Covering Globalization

Covering Globalization: A Handbook for Reporters

ANYA SCHIFFRIN
AMER BISAT
Copyright Date: 2004
Pages: 368
https://www.jstor.org/stable/10.7312/schi13174
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  • Book Info
    Covering Globalization
    Book Description:

    The first journalism textbook for reporters who cover finance and economics in developing and transitional countries, Covering Globalization is an essential guide to the pressing topics of our times. Written by economists from the Asian Development Bank and the International Monetary Fund as well as journalists who have worked for Dow Jones, the Financial Times, the New York Times, Fortune, and Reuters -- and with an introduction by Nobel Laureate Joseph E. Stiglitz -- this invaluable resource helps reporters write about subjects such as banking and banking crises, pension reform, privatization, trade agreements, central banks, the World Bank, sovereign debt restructuring, commodity markets, corporate governance, poverty-eradication programs, and the "resource curse."

    Each chapter explains the basic economic principles and current thinking on a given topic and provides

    • tips on what to look for when covering specific subjects;

    • a way to structure business and economics stories;

    • a way to use the Internet for reporting with links to more information online;

    • extensive glossaries and much more.

    eISBN: 978-0-231-50640-3
    Subjects: Language & Literature, Political Science

Table of Contents

  1. Front Matter
    (pp. i-vi)
  2. Table of Contents
    (pp. vii-x)
  3. ACKNOWLEDGMENTS
    (pp. xi-2)
  4. CHAPTER ONE THE IMPORTANCE OF CRITICAL THINKING
    (pp. 3-14)
    JOSEPH E. STIGLITZ and ANYA SCHIFFRIN

    Globalization has become a major subject of interest in both developing and developed countries. Reporters are now being asked not only to cover major events, such as the annual meetings of the International Monetary Fund and the World Bank and the periodic meetings of the World Trade Organization, but also to interpret what happens at those meetings within the broader debate on globalization. Indeed, media coverage already has played an important role in shaping the recent evolution of globalization. The media spotlight, including reporting trade agreements after the riots in Seattle at what was supposed to be the inauguration of...

  5. PART 1. CAPITAL MARKETS
    • CHAPTER TWO CAPITAL MARKETS
      (pp. 17-31)
      CATHERINE MCKINLEY

      Capital markets are markets in which equity (shares) and debt (bonds) are traded. If they exist at all in less developed countries, they are typically small and do not have much effect on the country’s broader economy. Most financing in those countries is conducted, instead, through bank financing rather than through capital markets. Over the past decade or so, an “emerging markets” capital market has developed. Based primarily in New York and London, this market has permitted developing countries’ governments (“sovereigns”) and the occasional company to borrow funds in the international markets.

      In developing countries in general, companies prefer to...

    • CHAPTER THREE FOREIGN EXCHANGE MARKETS AND FOREIGN EXCHANGE CRISES
      (pp. 32-41)
      SARA SILVER

      The concept of money is probably as old as humanity itself, but it has not always existed in the forms with which we are most familiar. Barter was long used as a means of exchanging goods—and in some cases it still is—but over time people began using more uniform means for trade. From cattle to shells to precious metals like gold and silver, money has had many forms throughout the ages. The paper currency now used widely across the globe was but one of these countless forms of money and traces back hundreds of years to China. In...

    • CHAPTER FOUR COVERING CENTRAL BANKS
      (pp. 42-51)
      MARJORIE OLSTER

      Central banks are among the most influential and closely watched financial authorities in virtually any country. They have the overarching responsibility of maintaining a country’s “economic stability.” Some central banks define economic stability broadly: they see themselves as inflation fighters, growth promoters, lenders of last resort, and exchange-rate defenders. Others prefer a much narrower focus, usually emphasizing price stability. However they define their mandates, central banks try to achieve their objectives using a unique set of instruments: they are the ones who control a country’s money supply and interest rates and have the power to buy or sell domestic or...

    • CHAPTER FIVE CAPITAL CONTROLS
      (pp. 52-62)
      ANYA SCHIFFRIN

      From the 1940s to the late 1980s, capital controls, or restrictions on the flow of money across borders, were the norm around the world. In Europe, anyone who needed a foreign exchange to trade with another country (so-called current account transactions) to buy goods or services could get it. But it was not so easy to get money that could be used for financial transactions such as currency speculation or buying and selling stocks in another country’s equity markets. Often there was a special, less-favorable exchange rate for such transactions. Ordinary individuals confronted these capital controls when they wanted to...

    • CHAPTER SIX DOLLARIZATION
      (pp. 63-72)
      TYLER MARONEY

      Dollarization is the process by which a country abandons its own currency and adopts the currency of a more stable country as its legal tender. Though the concept was coined in reference to the U.S. dollar, the conversion to any foreign, stable currency—the European euro and the Japanese yen, for example—is usually known as dollarization.

      In many countries, such as those with weak currencies and underdeveloped banking systems, there is a natural move toward the dollar. People who are afraid of inflation or who do not trust their domestic central bank keep their money in hard currency. If...

