Response to Stiglitz "Saving the Planet"

Perhaps the biggest issue to arise from today’s readings is the difficulty of ensuring that environmental policies are not used as a disguise for simply protectionist measures. How do you prevent nations from digging up dirt on other states in search for justification to adopt a protectionist policy? The idea presented by Stiglitz that states ought to be able to apply trade sanctions to those which refuse to lower pollution emissions seems fair on surface, but the implementation of such an enforcement measure would likely be chaotic. I would tend to agree with those “senior officials” of advanced industrial countries, of whom Stiglitz speaks, who liken such a proposal to impose sanctions and duties on the goods of the polluting nation to a declaration of trade war (Stiglitz, 178). Perhaps such an extreme measure would indeed prompt the United States to clean up quickly, perhaps not. Even if it does work, there is a substantial chance that similar tactics would be more readily used in the future for less serious cases. If trade sanctions are deemed to be an appropriate response for dealing with other nations whose policies violate the others ethics or ideals, there would be almost no limit to instances when such measures could be used. It seems that there would also be a greater occurrence of sanctions and duties being used bilaterally, giving stronger nations ample opportunity to prey on the weaker. Environmental policies may well become less ethical than opportunistic, being used only when a government recognizes an opportunity to take advantage of a justification for protection.

The best idea presented by Stiglitz is that of a common emissions tax. This plan is the better of the two primarily because it allows a country to control emissions while at the same time increasing revenue from the emissions tax. I am not, however, entirely convinced that this is a realistic possibility. Trying to think through how such a tax would be decided upon and established is mind-boggling. A plan like this requires (in the absence of the kinds of sanctions just discussed) the voluntary participation of governments. Such a tax might be much easier to levy in non-democratic state, than it would be in the United States. I simply cannot imagine that politicians in the United States (at least not enough to make a difference) would be willing to make the kind of risk associated with the implementation of such a tax. For it to work, the people will have to be convinced of the necessity of cleaning up emissions. Right now there is simply not enough concern among the American population to support such a movement.

It appears as though there is no good plan for implementing a world-wide clean up of emissions that does not involve the United States taking leadership. Like was the case with Kyoto, the US is likely to reject a proposal to meet a target level for emissions. There is simply no way to accurately measure what a necessary and realistic target level is. For changes to take place quickly and smoothly, the US needs to take the helm of leadership. The American people will be more agreeable to change if they feel as though the US is in charge (sorry, but that is just the way that it is), and the people need to be on board before anyone in power is willing to risk political capital to pursue an environmental agenda. It does not seem as though much will transpire until the American people are convinced of the need for such reform. I am not quite sure how to get to this point. Are Americans simply disinterested or are they uninformed?

Maybe this picking at too fine a detail in the reading, but I'll go for it anyway. "Development: The Market is Not Enough" argues for a very specific form of government influence in the market to create the infrastructures necessary for overall growth to take place. In order for a government to be successful at this, the authors argue that they must place themselves "above vested interests to help create the social and political infrastructure for economic growth" (FL, 400). This statement is, however, qualified further down the page when he says that governments should distance themselves not from interest groups in general but from "economic interest groups." I find this to be a peculiar idea. It seems that he is saying that only certain interests are legitimate, and that only certain interest groups should be successful. In his earlier section entitled "People Power" he praises the increasing success of "citizen's groups." Are these not simply special interest groups, which he claims the government should distance itself from. My problem with this section is not that he wishes economic interest groups had less power. Great benefits would likely arise from such a scenario. I also agree that more people should become more directly involved advancing their own interests at the government level. I am only critical because the authors seem to ignore the fact that the qualities they praise in the "citizens groups" are also exhibited by economic interest groups. They, like citizens groups, place an emphasis on "initiating and implementing plans, and in exercising control over their own lives." The real problem is that economic interest groups are just better at it. The authors speak of the citizens groups as though they are not also interest groups, and I simply don't see the difference. Politics is a game of competing interests, and "citizens groups" with honorable goals of limiting poverty and/or environmental damage
will quite simply have to learn to compete with economic interests. There is no other way to achieve balanced policy.

