Joseph Stiglitz's new book, "Making Globalization Work," is an imaginative and, above all, practical vision for a successful and equitable world. In clear language and compelling anecdotes, Stiglitz focuses on policies that truly work, offering fresh new thinking about the questions that shape the globalization debate, including a plan to restructure a global financial system made unstable by America's debt, ideas for how countries can grow without degrading the environment, a framework for free and fair global trade, and much more. Stiglitz reveals that economic globalization continues to outpace both the political structures and the moral sensitivity required to ensure a just and sustainable world. And he makes plain the real work that all nations must undertake to realize that goal- World Affairs Council of Northern California
The World Affairs Council was founded in 1947 out of the interest generated by the founding of the United Nations in San Francisco in 1945. With over 10,000 members, they are the largest international affairs organization on the west coast.
James Manyika is a Director (senior partner) at McKinsey & Company based in San Francisco. He is also a Director of the McKinsey Global Institute, McKinsey & Company's business and economics research arm. As a leader in McKinsey's Global High Tech and Strategy Practice, he serves several of the world's leading communication, Internet, software, and systems companies on a variety of issues, in particular on growth and innovation, strategy and organization.
Mr. Manyika has authored a book on distributed networks and decentralized decision theory, numerous academic papers, and articles that have appeared in academic journals, books and the op-ed pages of leading international publications, including the Wall Street Journal, Financial Times, Washington Post, Economist, Newsweek, Les Echos, Forbes, and McKinsey Quarterly. Mr. Manyika is a frequent speaker at numerous forums on the global economy, business and technology, as well as on radio and television in dialogues with Nobel-prize winning economists.
Joseph E. Stiglitz
Joseph E. Stiglitz was born in Gary, Indiana in 1943. A graduate of Amherst College, he received his PHD from MIT in 1967, became a full professor at Yale in 1970, and in 1979 was awarded the John Bates Clark Award, given biennially by the American Economic Association to the economist under 40 who has made the most significant contribution to the field. He has taught at Princeton, Stanford, MIT and was the Drummond Professor and a fellow of All Souls College, Oxford. He is now University Professor at Columbia University in New York and Chair of Columbia University's Committee on Global Thought. He is also the co-founder and Executive Director of the Initiative for Policy Dialogue at Columbia. In 2001, he was awarded the Nobel Prize in economics for his analyses of markets with asymmetric information, and he was a lead author of the 1995 Report of the Intergovernmental Panel on Climate Change, which shared the 2007 Nobel Peace Prize.
Stiglitz was a member of the Council of Economic Advisers from 1993-95, during the Clinton administration, and served as CEA chairman from 1995-97. He then became Chief Economist and Senior Vice-President of the World Bank from 1997-2000. In 2008 he was asked by the French President Nicolas Sarkozy to chair the Commission on the Measurement of Economic Performance and Social Progress, which released its final report in September 2009. In 2009 he was appointed by the President of the United Nations General Assembly as chair of the Commission of Experts on Reform of the International Financial and Monetary System, which also released its report in September 2009.
Stiglitz holds a part-time appointment at the University of Manchester as Chair of the Management Board and Director of Graduate Summer Programs at the Brooks World Poverty Institute. He serves on numerous other boards, including Amherst College's Board of Trustees and Resources for the Future.
Stiglitz helped create a new branch of economics, "The Economics of Information," exploring the consequences of information asymmetries and pioneering such pivotal concepts as adverse selection and moral hazard, which have now become standard tools not only of theorists, but of policy analysts. He has made major contributions to macro-economics and monetary theory, to development economics and trade theory, to public and corporate finance, to the theories of industrial organization and rural organization, and to the theories of welfare economics and of income and wealth distribution. In the 1980s, he helped revive interest in the economics of R&D.
His work has helped explain the circumstances in which markets do not work well, and how selective government intervention can improve their performance.