    • CHAPTER SEVEN DERIVATIVES
      (pp. 73-82)
      RANDALL DODD

      Derivatives serve an important and useful economic function, but they also pose several dangers to the stability of financial markets and the overall economy. They are often employed for the useful purpose of hedging and risk management, and this role becomes more important as financial markets grow more volatile. However, they can also be associated with massive market failings whose consequences can be tragic. Most remember the LTCM episode, when this major hedge fund’s derivative holdings imploded, nearly bringing down with them the global capital market as we know it.

      As the name suggests, a derivative is a financial contract...

    • CHAPTER EIGHT HEDGE FUNDS
      (pp. 83-92)
      AMER BISAT

      Ask the educated layperson about hedge funds, and the answer will involve descriptions of colorful names (Tiger, Jaguar, Quantum); of men (and yes, the managers are almost always men) with little taste for restraint; and, of course, of the 1990s financial crises. Hedge funds have entered the collective psyche as financial behemoths that sow the seeds of destruction wherever they tread. George Soros’s hedge fund is famed for forcing the pound sterling’s exit from the European Monetary System, and the 1998 collapse of Long-Term Capital Management nearly brought down the global financial system as we know it. Many are convinced...

  6. PART 2. BANKING AND MACROECONOMICS
    • CHAPTER NINE BANKING CRISES: CAUSES AND SOLUTIONS
      (pp. 95-105)
      ANYA SCHIFFRIN

      The banking system is the heart of a country’s economy. It is the major savings vehicle for the population. It also pumps the money that is required for the economy to grow and for businesses to develop. This intermediation role is especially true for developing countries, as they typically do not have developed capital markets and so bank credit makes up most of the funds that small businesses need to expand. Without such funds, companies cannot develop and jobs can not be created. And yet banking crises are endemic, for it is much easier to lend money than to get...

    • CHAPTER TEN SOVEREIGN DEBT CRISES
      (pp. 106-117)
      SUZANNE MILLER

      Sovereign countries have been borrowing money from foreign creditors since colonial times. Argentina, for instance, slid into debt even before it achieved independence, turning to England for money to fight Spanish colonial rule. In 1915, the United States sent troops to Haiti after the government failed to pay its debt. In 1902, Great Britain, Germany, and Italy sent a joint naval expedition to the Venezuelan coast, where they blockaded seaports and captured Venezuelan gunboats. Argentina’s foreign affairs minister, Maria Luis Drago, protested, laying the groundwork for the Drago Doctrine—in essence an extension of the Monroe Doctrine—which maintained that...

    • CHAPTER ELEVEN DEBT RELIEF AND HIPC
      (pp. 118-131)
      GUMISAI MUTUME

      There is growing consensus around the world that debt is a major obstacle to the sustainable development of poor countries. Some governments spend more than 75 percent of their revenues on debt payments, leaving them with little money for more productive expenditures such as education and health. The cost of debt payments, or servicing the debt, can also suck up much of the foreign currency a country earns from its exports, leaving little foreign currency to buy vital imports.

      When the burden of external debt, or the money owed outside the country, becomes too great, countries generally try to renegotiate...

    • CHAPTER TWELVE ASSESSING SOVEREIGN RISK
      (pp. 132-146)
      GRACIANA DEL CASTILLO

      Sovereign-risk analysis has acquired a new importance as more and more emerging-market governments borrow in the international capital markets. Governments borrow for a number of reasons, most importantly to finance their fiscal and current-account deficits. In addition to borrowing from banks, governments borrow from the public by issuing bonds, both in domestic and foreign currency. A bond (or debt instrument) is simply an IOU that describes the terms of the contract between borrower and lender, including the cost of borrowing and the promise of repayment in full by a certain time. Sovereign risk refers to the risk that the government...

    • CHAPTER THIRTEEN PENSION REFORM
      (pp. 147-156)
      PHILLIP LONGMAN

      Even among the advanced welfare states of Europe, efforts to contain pension costs are now common. The United Kingdom, Sweden, Germany, and Italy have all enacted partial privatizations of their pension systems in recent years. Countries such as Spain and Greece will soon have to do so, with Greece making reforms in order to comply with European Union regulations that limit government borrowing. Hungary and Poland have both adopted hybrid systems, in which traditional plans are being phased out and replaced by mandatory savings requirements.

      In part because of the need to bring their fiscal accounts closer to balance, some...

  7. PART 3. CORPORATE REPORTING
    • CHAPTER FOURTEEN FOREIGN DIRECT INVESTMENT
      (pp. 159-170)
      DAN DELUCA

      Foreign direct investment has increased dramatically in the past twenty years to become the dominant type of crossborder capital flow in both developed and developing economies. Total worldwide FDI inflows grew from $59 billion in 1982 to $651 billion in 2002, peaking at $1,393 billion in 2000.¹

      In the same period, FDI in developing countries grew from $8 billion to $205 billion. This dramatic growth both reflects and helps bring about the growing integration of the world’s economies. Multinational corporations have increased their geographic scope of operations dramatically, creating the “global supply chain,” where each stage of production takes place...

