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Published on November 1, 2007

According to Stiglitz, criticism is unavoidable because such a requirement seriously affects international investors, but he said the measures were needed to manage excess volatility due to capital market globalisation.

Speaking after his presentation on his third book - "Making Globalisation Work" - at a seminar jointly held by Institute of Directors Association and The Nation, he also cited the United States in the 1990s as an example in which action was taken too late to prevent the bursting of the dotcom bubble.

Due to political factors, it was rather difficult to act when the party was still going on, even though it could not continue forever, he said.

Stiglitz said investors who were making money would not be happy if the party were stopped, so the authorities would be blamed anyway regardless of whether or not they take early action.

In the case of Thailand, the Bank of Thailand has imposed a 30-per-cent reserve requirement on capital inflows since December 2006, resulting in relentless criticism of the central bank.

The requirement, which makes international capital flows less free, is often cited as a major factor undermining international confidence in the economy.

However, Stiglitz, a former chief economist of the World Bank and now an economics professor at Columbia University, said he believed the world was not really "flat" as suggested in a recent popular book, as there remain many inequalities in the global economy and societies.

For example, multilateral trade agreements - particularly the Uruguay Round - have been working against developing nations, so the poor have become worse off in recent years.

Stiglitz, meanwhile, praised the government for its recent actions on compulsory licensing of life-saving drugs for Aids patients and those with other serious diseases, commenting that the current international deal on pharmaceutical patents is not in the interests of the poor.

On exchange-rate regimes, he said having a relatively low exchange rate was a good strategy for developing countries as such a move supports the competitiveness of export industries and the development of certain domestic sectors.

Stiglitz cited China and India as being among the success stories of globalisation, but added that the phenomenon had also widened the rich-poor gap.

On the US sub-prime mortgage woes, he said easy credit for households had led to a financial as well as a social crisis as 1.7 million-2 million US families could lose their homes due to the collapse of this section of the mortgage market.

Given this state of affairs, US consumption will also be dented, resulting in less demand in the global economy.

In 2001, Stiglitz won the Nobel Prize for Economics with George Akerlof of the University of California, Berkeley, and A Michael Spence of Stanford University, for their analyses of markets with asymmetric information.

Nophakhun Limsamarnphun

 The Nation