Recognized around the world as a leading economic educator, he has written textbooks that have been translated into more than a dozen languages. He founded one of the leading economics journals, The Journal of Economic Perspectives. His book Globalization and Its Discontents (W.W. Norton June 2001) has been translated into 35 languages, besides at least two pirated editions, and in the non-pirated editions has sold more than one million copies worldwide. Other recent books include The Roaring Nineties (W.W. Norton); Towards a New Paradigm in Monetary Economics (Cambridge University Press) with Bruce Greenwald; Fair Trade for All (Oxford University Press), with Andrew Charlton; Making Globalization Work, (W.W. Norton and Penguin/ Allen Lane, 2006); and The Three Trillion Dollar War: The True Cost of the Iraq Conflict, (W.W. Norton and Penguin/ Allen Lane, 2008), with Linda Bilmes of Harvard University. His newest book, Freefall: America, Free Markets, and the Sinking of the World Economy, was published in January 2010 by WW Norton and Penguin/ Allen Lane.
Process by which the experience of everyday life, marked by the diffusion of commodities and ideas, is becoming standardized around the world. Factors that have contributed to globalization include increasingly sophisticated communications and transportation technologies and services, mass migration and the movement of peoples, a level of economic activity that has outgrown national markets through industrial combinations and commercial groupings that cross national frontiers, and international agreements that reduce the cost of doing business in foreign countries. Globalization offers huge potential profits to companies and nations but has been complicated by widely differing expectations, standards of living, cultures and values, and legal systems as well as unexpected global cause-and-effect linkages. See alsofree trade.
(born Feb. 9, 1943, Gary, Ind., U.S.) U.S. economist. He received a Ph.D. (1967) from the Massachusetts Institute of Technology and taught at several universities, including Yale, Harvard, Stanford, and Columbia. From 1997 to 2000 he was the World Bank's chief economist but often disagreed with the organization's policies. Stiglitz helped found modern development economics, and he changed how economists think about the way markets work. His studies on asymmetric information in the marketplace showed that the poorly informed can obtain information from the better informed through a screening process, for example, when insurance companies determine the risk factors of their clients. He shared the 2001 Nobel Prize in Economic Sciences with George A. Akerlof and A. Michael Spence.
Joe Stiglitz is one of the most renowned economists in America. He's presently aprofessor at Columbia University in New York, and chair of the university's Committeeon Global Thought. He received his PhD from MIT in 1967, became a full professor atYale in 1970, and in 1979 was awarded the John Bates Cluck Award, given annually bythe American Economic Association for Economists under forty who have made asignificant contribution to the field. He has taught at Princeton, Stanford, MIT, and was aDrummond professor and a fellow of All-Soul's College in Oxford.Stiglitz has helped create a new branch of economics: the economics of information,exploring the consequences of information asymmetries and pioneering such pivotalconcepts as adverse selection and moral hazard, which have now become standard tools,not just for theorists, but also for policy analysts. He has made major contributions tomacroeconomics and monetary theory, to the development of economics and tradetheory, to public and corporate finance, to the theories of industrial organization and ruralorganization, and to the theories of welfare economics and of income and wealth distribution.In the 1980s he helped revive interest in the economics of RND as well. ProfessorStiglitz was a member of the Council of Economic Advisors from 1993 to 1995, duringthe Clinton administration, and served as the Council's chairman from 1995 to 1997. Hethen became the Chief Economist, and Senior Vice President of the Ward Bank from1997 to 2000. In 2001 he was awarded the Nobel Prize ineconomics for his analyses of markets with asymmetric information.In addition to his groundbreaking theoretical work and the pragmatic policy work he'sbeen involved in, Professor Stiglitz is well-known for his provocative views on the globaleconomy. Many of you may recall that we had the pleasure of having Professor Stiglitzbe our guest at the council about two years ago, when his last book came out. Well, JoeStiglitz's most recent book, Making Globalization Work, is part of his effort to create amore successful and equitable world. The book draws both from his academic expertiseand the time that he spent on the ground in dozens of countries aroundthe world. So please join me in welcoming Professor Joe Stiglitz.Well thank you very much for that introduction. The title of the book actually says agreat deal about what the book is about, making globalization work suggests first that it'snot working. And that actually is a very important part of what I have to talk about, thevarious ways in which it's not working, and the reasons that it's not working. But unlikemy