If

Stiglitz writes about developing countries with natural resources and how they have to manage their resources to develop. He sights many countries that have failed to take advantage of the rich oil reserves/ minerals due to corruption, inequality, exploitation, fighting and unwise spending of the riches. His basic argument makes sense. Developing countries with resources must be wise with how they extract/sell them and use the income from the sales. If they can do that then they have a good foundation for development. Moreover, if the developed countries can be less exploitative and more supportive of developing countries then these countries' situations look hopeful.

That raises another question. What then are left for the developing countries without much natural resources? What kind of strategies can they take? I suppose these countries have their comparable advantages but how can they possibly build themselves up? I suppose there is some hope becasue some of the developed countries are small countries with little natural resources and they have successfully developed.

I realized I used a lot of "if"s to talk about development. If only we can figure out what actually works...

Balance

Balance is important in most of the thing that can be balanced in life. In soccer, teams typically try to balance their game by using formations such as 4-4-2 / 4-3-3 not 2-2-6. Students on the other hand try to balance the time. In the FL chapter 25 reading, Stiglitz and Squire writes about the importance of balance in development. The balance between state run development and unfettered market are absolutely crucial. Neither extreme are likely to lead to development. Stiglitz argues that other ingredients of success are capabilities of individuals and interest of communities. It makes sense to say that development fails if the individuals are incompetent or the communities are indifferent. I think raising the capabilities of individuals and involving the communities can be achieved by strong government action on education and also the work of the market in providing resources.

Wolf also seems to try to balance his argument in this chapter in that he admits the developing countries' needs for protective measures against completely open market. Wolf still believes in the free market to solve everything but he does realize current global market is not the perfect free market that he advocates. He criticizes us developed countries for hypocrisy and rightly so. We have much to improve on our side of the issue of development such as tariff/ subsidies on agricultural imports /domestic products. If we are committed to reducing global poverty we must be willing to pay the price.

The role of the government

Martin Wolf has a strong opinion on why globalization under free market works. He believes in the effectiveness of the market to work its course. He does acknowledge the need for the state but he thinks the state has a little role as he writes "The role of government is to be a humble and honest servant." He mentions that the state should be there to ensure the basis of economy such as stability, transparency, infrastructure, education and environmental protection. But he thinks governments do too much. I don't necessary agree with him. As a developing country try to develop, their governments can and perhaps should protect baby industries in that country rather than completely opening itself up to free trade. I think some East-Asian countries have done that with success. When countries do develop, they need to have some industry if they have capable labor. For the countries that lack capable labor, they need the states to provide better education so that their people may gain the capability that is required for them to promote growth.

I do think a lot of what Wolf says makes sense. The state must provide education, adequate public health, infrastructure, right set of conditions for business. However for many of the developing countries, these are the things they don't have precisely because of their weak governments. For these countries, the government must to do more and must do better. Otherwise no business will find these countries worth investing in. I don't think wolf thinks much about developing countries.

Injustice and multinational corporations*

In the reading Stiglitz gives many examples of exploitation conducted by multi-national companies; many of them have to do with their disregard of environment (just a few examples here: Union Carbide screw up in India; Ok Tedi in Papua New Guinea). He argues that these companies can get away with these deeds (or exploite people in developing nations) due to the fact there isn't a global judicial system and they also have political powers to pressure governments of developing countries by threatening to leave if the regulations tighten up. Often times the people responsible for making bad decisions can hide in the veils of corporations and don't pay for their bad decision making. He thinks this is a huge problem that needs to be fixed.

