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Martin Wolf
a biography of the
chief economist commentator and associate editor of the Financial Times and author of the book Why Globalization Works
Based on the preface of Why Globalization Works, article added on August 1, 2004
  
One of the most interesting parts of Why Globalization Works is the preface in which Martin Wolf gives the reader information on his biography as well as on his intellectual education.
 
Born in 1946, he is the son of an Austrian Jew who sought refuge in Britain before the Second World War and a mother from a Dutch-Jewish family, who lost some thirty aunts, uncles and cousins in the Holocaust.

Martin Wolf's father "was always pro-democracy and anti-communist". He was a journalist, broadcaster and writer. An intellectual "inclined towards socialism, tough of moderate and cautious kind. Social democracy was then his natural home." A man who would have liked Tony Blair's politics.

Since his father was "the most important influence upon me, both intellectual and moral", one is not surprised that Martin Wolf was "an active supporter of the Labour Party until the early 1970s."
 
In October 1965, Martin Wolf entered Corpus Christi College, Oxford University. Two years later, he switched from the study of classics to politics, philosophy and economics. "The chief lesson relevant to this book" he learned at the college was "the damage caused by the collapse of liberalism in the late nineteenth and early twentieth centuries under the assault of assorted collectivist ideologies - imperialism, militarism, socialism, communism and, finally, fascism." He also learned that "good economic policy [...] could help sustain a liberal society and economy against such attacks."

At the time under the influence of his father, Martin Wolf was "still a social democrat in the tradition of the then recently deceased leader of the Labour Party, Hugh Gaitskell.". Since the age of 16, Wolf "had been active as a staunch anti-Marxist in the Labour Party's Young Socialists". In Oxford,, he joined the Labour Club and, at the end of his first term, was "involved in forming a breakaway club, the Oxford University Democratic Labour Club", because Marxists opposed to Harald Wilson dominated the old Labour Club. In 1966, Wolf was a co-founder of the Democratic Labour Club and became its chairman in 1967. As mentioned above, he remained "an active supporter of the Labour Party until the early 1970s."

In 1969, Martin Wolf went to Nuffield College, Oxford to study for what is now called the Master of Philosophy in economics. His three most influential teachers from whom he learned the importance of international trade for prosperity, above all for developing countries, were Max Corden, Ian Little and Maurice Scott.

"Max Corden had then completed his important work on effective protection and was teaching trade theory in a way particularly valuable to the mathematically challenged (such as myself)." Ian Little and Maurice Scott, together with Tibor Scitovsky of Yale University published in 1970 "one of the most influential books on economic development of the past half-century, Industry and Trade in Some Developing Countries." Wolf goes as far as to call it "a Wealth of Nations for our time". He sums up its content as " a counter-revolutionary manifesto, arguing for the importance of outward-looking trade regimes, against import substitution, and for the market economy, against dirigisme. Subsequently, this approach became the conventional wisdom. At the time, it challenged a damaging orthodoxy."

"This book cemented [Martin Wolf's] conversion to belief in the superiority of the market economy over any available alternative." It made him discover "the disastrous consequences of rent control and the growth of council (or public) housing." Wolf wrote a short pamphlet on this topic for the Young Fabians, which was rejected (as he later learned, by the former cabinet minister Richard Crossman). This persuaded Wolf that "the Labour Party had become intellectually moribund". Subsequently, this conviction was strengthened when Wolf could "persuade the vastly more intelligent Anthony Crosland of the need for a radical change in the country's calamitous housing policies."

Subsequently, Friedrich Hayek's The Road to Serfdom and The Constitution of Liberty convinced Wolf that "a market economy was also a necessary condition for a stable and enduring democracy". It may not be a sufficient, but a necessary condition for such a democracy.

"This set of convictions" shifted Martin Wolf "from social democracy to classical liberalism. I remain such a liberal today." Since the "death of socialism", he considers: "Liberals, social democrats and moderate conservatives are on the same side in the great battles against religious fanatics, obscurantists, extreme environmentalists, fascists, Marxists and, of course, contemporary anti-globalizers." With Why Globalization Works, Martin Wolf hopes to convince them that "a global market economy is highly desirable."