earlier book, where I did an awful lot of complaining, I still do a lot of complaining,what I try to do in this book is to suggest what might be done about it. So the other partof making globalization work is a sense of optimism, that there are some new forums,some small some big, some that we could do right away and some that would take a longtime, that could make globalization work, or at least worka lot better than it has been for a lot more people.Let me begin by describing some of the ways in which globalization has not been livingup to at least what was hoped at the beginning of the current era of globalization. Whenit was hoped that everyone would be better off. At that time, the advocates ofglobalization were actually quite surprised when in December of 1999, the riots broke outin Seattle, in what was supposed to be getting a new round, a lot of people that had beencalled the Clinton Round. And now of course, we only remember the Seattle Riots.The, some economists thought, that the problem was really a problem for psychiatry, notfor economics. Why was it that people were better off, but not happier? Why was it theydidn't know that they were better off? But as economists looked at this more carefully,they realized the reason that they were unhappy was that they should be unhappy. Theywere actually becoming worse off. In fact, after the last round of trade negotiations, theUruguay round that was completed in 1994, the poorest countries of the world wereactually worse off. Everybody had expected in the United States, the EU, to get thelion's share of the game. But they hadn't expected it to beso unfair that the poorest were actually worse off.There was the hope that globalization would reduce the disparity between the richest andthe poorest, and some of you may have seen the recent book by Thomas Freedman, calledThe World is Flat. Who not only suggests, the title suggests not only that it was makingit more equal that we've already had a flat landscape. Well, he's right that there's been very largechanges in the global landscape, but in case any of you don't know, the world is not flat.And in fact, in some ways, the world has become less flat.I mentioned before the disparity between the poorest and the richest countries hasincreased, what is true is that China, India, two countries with 2.4 billion people, havedone enormously well, historical change of historic proportions. China's been growing at9.7% for 30 years, India growing at 5, 6% for a quarter century, and last year, this yeargrowing at 6, 7, 8%. They've figured out how to manage globalization. In the case ofChina, they've even managed it so that several hundred people were moved out ofpoverty. Seven hundred million, I'm sorry. Seven hundred million. I'm sorry, thankyou. Seven hundred million. Seven hundred million, thank you.Many people were moved out of poverty.So the. but elsewhere, as I said, things have not worked out so well. I was on theCouncil of Economic Advisors when NAFTA was being discussed and it was adopted,and one of the reasons that there was a certain amount of enthusiasm for it was that it washoped that this would reduce the disparity between Mexico and the United States.There's a sixfold disparity in income across this border. None of us took seriously theRoss Perot's worries about the giant sucking sounds, perhaps maybe Lou Dobbs, whoyou'll hear about next week, but and Ross Perot was proven wrong, unemployment was6% of the time, that at the time NAFTA was signed, and it got down to 3.8%. So we lostsome jobs, but we created a lot more jobs.The real hope was that NAFTA, by reducing the disparity between the United States. thedisparity in incomes between United States and Mexico, would reduce the migrationpressure, and addressing one of the real problems facing the United States. Well,NAFTA didn't do that. In the first decade of NAFTA, the disparity of incomes betweenthe United States and Mexico actually increased. Of course, there are a number ofreasons that I talk about in the book why this is so. It's partly, NAFTA is not a free tradeagreement, that's just part of the title. It's become fashionable to call these things freetrade agreements. If it were a free trade agreement, it would only be a few pages. Wewould say we eliminate our tariffs, we eliminate our non-tariffs, and we eliminate oursubsidies, and they would eliminate theirs, and another page for Canada, and a three pageagreement. But any of you who have looked at these agreements know that they go onfor thousands and thousands of pages.What they really are is an excuse for every vested interest to try to make sure that othercountries open up the markets to their goods, but they don't reciprocate. So they aredesigned, as far as they can, to be asymmetric trade agreements, and that's what they'vebeen. There are other ways in which globalization has not born the fruits that was hoped.In spite of the fact that economists think that we've learned something in the last quartercentury, I mean what else have we been paid for, and we, institutions have gotten better,supposedly, we've been giving advice freely, or un-freely, around the world, the fact isthat growth in those, not in China and East Asia, but in the countriesthat paid attention to us, in Latin America, has been dismal.Growth