On the other hand, Wolf thinks we don't need to worry about these corporations too much. He argues that these companies are not as powerful as nations and they are in fact improving the conditions of the people in developing countries because they are in a terrible condition to start with. Before I go on to write about how much I hate his writing, I do partially agree that these companies are probably making the living conditions slightly better than what they had assuming most of the companies aren't polluting the area around their facilities. But this doesn't mean they aren't exploiting the people in developing nations. I think these companies must provide adequate wages, working environment as well as safety regulations that is as tight as what they are in the US. People are pretty much the same everywhere, a pollutant that is harmful at a little amount is as harmful to anyone. Any sort of pollutant /material that are regulated in the developed countries must be used under the same standard. Wolf simply doesn't see that. He also doesn't seem to believe that large corporation can pressure developing countries' politics. I don't have any sort of authority to make a judgement here but I think it's pretty fair to assume that developing countries that need money flow desperately would be more vulnerable to this pressure and also many of these countries have dictators that have little interest in the living conditions of the people and these dictators would probably be vulnerable to this pressure.

I just feel pretty disturbed after reading these articles. What am I going to do about it then? Well...that's a question for another day.

IMF and poor countries

Reading Stiglitz made me think about IMF and how they work with poor countries. He had much to question about IMF's policies and criticised IMF for working for the lender's (banks and such from developed nations) benefit rather than the poor countries' benefit. He talked about how IMF lends aid when a country has a crisis yet the money is mostly spent to repay the debt that the country owe the lenders in the developed nations. So the money does not stay in the poor nations. He also questioned some of the IMF's policies and how they have worsened some countries financial situation, more specifically countries in Southeast Asia and some Latin American countries.

It was interesting to read about Argentine where they had fallen into a crisis and decided to follow their own fiscial policy that differs from IMFs and Argentine achieved high rate of economic growth following their own policy. Upon reading this, I had to wonder what's the use of IMF if it doesn't work?

I've been reading this book written by Robert Klitgaard, a former advisor of the World Bank, called Toropical Gangsters in which he gives a first-hand account of political reform in Equitorial Guinea during the 1980s. In the book, he writes about this common feeling the ministers of equitorial Guinea have towards IMF, the World Bank and other foreign aid in general. He calls it "us against them" feeling in that they just feel wronged and feel they are not helped by the aid IMF or the World Bank can offer. Equitorial Guinea receives IMF's fund towards the end of this book(towards the end of 80s that is) and we know that this fund has failed to improve the situation in Equtiroal Guniea.

After reading these, I'm having it hard to have any faith in IMF.

Drugs

In CH 4 of his book "Making Globalization Work", Stiglitz criticizes the pharmaceutical companies for their profit seeking behavior that results in deaths of people in the developing countries. He sees how these companies try to protect their drugs from generic drugs that can be made and sold so much cheaper in the countries that really need them. He mentions the HIV drugs as an example. HIV is so prevalent in African nations that are poor. Affordable HIV drugs would save millions of African lives yet the pharmaceutical companies are not willing to provide these drugs at discount rate or allow local pharmaceutical companies to produce generic drugs there.

Pharmaceutical companies have little incentive to research for diseases that are not prevalent in the developed countries either because they won't be able to make money. They are profit seeking company after all and they need to produce profit. Drug research and development is not a cheap enterprise. It normally costs pharmaceutical companies a few hundred million dollars and 10 years to produce a drug that is marketable. It also have fairly low success rate as well. However that shouldn't be an excuse for these companies to refuse providing drugs for the poor who can be saved by these drugs.

Research and development for many disease affecting developing countries are neglected. Malaria is an example of disease that have little effects on developed nations. Between 1975 and 1996, out of 1,223 new drugs developed, only 3 were antimalarial drugs. On the contrary about 25 % of them were drugs related to heart conditions and another 25 % of them were drugs related to mental problems. Pharmaceutical companies have no or little incentives to carry out research for these diseases.

Some form of public private partnership is necessary to solve this problem. In a public private partnership, public organizations such as WHO, NIH and also private foundations such as Gates Foundations pay for pharmaceutical companies and universities to conduct research using their facilities and employees. So the incentive is there for pharmaceutical companies to produce medicine for diseases that affects developing countries.

The internatiol market as it is fails to provide medicine for too many people in developing countries.