The term “globalization”, that was on the lips of journalists and social scientists ten years ago, now is found only as the synonym for the word “crisis”. The fever of global financial markets threatens to complete the historical cycle that has just begun over 30 years ago. Nowadays, destructive crises of currency knocked Asian, Latin American, Russian, and Turkish markets. Nevertheless, there are many economists, who criticize globalization; on the other hand, there are those who continue to advocate this phenomenon.
One of the avid critics of globalization in today’s form appears to be Joseph Stiglitz. Joseph Stiglitz is a Nobel laureate in economics, the former Chair of the Council of Economic Advisers of President Bill Clinton, and former Vice President of the World Bank. Stiglitz is Keynes follower and the opponent of monetarists who support the idea of unlimited market and globalization. Therefore, Joseph Stiglitz is an anti-globalization economist.
Friedrich Hayek is another one Nobel laureate in the field of economics considered the creator of the modern neoliberal globalization. Unlike Stiglitz, he is famous for the support of classical liberalism ideas and free market capitalism. He was an opponent of socialism and collectivism. The recipe formulated and proposed by Hayek proved its demand in the late 70s.
In 1980, the policy of trade liberalization has caused the access of most of the developing countries to imports and export access to developed countries. Furthermore, the enormous breakdown of the cost of transport and communication has created such phenomenon as global economics of universal distribution and production. It was the first step towards globalization.
Continuing the liberal tradition of Adam Smith, Hayek advocates the concept of minimal state’s involvement. His personal contribution lies in criticism of the idea of “social justice”. In his opinion, this concept was hidden to protect corporate interests of the middle class. He stands for the abolition of state intervention in social and economic fields. His program includes the abolition of regulation, privatization, and reduction programs to combat unemployment, the elimination of allowances for housing and rent control, reduction of expenditure on social security, and the limitation of the power of the trade unions. Most of these ideas are now lying at the bottom of globalization. Therefore, we can confidently say that Hayek was the supporter of globalization in its initial form.
Contrarily, Joseph Stiglitz is a critic of globalism policy. In other words, Stiglitz believes that globalization has enormous potential to improve the lives of people, including those in developing countries. For instance, the globalization of knowledge has led to the improvement of health and prolonged life expectancy.
At the same time, Stiglitz regards that governance of globalization carried out now too often leads to the deterioration of the situation of the poorest. Thus, capital market liberalization, which the International Monetary Fund (IMF) supports, increased volatility of global financial markets, and the big share of the burdens of this instability laid down on the poorest countries.
According to Joseph Stiglitz, supporters of globalization are wrong, arguing that globalization is inevitable. After all, by any estimate, after World War I there was a rollback of globalization. However, Stiglitz thinks that anti-globalists are wrong too. They are ignoring the positive potential of this phenomenon. He considers that the challenge lies in the need to reform globalization. The problem was that the economic globalization has outpaced the political globalization. It is not just the absence of institutions that provide us the democratic decision-making at the global level. Mentality is also not kept pace with globalization: it seemed that a commitment to social justice and social solidarity often remains within the national boundaries.
Stiglitz also recognizes the failures of the international financial order and the international financial institutions. There has been discussion on the reform of the international financial system, but so far, there are few results. Emerging nations continue to carry risks associated with the instability of interest and exchange rates. It is recognized that IMF programs are characterized by excessive conditionality. It is also a fact that many of the conditions imposed by the IMF in times of crisis had no relation to the actual crises. In many cases, IMF was overtly political, in other cases - aggravated the crisis. Even the IMF admits that the requirements and conditions imposed to be met by the countries of Southeast Asia usually aggravated the recession. IMF recognizes that the rights of ownership and participation of the countries in the decisions should be extended.
Contrarily to Stiglitz, Hayek considers that the state has no right on redistribution, especially based on the criterion of “social justice.” The role should be limited to providing the legal framework, guaranteeing the basic rules of trade. In 1976, he even offered denationalization of the currency. In particular, he offered to privatize the national central banks to subdue the release of the money market mechanisms. Therefore, Friedrich Hayek can be characterized as too radical in his liberalism views.
For more than a decade, Stiglitz strongly criticizes the liberal views of Hayek. He passes judgments on economic liberalism, monetarism, and neo-classical political economy in general. He also does not support the dogmas of the Washington Consensus. They include neo-liberal understanding of globalization, IMF policies on developing countries, liberal reforms in countries with “economies in transition”, including Russian, etc.
Overall, Stiglitz and Hayek are two famous economists with different views of the globalization process because they have lived in different times. Hayek was born in 1899 and was an active participant of the globalization in the 1970s and 1980s. Hayek was one of the originators of the trade liberalization that led to the creation of such phenomenon as global economics of universal distribution and production. Stiglitz criticized globalization because he faced all the outcomes of it in 1990s and 2000s. He saw how globalization carried out now has led to the deterioration of the situation of the poorest.