in Latin America in the 90s was just over half of what it was in the 50s, 60s, and70s, before we taught it what to do. Brazil, we sometimes forget. Had 75 years ofgrowth at 5.7%, before 1980. Wasn't quite as rapid as East Asia, but it';s still veryimpressive. And then we explained it how to manage its economy, and today they feellucky if they can get growth of 2 or 3%. In the lowering of their expectations is one ofthe saddest things that I feel as I visit these countries. Not only did we think that a basisof this better knowledge and better institutions would there be more rapid growth, wealso thought there would be more stable growth. And yet there have been 100 crisesaround the world, mostly in emerging markets in the last 30 years. It's more unusual fora country not to have had a crisis than to have a crisis.Another manifestation of things not working the way they were supposed to. Partlyaccountable for why growth has not been done in the way it, formed in the way it shouldhave. Is that money has been flowing from the poor countries to the rich. One wouldhave thought, because like water should flow downhill, money should flow from the richto the poor, but it's going in the other way. And in spite of the fact that financial marketspride themselves on being able to shift risk, slice and dice risk, risk should be transferredfrom those less able to bear it to those more able to bear it. And the rich are more able tobear it. In fact, the poor, the poor countries, bear disproportionately a high amount of therisk. When they borrow, they borrow short term in hard currencies. And that meanswhen exchange rates change, interest rates change, they bear the brunt of that.And this too has enormous cost around the world.I was visiting Moldova, one of the former Soviet Union, hard to remember but at the timewe has said that capitalism was a much more efficient system than communism, and wethought therefore that when they went from communism to capitalism, their economywould grow. What happened was that poverty grew, GDP fell by 70%. And when Ivisited Moldova, 75% of their income was being spent servicing the foreign debt. Andthat meant that they had no money for roads, for schools, for an economist it wasinteresting because we could see the process of de-development. They were going backto using horses and buggies. And the consequences of course could be devastating.While we were there, one of the daughters of one of the, of a friend of a member of ourteam was hospitalized, was put on oxygen, and the whole country ran out of oxygen inthe middle of the night. And she died. And what we take as. take for granted for themwas an unaffordable luxury. And what was the reason for this? It was very simple. Whyhad their debt grown? It was nothing that they had done, particularly, what had happenedhad their debt grown? It was nothing that they had done, particularly, what had happenedwas, they had borrowed in hard currencies, their currency itself was linked to the ruble,when the Russia had a crisis in 1998, the ruble fell by sixfold, and the value of their debtin their currency increased sixfold, and what was a manageabledebt became an unmanageable level of debt.The problem of debt is a problem that plagues country after country. If it were only onecountry that were facing a problem of debt, we'd say, a pofolk of government. We allknow how mismanagement can turn a country with a 2% surplus into a 4% deficit in aspace of just 3 years. But it's not just one or two countries. It's country after country.And when you see it being country after country, you have to conclude, it's a systemicproblem. So it was good news in the summer of 95, when the leaders of the GA gottogether for the third time, said that there's going to be more extensive debt relief.But they didn't ask the fundamental question, why were so many countries facing debtsbeyond their ability to pay. And unless they address that question, the problem will ariseagain. They'll get debt forgiveness, but more countries will wind up in debt, and theproblem will be with us, and unfortunately these questions were not even on the table.What I would have hoped to give you a glimpse of just a few of the problems, and toconvince you that there was a reason to write the book, that globalizationisn't working quite the way that it was supposed to.So I want to turn now to spend a few minutes on overall perspective of why thingshaven't worked as well as they should have. And do it very quickly. The first is thateconomic globalization has outpaced political globalization. Economic globalization isthe closer integration of the countries of the world, as we become more integrated webecome more dependent, what happens to one part of the system affects others, thatmeans we need more collective action, but we don't have the democratic politicalinstitutions or the mindsets that allow us to act cooperatively at a global level.The result of this you can see dramatically in so many different ways. Domestically,when we talk about an issue of economic policy, we always ask what's efficient, but alsowhat is fair, and we look at the effects of various groups. Our trading, US traderepresentative, when we send him off to Geneva, we don't say, come back with a fairtrade agreement. If he did that, he would be