2003 Articles

Globalization and Growth in Emerging Markets and the New Economy

Stiglitz, Joseph E.

While today it is recognized that globalization may have adverse effects on particular groups, in this essay, I want to set forth some of the reasons why globalization, when not managed well, may actually be adverse to overall economic growth, and the ability of countries to take advantage of the advances associated with the New Economy. Not just the poor may suffer. There are several channels through which the adverse effects may run. In presenting these adverse effects, one needs to keep in mind the objective of the analysis: Because I believe that globalization can be a powerful positive force, I believe that it is imperative that one must face up to the downside risks, and design programs, policies, and institutions that address these concerns. If this is done, globalization will not only be more acceptable, it will be more beneficial. The fact that, say, trade on average is beneficial to growth is of limited relevance to a particular country, if it sometimes is not, or it brings benefits on average, but enormous costs on particular groups. Countries worry that they will be off the regression line--and in the wrong direction.