MNC's or State Ownership?

Tarzi and Fieldhouse both seem to agree (please correct me if I've misunderstood them) that Third World Countries (LDC's as Fieldhouse calls them) have the potential to exercise a great deal of authority and influence over the Multinational Corporations which they host. Whether or not, however, they are realistically able to marshall all of their influence to direct the activities of the MNC's varies from case to case and from country to country. They also seem to be convinced that the power of host countries over the affairs of MNC's is increasing over time. This has occured as they have acquired more expertise in the varying industries or fields and as ownership of MNC's has become more equally distributed across the globe. With this more equal distribution, host countries do not have to fear provoking retaliation (abandonment) as there are likely to be other nations looking to make investments in their own.

One area where LDC's have been able to exert a great deal of influence over MNC's is the Oil Industry. Tarzi points this out on p.157 when he refers to the transfer of oil production from private corporations to the OPEC member states. Is this a good or a bad thing? What I did not get a good sense of, from either article, is the international effect of state ownership and control of resources compared to those of private ownership and control. As I was looking for relevant information on this topic I found a Financial Times article which argues that such state ownership (particularly of oil production) is responsible for oil shortages and high prices. This makes sense, why wouldn't a country rich in oil want to invest some of its profits back into other areas of its economy than oil production alone. Is the world better off with more power in the hands of the MNC's and less in the hands of the state? More importantly, will this international pressure for OPEC nations to increase oil production ever convince them to adopt a course of action that runs counter to their own self-interest? The chips are definately stacked in favor of the host nations on this one.

Multinational Corporations

I am having some difficulty with these readings on multinational corporations. While I am, on the one hand, persuaded by the arguments presented by Wolf in favor of allowing market forces to determine investment and wages in developing countries, I am less convinced that the market is capable of bringing about the kinds of changes which are needed to safeguard shareholders, hold executives accountable, and protect the environment. Corporations need not be lambasted as destructive and undemocratic. Certainly cases exist where destructive methods are used, but it is not the case that they bring only ill-effects to those countries which attract their investment. The fact that these corporations provide new jobs at above average wages demonstrates this. Yet, while Wolf provides a theoretical justification for the multinational corporation as it currently exists, his rationale fails to adequately address remedying or protecting against the damage that such corporations have the potential to do.

The example that Stiglitz provides of the Union Carbide plant explosion in India is a helpful one. Here the issue is not whether or not Union Carbide belonged in India, was welcomed, or was benefiting its employers. Maybe their plant created a lot of great jobs, maybe their investment was good for the region, maybe they did many things right. Yet when an accident happened that resulted in the death of thousands of people, there was no effective way to hold executives responsible for the damage done. I am not suggesting that US citizens be routinely turned over for trial in other nations, yet there needs to be some way of ensuring corporate responsibility on an international scale. If a corporation wants to seek out a cheaper source of labor, they should be able to do so, but if their goal is to skirt around regulations (environmental, health etc) they should be prevented.

The biggest question is whether competition for foreign investment results in the kind of “race to the bottom” that Stiglitz is fearful of. Will developing nations gradually cut back on more and more regulations, offer subsidies and tax breaks as a means to entice foreign investment. Wolf denies that such a phenomenon will take place, but I am not entirely convinced that market forces alone will be able to prevent such a backwards movement in regulations. As of now, developing nations have great incentive to be lax in their regulation of multinational corporations. It would be foolish to assume that they will not act on those incentives and compete with other similarly situated states for corporations seeking to establish a new factory or plant.