fired. We say, come back with the bestagreement for America, and what we really mean is come back for the best agreement forthose who are giving large campaign contributions. And you can see the disparity and the outcomes.Clinton administration, one of the big issues, the beginning administration, was theaccess to health care, and one of the problems was high drug prices. And theadministration rightly criticized the drug companies. But when it came internationally,we were in effect in bed with the drug companies. At the trade agreement that I referredto earlier, the Uruguay round, we, part of that was a provision called TRIPS, trade relatedintellectual property, and it was not trade related, they just put it there so they could put itinside the agreement. There already was a world intellectual property organization, sothey had to have a reason to put it into a trade agreement, so they put those words T-R in front.But no one was really fooled. The real objective of this was to make generic medicinesless accessible to the poor. And this is a very important issue, because generic medicinesare 5, 10% of the price of brand name medicines. So a year's treatment of AIDSmedicine, generic medicines will cost under $300, for brand name, $10,000. If yourincome is 300 or even 3,000 dollars a year, you can't afford 10,000. So when they signedthe agreement, they were signing the death warrants for thousands of people in sub-Saharan Africa who would no longer be able to afford the generic medicines that wouldbe available, and we made generic medicines no longer available to them.Making matters worse, the end of the Cold War. In most ways the Cold War was a goodthing. But the Cold War meant that we had to compete for the affections, for the interest,for the loyalty, of the Third World. So we would give money to Mobutu, knowing thatthat money was going to wind up in a Swiss bank account. The fact that it wasn't helpingdevelopment was not the issue, we wanted to make sure that those country's rich naturalresources weren't at the disposal of the Soviet Union. We had the position that theenemy of our enemy was our friend. And so we cuddled up with Pinochet in Chile.The end of the Cold War meant that we had an opportunity to re-define our internationalrelations, international economic relations. We could either do it on the basis of a set ofprinciples, reflecting American values, or we could let our economic interests, specialinterests prevail. And unfortunately to a too-large extent, we chose the second course.And that's why, as I mentioned before, just a few years after the end of the Cold War, wewere pushing the kind of trade agreement, that word got around, thatactually the poorest countries in Africa were worse off.And the final reason why things have not worked out as well is that we've been a littlePollyanna-ish. We actually believe some of the rhetoric that the advocates ofglobalization put out, that everybody would be better off. And actually, economic theoryhad always made it clear that that wasn't the case. What it said is that there would bewinners and that there would be losers, that the winners could compensate the losers, butnever did we say that they would compensate the losers. And in fact they haven't. Andmaking matters worse is too often we've used globalization as an excuse for taking awaythe social protections that government in the past has provided.To explain why economic theory actually predicted in a way that the poorest in theadvance industrial countries would be worse off, it's very easy to just think for a moment,what a world of globalization, perfect globalization would look like. In the kind of worldin which markets were perfect. The assumption of a perfect integration, perfect markets,would mean unskilled workers all over the world would get the same wage. And thatwould mean that unskilled workers in the United States would have the same wage asunskilled workers in India and China. And that would mean thatthey would be lower than they are today.Now, my own teacher, Paul Samuelson, showed that you didn't need full integration toget these kinds of results of downward pressures on unskilled workers. It would happeneven if you had partial liberalization. These are obviously effects that were neveradvertised by the advocates of globalization. When he wrote his work, some 60 yearsago, like any work, any theory, there are assumptions. And one of the assumptionsunderlying his analysis was that there was the same information, the same knowledge,everywhere in the world. And that was a pretty bad assumption 60 years ago. But it's amuch better assumption today. One of the benefits of globalization has been the sharingof knowledge all over the world, and that means the predictionof the theory is much better today than it was 60 years ago.And clearly I think that globalization has exerted a downward pressure. It's only one ofseveral forces: technology, weakening of labor unions, other forces, social forces, havealso had the effect. But the effects are clearly palpable. Real wages at the bottom havenot only stagnated but today at the very bottom they're 30% below what they were 30years ago. In recent years, even the middle has been suffering, meaning family income inthe United States is lower than it was six years ago. As I