Stanley Fischer lecture presents promise and challenge of globalizationBy Matt Golosinski
5/1/2004 - The debate surrounding the merits of globalization continued at the Kellogg School on April 14 when Stanley Fischer addressed several hundred Kellogg faculty, students and staff in the Donald P. Jacobs Center.
Fischer is president of Citigroup International and the former first deputy managing director of the International Monetary Fund. He spoke at Kellogg as the guest of the Kellogg Emerging Markets Club.
In stark contrast to Joseph Stiglitz, the former vice president and chief economist for the World Bank who spoke at Kellogg in November and expressed his largely critical views on the current globalization dynamics, Fischer appeared as a globalization advocate.
“Globalization, on the whole, is the best way to run individual economies and the global economy,” said Fischer, who cited World Bank numbers suggesting that worldwide poverty rates are decreasing. China and India in particular, he said, have benefited from instituting trade-friendly policies over the last two decades.
“There’s been a lot of progress, despite continents such as Africa where poverty has actually increased,” Fischer said.
Even so, he noted that the current global economic paradigm presents challenges that must be addressed if the model’s promise is to be fully realized. Some restructuring of global trade will be required to ensure that most countries can participate meaningfully in the economic dynamo that produced what Fischer said was a $5 trillion increase in world trade during the 1990s.
Fischer outlined what he saw as the three major complaints leveled at globalization: 1. It isn’t working, so the poor are getting poorer; 2. The trading system is unfair and; 3. The international financial system is unstable and disadvantageous for poorer countries.
With reference to the first complaint, Fischer said it was “almost entirely wrong” and that the last decade of the last century saw an unprecedented growth in income, albeit largely concentrated in Asia where Fischer said some 123 million people were lifted out of poverty.
Fischer agreed, in part, with the second complaint, admitting that tariffs on products, especially agricultural products — which is most likely what the poorest countries have to trade — are unfair.
“This is a valid complaint,” said Fischer, “but even so somehow the countries of East Asia have made globalization work.”
Fischer noted that a bloc of developing countries — the so-called G20+ — have been forcing negotiations on world trade to move in the “right direction, especially with regard to [arguing for] concessions on agriculture” from more affluent countries.
As for the complaint about instability in the international markets, Fischer conceded that the financial crises of the 1990s, such as those involving Mexico and Argentina, were the result of “capital flows reversing themselves very fast.” In Fischer’s estimation, these crises were significantly influenced by pegged exchange rates set by the government rather than market forces. These pegged rates, he said, have largely been discarded, and so the likelihood of them precipitating a financial crisis again is minimal.
To best combat this economic instability, Fischer argued for strengthening financial institutions worldwide.
He also acknowledged that one of the elements generating the most disturbance with respect to globalization is the fear of creating a worldwide mono-culture, one rooted in American socio-political values. While Fischer said he understood the desire for countries to retain their national cultures, he suggested that market forces should serve as the ultimate arbiter.
Fischer’s lecture was sponsored by the Kellogg School Emerging Markets Club, a student-run organization whose agenda involves developing future business leaders who understand the issues and rewards associated with globalization in the developing world.