrictive participation in the global economy and thus kept their economies stable despite the financial storms in the neighborhood. Therefore, he said, developing countries like the Philippines can choose not to be too aggressive in embracing globalization. Stiglitz said that Malaysia�s capital controls are being criticized by both the western powers and the IMF despite the glaring fact that the country had the shortest economic downturn in the East Asian region during the recent financial crisis.. He gave China an �A� for its �well-managed� and sound macroeconomic policy that ensured growth amid the regional storm. First in Stiglitz� list of risks is the possible increase in unemployment. �Globalization is too often associated with job destruction rather than job creation,� he said. As an example, he cited the opening of Russia�s economy in 1991. However, as recommended by the IMF, Russia adopted a tight monetary policy through high interest rates. The result: not much investment came in and, thus, no jobs were created. Pointing to Argentina as another country under IMF tutelage, he said that the country did liberalize and privatize its banking industry. But it neglected to push the banks to lend aggressively to small and medium enterprises. Thus, Stiglitz said, Argentina suffered zero growth, borrowed funds from foreign creditors and ended up saddled by a debt problem. Unemployment in that country, he said, has been at double-digit since 1995. A sound macroeconomic policy must also be in place before an economy opens its doors to globalization, he then counseled��.. Stiglitz noted there are �a variety of ways� to succeed in managing risks posed by globalization. And some countries, he added, have in fact been successful in this area, citing Taiwan and South Korea, which manage risks �their own way.� How these risks are managed is the responsibility of the State, he said. That is why, he pointed out, the issue of good governance should be at the top of the development agenda of every country, including the Philippines. Stiglitz, a senior fellow at the Brookings Institution, was senior vice-president and chief economist of the World Bank from 1997 to February 2000. Previously, he was chairman of the US Council of Economic Advisers. He is known internationally for his critical views on IMF policy prescriptions for developing countries. *** See also Tony Abaya's columns: Mar Roxas on Free Trade and More on Free Trade |