GLOBALIZATION. VOLATILITY AND DEVELOPMENT
Joseph E. Stiglitz
Senior Vice President and Chief Economist
The World Bank
The Euro is the common currency of a group of eleven of the richest nations in the world -an exclusive club that, at least for now, includes no developing countries. What, one might ask, can the Euro possibly tell us about the challenges facing the developing world?
A great deal, it turns out. Leave aside the technical questions, such as to what extent the Euro will emerge as a reserve currency to be held by developing-country central banks, or whether developing countries should take out loans denominated in Euros. The Euro matters most to the developing world because of what it signals about globalization and integration. In this fascinating art exhibition, the old national currencies of Europe bob placidly and enticingly just below the surface of the water. But in the real world. all too often countries-especially developing countries-see their own currencies tossed about in rough waters roiled by capital flows.
Although its primary impetus was political, development of the Euro was driven in part by such economic concerns-specifically, by the view that Western Europe needed to gird itself for the new global competition and that a common European currency would reduce production costs and dampen economic volatility. If even the wealthy countries of Europe are moved by these concerns, it should be clear that the developing nations face truly great challenges.
Economic volatility is an ever-present threat, and we should not have needed the Asian financial crisis as a reminder of that fact. The developing countries are struggling to grow economically and socially-a goal that requires greater integration with the world economy-while protecting their most vulnerable people from being buffeted by these economic shocks. The World Bank Group's role in the development community is to support these countries in these twin labors. This does not necessarily mean encouraging them to build EU-style regional integration zones, although these may be helpful in the right circumstances. What it does mean is recognizing that the goals of reducing vulnerability and volatility are valid ones, as the EU members have acknowledged through their actions. These goals probably deserve as much support from us, in fact, as the traditional objective of increasing economic growth. Support may come in the form of knowledge about policies and projects that have worked in the past, or throgh support for experimentation with those that show great promise for the future.
So as you enjoy this Euro exhibition, I would ask you to remember that it is not only an aesthetically pleasing temporary addition to our environment, but also a visual reminder of the great challenges that face the developing world.