Response to Chapter 15 of Frieden and Lake -- "The Triad and the Unholy Trinity"

In “The Triad and the Unholy Trinity” Cohen argues that in spite of all its benefits, international monetary cooperation is very difficult to maintain. The instability of such cooperation can be linked to three common values or goals of governments: exchange rate stability, capital mobility, and national policy autonomy. The difficulty with the pursuit of these goals is, in Cohen’s mind, the inability to achieve all of them simultaneously. Achieving one, means sacrificing another. For instance, governments seeking to preserve exchange rate stability “will then be compelled to limit either the movement of capital (via restrictions or taxes) or their own policy autonomy (via some form of multilateral surveillance or joint decision-making)” (FL, 251). Of the three, Cohen suggests that capital mobility is the most difficult to control, thus the end result becomes a competing relationship between exchange rate stability and policy autonomy. This accounts for the ebb and flow of international monetary cooperation. A government may move forward with cooperative measures only to withdraw again in effort to preserve its own autonomy.

Cohen also asserts that policy autonomy cannot be maintained in the absence of international cooperation. On page 246, Cohen says that “the irony is that even without such a commitment most…governments will find their policy autonomy increasingly eroded in the coming decade—in a manner, moreover, that may seem even less appealing to them than formal cooperation.” I understand how this argument stems from the idea of the increasing interdependence of different economies across the globe, yet I am not sure I completely understand the conditions under which a country would see decreasing autonomy in the absence of economic cooperation. It seems that he is saying that governments seeking to maintain their autonomy must strategically sacrifice portions of it to that end.

Cohen’s argument is a very strong statement of the benefits of economic cooperation. In it he sees not only the means by which to increase the stability of exchange rates, but he also seems to suggest that it is a means by which to preserve policy autonomy. I wonder, however, what the limitations to this argument are. Can there be, for instance, cases in which cooperation would lead to a quicker disintegration of policy autonomy than would be achieved through a unilateral economic policy?

Patents and Innovation

I found Stiglitz's discussion of the damaging effects of excessive patenting on innovation to be very persuasive. What seems most problematic however is the ability of US pharmaceutical companies to prohibit the distribution of generic AIDS medications in developing countries. This, I think, is the best example of an area in which developed countries should show more favor to developing countries. At the very least, as he suggests, these countries ought to be able to develop and trade amongst themselves their own versions of patented "life-saving" drugs like those used to treat AIDS and Malaria.

I was browsing the Financial Times and found an article refering to a recent Supreme Court decision which should make obtaining patents, those which would potentially limit innovation more difficult. Though it doesn't seem to hold much bearing on the pharmaceutical industry, it does seem relevant to the overarching problem of patents being obtained too easily.

Limiting Protection

In his chapter "Making Trade Fair," Stiglitz explores the issue of the misuse of nontariff barriers to control markets. He divides all such nontariff barriers into the categories of safeguards, dumping duties, technical barriers, and rules of origin and then demonstrates how each has been used by developed countries to limit developing nations' abilities to export their goods to the United States. Operating under the assumption that a nation should not protect its domestic markets, Stiglitz makes some very convincing arguements concerning the misuse of such tactics. It seems, however, that the solutions he offers do not adequately address the difficulty of moving developed nations away from protectionist tactics. At the end of each of these sections, Stiglitz returns to his suggestion that an international tribunal of some sort is needed to resolve all disputes concerning the misuse of such nontariff barriers.

I agree that such a tribunal would be needed to effectively resolve such disputes, yet I am not convinced of the possibility for the existence of such a tribunal. Convincing any developed nation to submit to the judgment of an international tribunal that might (or would definately) limit its ability to protect certain domestic markets will be a difficult task indeed. If one were successfully created, I am doubtful that its authority would hold. If the people of these nations cannot be made to understand the need (moral, economic, or else) for preventing protectionism, the corresponding governments will be hardpressed to make changes. I am anxious to see if Stiglitz explores, in further depth, what such a tribunal would look like and how its authority would be maintained when developed nations believe they have a legitimate cause to protect a certain market.