said, globalization is only oneof the forces, but it's the one force that people can do something about.Or at least they feel they can do something about.Now, some people have always had the attitude that globalization is sort of like medicine,like cod liver oil, you have to swallow it even if I don't like it. But the fact is that that'snot true, it's not inevitable. And globalization is measured, for instance, by the ratio oftrade to GDP, or capital flows to GDP, was stronger before World War I than it wasduring the end of war period. There was a backlash against globalization, and one of myconcerns is that because globalization has been managed in such a bad way, with so manylosers, more losers than winners in some places, that it is not unlikely that there will be abacklash. In that case, the potential benefits of globalization will not be realized.Now, most of the book is spent by looking at the problems of globalization as they aremanifested in a while variety of ways. So rather than talking about these in a veryabstract way, I try to look at this in very specific contexts, trade, intellectual property, theenvironment, natural resources, multinational corporations, global financial markets,debt. Because it's in each of these areas that you really see how things go, and you seethe ways in which they go wrong, and those are the areas where you can make specificproposals, specific reforms that will make things work better.In the time that I have, I obviously can't go through all of those, so let me talk maybewith one or two until the time runs out. I mean, the time before the question period. Andlet me begin by intellectual property, and the reason I begin with intellectual property isthat sometimes people say, well what does this have to do with globalization? Well, it'spart of globalization because we made it part of globalization. We said that everycountry in the world had to have the American style of intellectual property regime.Didn't really have to, but as part of the WTO agreement, Uruguay round, we forced thaton everybody, and that's an aspect of globalization, forcing standards, sometimes that areinappropriate, for countries at various stages of development. The intellectual propertyregime that's appropriate for the United States is not the one that's appropriate for adeveloping country, and the one that we forced, foisted on the developing countries is noteven probably the best one for the United States.As an academic, as a producer of intellectual property, I obviously have some sympathyto the notion of intellectual property. If it's designed right. But I ought to share with youa minute some of my ambivalences about intellectual property. A number of years ago,in the 80s, I got a letter from a Chinese publisher that wanted me to write a preface forthe pirated edition of one of my textbooks. And actually, I was actually very pleased,because you know I figured if 1/10th or 1/100th of a percent of the people in China readmy book, I would have more influence than I did at home, and when you write thesebooks, money is only one small part of why you do this, and so I was actually veryenthusiastic. But I thought, before doing it I ought to ask my publisher. And he did go ballistic.So it shows the tension. now intellectual property is different from ordinary property.Ordinary property is designed to increase sufficiency. You need property rights if you'regoing to have incentives to take care of your property. But intellectual property isfundamentally associated with an inefficiency. Because knowledge is a public good.The marginal cost, the way economists put it, is marginal cost, of somebody else usingknowledge, is zero. When I tell you what I know, you know it and I still know it. It's notlike a chair, if I'm sitting on it, only one of us can comfortably sit on it at the same time.Thomas Jefferson put it much more poetically, when he said that knowledge is like acandle, that when the candle lights another candle, it doesn't diminish from the light of the first candle.But actually intellectual property is even worse than that because intellectual propertycreates a monopoly. A monopoly is one of the worst inefficiencies in a market economy.So the question is, why do we allow there to be this inefficiency, this monopoly? Andthe answer is, that because we think it will induce innovation. But if we don't designintellectual property rights, it will have just the opposite effect. And there are a numberof provisions that when we design intellectual property, the length, the patent forinstance, the length of the copyright, what kinds of things can be patented or copyrighted,and when we don't get it right, we get all the costs and we get none of the benefits.And in fact, there are many instances where intellectual property can stymie innovation.The two most important innovations in the 20th century were probably the automobile andthe airplane. And both of those were almost stymied by intellectual property. In the caseof the automobile, the George Selden got a patent for a four wheel vehicle, his intent was not to make acar, his intent was to make a cartel. And he succeeded in doing that, the other automobilecompanies thought it was a great thing, well who doesn't like high prices. There's onlyone person who had a different