Get Deglobalization Right, Stiglitz Tells Davos Participants

Nobel Laureate Joseph E. Stiglitz wrote for Project Syndicate that this year's World Economic Forum (WEF) in Davos, Switzerland has come to realize that its vision of a world without borders has crashed, but that this realization should be accompanied by an admission of past mistakes.

Photo Insert: An open forum at the World Economic Forum 2022

Instead of praising globalization, the symposium focused on its flaws, such as broken supply chains, food, and energy price inflation, and an intellectual property (IP) regime that left billions without COVID-19 vaccines just so a few drug corporations could benefit billions more, according to Stiglitz.

Among the proposed responses to these critical issues are to “reshore” or “friend-shore” production and to enact “industrial policies to increase country capacities to produce.”

Gone are the days when everyone seemed to be working toward a world without borders; now, everyone acknowledges that national borders, at least in part, are essential for economic development and security.

Long-standing regulations of the international trading system will be bent or broken as a result of the new policy ideas. Most business and political leaders in Davos resorted to cliches after failing to reconcile friend-shoring with the principle of free and non-discriminatory trade. There was little introspection about how and why things went so wrong, or about the erroneous, too optimistic thinking that dominated during the heyday of globalization.

Of course, globalization isn't the only issue. Our entire market economy has shown to be brittle. We essentially manufactured cars without spare tires in order to save a few dollars now while ignoring future requirements.

Just-in-time inventory systems were fantastic innovations as long as the economy was stable; nevertheless, they were a nightmare when COVID-19 shut down, causing supply shortages to cascade (such as when a dearth of microchips led to a dearth of new cars.)

“As I warned in my 2006 book, Making Globalization Work, markets do a terrible job of ‘pricing’ risk (for the same reason that they don’t price carbon dioxide emissions). Consider Germany, which chose to make its economy dependent on gas deliveries from Russia, an obviously unreliable trading partner. Now, it is facing consequences that were both predictable and predicted. As Adam Smith recognized in the eighteenth century, capitalism is not a self-sustaining system, because there is a natural tendency toward monopoly,” Stiglitz argued.

Increased market concentration has become the norm since US President Ronald Reagan and British Prime Minister Margaret Thatcher ushered in an age of "deregulation," and not just in high-profile areas like e-commerce and social media.

Monopolization was to blame for the severe scarcity of infant formula in the United States this spring. Following Abbott's production halt due to safety concerns, Americans quickly understood that one firm controls about half of the US supply.

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