Back to Martin Wolf's biography: In 1971, he joined the World Bank, partly because he believed that "raising the incomes of the poor countries was the most important contemporary challenge for economists." Working as an economist of the World Bank on East Africa from 1972 to 1974 and on India from 1974 to 1977, Martin Wolf "learned first-hand ot the damage done by dirigiste, inward-looking economic policies", due to inefficiency and "epidemic corruption" they caused.

Among his colleagues where Montek Singh Ahluwalia, later a reforming finance secretary of India, and Shankar Acharya, later India's chief economic adviser. Both played important roles in India's market-oriented reforms of the 1990s. The most impressive friend he made was Dr Manmohan Singh, then the government of India's chief economic adviser and later India's reforming finance minister. When writing his book, Wolf could not know that Manmohan Singh would even become India's prime minister in May 2004 (check our article in German: Die Wahlen in Indien 2004). 

Among the important intellectual influences during his time with the World Bank, Martin Wolf cites the late Bela Balassa, Jagdish Bhagwati and Anne Krueger.

By the late 1970s, Martin Wolf came to the conclusion that despite all good intentions and abilities of its staff, the World Bank "was a fatally flawed institution. The most important source of its failures was its commitment to lending, almost regardless of what was happening in the country it was lending to." According to Wolf, this flaw was "magnified by the personality of Robert McNamara, former US Defence Secretary, who was a dominating president from 1967 to 1981."

The Financial Times chief economic commentator describes McNamara as "a man of ferocious will, personal commitment to alleviating poverty and frighteningly little common sense". Together with his chief economic adviser, the late Hollis Chenery, McNamara "put into effect a Stalinist vision of development: faster growth would follow a rise in investment and an increase in availability of foreign exchange; and much of these needed resources would come form the [World] Bank."

The World Bank and its lending grew enormously. Every division was under great pressure to lend money, regardless of the quality of projects or the development programs of the countries involved. The result was a disaster. Wolf refers to Montek Ahluwalia who once told him that the World Bank was "a growing business in a dying industry."

Martin Wolf concludes that in the case of India, the money lent by the World Bank was used to avoid necessary policy changes, one of the reasons why Martin Wolf left the World Bank. The desperately needed changes in India were only made much later, during the foreign exchange crisis of 1991, by two men well known to Wolf: Manmohan Singh and Montek Ahluwalia. From this experience, Wolf concludes three lessons: policy can make a huge difference to economic performance; policy changes can be put into effect by small teams of motivated and able individuals; most importantly, changes cannot be imposed from outside.

In September 1981, Martin Wolf joined the London-based Trade Policy Research Centre as director of studies. During his last two years at the World Bank, Wolf had come into contact with the Centre, which was reputed for its work on trade liberalization and the multilateral trading system. Together with a colleague, Donald Keesing, he wrote a substantial study of the system of quotas operated by the advanced countries against the textiles and clothing export of developing countries. Wolf describes it as an "invaluable lesson not only in the hypocrisy with which the world's richest countries have responded to the comparative advantage of the poor, but also in the mixture of complexity with irrationality of some trade policy regimes."

After Wolf's six years as director of studies, in which most of the Centre's time was aimed at promoting multilateral trade negotiations, which were subsequently known as the Uruguay Round, which began in 1986. By that time, "it was becoming evident that the Centre was likely to fold." As Martin Wolf was looking for a new job, he was invited, out of the blue, by the then editor of the Financial Times, to join the newspaper as its chief economist commentator, which he did in September 1987. Since then, he has also became associate editor of  the Financial Times.

Martin Wolf describes the collapse of the Soviet empire between 1989 and 1991 as "the most pleasurable surprise of my life - which appeared to confirm the global transformation in politics and economic policy. Socialism was dead." However, the enemies of liberalism are far from dead. Therefore, Martin Wolf wrote the book Why Globalization Works, published in 2004 intended not as a work of academic scholarship, but as one of persuasion.
 

Martin Wolf: Why Globalization Works. Yale University Press, 2004. Get it from Amazon.co.uk, Amazon.de. Other edition: Amazon.com, Amazon.ca, Amazon.co.uk, Amazon.de. Check our review: Why Globalization Works.

Suggested further reading:
- Ian Little and Maurice Scott, Tibor Scitovsky: Industry and Trade in Some Developing Countries: A Comparative Study. London, OUP, 1970.
- Friedrich Hayek: The Road to Serfdom. London, 1944.
- Friedrich Hayek: The Constitution of Liberty. Chicago, 1960.





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