view, and that was Henry Ford. His view was a lowpriced vehicle distributed, a people's car, and he had the determination and the resourcesto fight the patent, and he eventually prevailed, but had he not, the car, the developmentof the car would have been delayed for years, decades. Given the problems of globalwarming, that might have been a good thing. But they didn't know about it at that time.The same thing is true in the case of the airplane. We all know about the WrightBrothers, 1903, but also Curtis got patents, and then you have what is called a patentthicket. Two people have the patents, nobody knows who to pay off, and nobody wantsto develop the airplane because everybody's demanding. Anybody if you work insoftware know about this problem today. Thousands of patents, if you've read all thepatent applications, you wouldn't have any time to do research. The likelihood when youwrite your software program that you're trespassing somebody else's patent is very high.Blackberry found that out, but in that case, it was actually interesting, because it was apatent that was already declared invalid in two countries. And yet Blackberry had to pay$600 million in ransom to continue operating. So what happened was, World War I, itwas too important to have the airplane to allow the patent lawyers to stop all this, and USgovernment basically seized the patents. And said, we'll determine who gets, who has topay how much and who gets how much. Well, these are examples, there are a lot more,of intellectual property actually stymieing innovation.In the case of the developing countries, the problem is that they're paying this high pricefor drugs, but they're not getting any of the benefits. So what's happening is that drugcompanies are spending more on advertising and marketing than they are on research,more on research, on lifestyle drugs, like hair, than they are on life saving drugs, andalmost all the research on life saving is for the diseases that affectindustrial countries. Almost none on diseases like malaria.Now, of course, it takes resources to make innovation. It needs incentive system. So noone is saying that you don't need some incentive system. The question is, is are currentlydesigned patent systems the right one? And the question I think is unambiguous, theanswer I think is unambiguously, no. And I give an alternative system called the medicalprice fund, where you give a prize, and you say, if you come up with a vaccine or a curefor malaria or a drug that affects hundreds of millions of people, and has a huge cost, thenyou get a big prize, if it's for a small disease or for a disease that there already is a cure,you just make it a little bit better, or fewer side effects, you get a smaller prize. So youhave an incentive system but then you use the market, competitive markets, notmonopoly markets, competitive markets, to distribute the drug widely at low prices,rather than the monopoly system which is based on low distribution at high prices.And this is just a much more efficient system than our current system. Well, thisillustrates how we can redesign incentives, markets, to make them work better, and howmarkets often don't work the way that they should. In each of the other areas that Imentioned I talk about specific reforms, where we canactually make our economic system, our globalization, work better.Let me conclude by sharing with you why I have some degree of optimism.Globalization is actually in a very fluid state. There are lots of changes going on. Thinkabout the issue of global warming. It's moving on much faster than anybody anticipated.I was on the scientific panel that reviewed the evidence in 1995, it was compelling then,but I don't think any of us really thought it would proceed as fast as it has.The melting of the Arctic ice caps within 70 years.Let me just digress for a moment and share a little story, which I was in Davos, meeting alot of the business leaders of the world got together, and at a meeting which a lot of theoil companies were, and one of these oil executives said, you know you guys are beingtoo pessimistic about global warming. You're only looking at the negative side, you'renot looking at the positive side. Because of the melting of the ice caps, we'll be able toget oil much more cheaply underneath the Arctic Sea. And the only problem is, becausethe United States hasn't signed the Law of the Sea, there may be a little conflict. Of whogets this oil. But we'll have this oil much more cheaply than we otherwise would have.Well, these are examples of the fluid nature in which globalization is in. The WTO hasruled that American cotton subsidies are illegal. There are lots of other changes that aregoing on very rapidly. The question isn't whether globalization will change, the questionis whether we will make a patchwork in the system as one crisis happens after another,kicking the ball a little bit long into the next crisis, or whether we try to intelligently thinkabout these problems, make the reforms before the crisis, do it in a more careful,thoughtful way, and this book is written in the hope that we will take the latter course.And if we do that, then I do think we can make globalization work, or at least work a lotbetter for more people than it has been working in the past. Thank you.