Overriding economic issues
Reviewed by Shelley Walia

Freefall: Free Markets and the Sinking of the Global Economy
by Joseph Stiglitz.
Allen Lane, London. Pages 361. Rs 499.

Freefall: Free Markets and the Sinking of the Global EconomyI first met Joseph Stiglitz, the Economics Noble laureate, in Oxford before his famous lecture in the Examination Halls where he would be speaking on the fallout of globalisation and the mechanisms by which developed countries exert an excessive influence over developing nations. Dr Stiglitz, I remember, argued that through tariffs and subsidies the world is being both economically and politically destabilised. The lecture was a devastating critique of the dubious role of economic institutions so unashamedly supported by the developed nations, indicating the hidden agendas of the rich nations that control the International Monetary Fund, the World Bank and the World Trade Organisation in the service of universal justice and neo-liberalism.

Stiglitz has always been profoundly concerned with makeshift economic policies that take knee-jerk steps of hurried bail-outs in the face of a crisis, but as seen lately, the backing remains always for the Wall Street at the cost of the Main Street. For Stiglitz, there is an urgency for a paradigmatic shift that will introduce a new grammar into the financial architecture. Highly critical of George Bush and Barack Obama, Stiglitz emphasises that the off-loading of the financial burden has to be shared by both the rich and the poor. The recession of 2008 saw millions lose their homes, jobs and savings. In China alone 20 million lost their livelihood. Stiglitz therefore, is disillusioned by the promise of free market economics.

He goes on to sound a warning against living in such a world of illusion where modern economics is made out to be the antidote to economic fluctuations. The prevailing economic doctrines of "unfettered markets", of deregulation as the only solution for innovation, or the independence of Central Banks completely failed to live up to the utopian dreams of "even the high priest of that ideology, Alan Greenspan".

Such flawed economic perspectives form underpin the focus of this book. Stiglitz puts full responsibility not only on the governments to immediately take steps to tide over the problem and ensure that economies are rescued, but also on the markets to understand their pivotal function. Moreover, the "nonmarket and nongovernmental institutions" must also realise that they also have a constructive role intended to bring about a balance of responsibility. Crisis management and a sincere concern with the ramifications of the crisis are two aims behind Stiglitzís endeavour to understand the need for reinventing economic policies. Expediency has to be replaced by imaginative programmes that finally eradicate the wide gap between the rich and the poor.

Interestingly, the Philippines government advertisement in the Fortune magazine in 1975 reads as "To attract companies like yours `85 we have felled mountains, razed jungles, filled swamps, moved rivers, relocated towns `85 all to make it easier for you and your business to do business here". Herein lies enough evidence of the power exercised by global economics on the Third World nations. This is the result of neoliberalism, the embodiment of free market economy that states the rules of the world we live in.`A0But as economies are liberalised democratic forces gradually take a beating and the client states are engaged to reign in the hostility of the masses.`A0Standing on the fringes, the Third World becomes an onlooker of the steamrolling effect of Western capitalism.

Stiglitz in an agitational and inspirational tone argues for strong, transparent institutions needed to address overriding economic issues. There is the possibility of bringing to a halt the recent economic collapse with the tightening of fiscal controls on banks, and by shaping policies to make growth balanced and sustainable globally. Moreover, liberalising trade as well as revamping the International Monetary Fund, so that smaller nations play a significant role in keeping with their emerging economies will also go a long way in countering the crisis. President Obama, along with other world leaders, need to immediately set examples through policy decisions that will convey the urgency of the economic challenges in the coming years. One positive move indeed has been the G8 finally admitting other emerging economies into a larger club of G20, thereby superseding the elitist-dominated predatory complexion of a club that had become outdated.