Reference no: EM132250423

When discussing the volatility of markets, Stiglitz focuses on the liability of unpredictable change in the global market, especially for the poor.

After reading the chapter on legitimacy crisis in the textbook it is clear that in focusing on this concept, Stiglitz means to address global inequality on the basis of "market fundamentalism" that has pushed policies "in ways that have undermined emerging democracies."

Further, Stiglitz states, "globalization itself has been governed in ways that are undemocratic and have been disadvantageous to developing countries, especially the poor within those countries."

Often, this undemocratic globalization has been the fault of richer countries while those in a more compromised position are then forced to deal with the consequences.

Stiglitz exemplifies this notion with the massive increase in interest rates in Argentina in 1988 that were namely due to Russia's actions.

Even with financial aid, or initial democratic guidance, many of these more compromised countries are liable to become stuck in the cycle given Stiglitz's small boat analogy where small countries set sail onto rough seas as "small boats," only to get hit by a large wave or even capsize despite the captain's abilities or resources in that moment.

Overall, "capital - market liberalization is inevitably accompanied by huge volatility, and this volatility impedes growth and increases poverty."