    • CHAPTER FIFTEEN PRIVATIZATION
      (pp. 171-181)
      DEIDRE SHEEHAN

      Since the 1980s, when Margaret Thatcher was elected prime minister of Great Britain and Ronald Reagan was elected president of the United States, there has been a massive change in thinking about the role of the state. Part of this was a move towards privatization, as governments around the world decided to stop running businesses and let the private sector take over.

      This was a fairly profound reversal in public policy. Until then, governments in both the developed and developing world had pursued a development strategy that emphasized heavy government participation in the economic cycle. Over the decades, governments accumulated...

    • CHAPTER SIXTEEN CORPORATE GOVERNANCE
      (pp. 182-190)
      HOWARD I. GOLDEN

      The day-to-day running of a corporation is entrusted to the management, who are supposed to act in the interests of the corporation—its shareholders and other stakeholders (such as workers). Under good corporate governance, a publicly held corporation is managed properly (not just in the interests of managers or majority shareholders) and efficiently. This benefits its shareholders and society as a whole.

      When a chief executive in the U.S. spends $15,000 of his shareholder’s money to buy an umbrella stand, and millions of corporate dollars go to support a royal lifestyle, it is fair to question whose interests are being...

    • CHAPTER SEVENTEEN LABOR
      (pp. 191-199)
      KRISTIN HUCKSHORN

      Issues of labor and workers’ rights have been fertile ground for journalists since the 1800s, when thousands of impoverished Europeans and Americans left farm fields for factories. A reporter needs to look no further than the strict rules governing working girls in the Lowell, Massachusetts, textile mills in the 1850s to find antecedents for the regulations issued 150 years later to Asian workers inside foreign-controlled sneaker factories.

      Today, the rush toward globalization and the accompanying exodus of jobs from industrialized to developing countries has reestablished labor as a hot-button issue. Indeed, labor is one of the chief ways in which...

    • CHAPTER EIGHTEEN ACCOUNTING
      (pp. 200-229)
      JANE M. FOLPE and HERBERT K. FOLPE

      Understanding accounting is essential to understanding what is happening in the world of business. And yet, until recently, accounting and the accounting profession did not receive much press from the mainstream media. Sure, a few journalists followed the profession and its standard-setting bodies. The U.S. financial press did some reporting on accounting scandals, including those of the mid-1990s that involved top executives at certain firms attempting to “manage earnings” in order to keep stock prices high. But more often than not, mainstream press coverage either glossed over how businesses accounted for their activities or offered the firm’s own—and often...

    • CHAPTER NINETEEN MONEY LAUNDERING
      (pp. 230-238)
      DAVID MARCHANT

      Money laundering is the method of concealing the proceeds of criminal activity in order to disguise its illegal origin and create the appearance that it was generated through legitimate business activities so that the perpetrators can spend their booty with the minimum of suspicion. Governments have designated it a criminal offense in its own right, just like the underlying offense(s) that resulted in the proceeds being obtained in the first place, in an attempt to take the profit out of crime.

      Different jurisdictions have historically defined money-laundering offenses in different ways. Historically, it included only those crimes that were universally...

  8. PART 4. TRADE AND COMMODITIES
    • CHAPTER TWENTY INTERNATIONAL TRADE
      (pp. 241-254)
      NICHOLAS ROSEN and HELEN CAMPBELL

      Trade used to be a dry, arcane subject best left to experts who argued over the details of lengthy and complex international agreements. But in recent years, the international-trade-policy debate has become one of the hottest topics a journalist can cover. International trade—the flow of goods and services across borders—affects the lives of vast numbers of people around the world in profound and different ways. At the national and international level, it is one of the most important—and contentious—issues of the day. The antiglobalization protests at the World Trade Organization Summit in Seattle (1999), and the...

    • CHAPTER TWENTY-ONE COMMODITIES MARKETS
      (pp. 255-262)
      VINCENT NWANMA

      Commodities are a vital sector for many developing countries. Revenues from commodity exports often provide a large share of foreign-exchange revenues, as well as government income. In countries where the commodities being produced are agricultural, most of the labor force—in some cases, as much as two-thirds—is employed in the sector. This means covering commodities goes beyond merely reporting about events that influence prices on world markets. It also involves writing about economic development and the lives of the millions of people working in agriculture, mining, and elsewhere.

      Anything from social unrest to bad weather can affect commodities. Good...

    • CHAPTER TWENTY-TWO OIL AND DEVELOPMENT
      (pp. 263-275)
      PETTER NORE

      The oil and natural gas industries play a decisive role in the economic, social, and environmental development of countries with deposits of either fuel. While the discovery of oil or gas is usually heralded as a windfall for a country’s economy, particularly a poor one, it can also be a double-edged sword. Economists term this phenomenon the “resource curse,” and it is often associated with worsening income distribution and a lack of development not only on the economic front but in the social and environmental realms as well. For journalists in developing countries covering the petroleum industry, it is vital...

    • CHAPTER TWENTY-THREE POVERTY REDUCTION
      (pp. 276-286)
      ISABEL ORTIZ

      More than 2.8 billion people, or around half the world’s population, live below the international poverty line of $2 a day. Of those, 1.2 billion live in extreme poverty, surviving on less than $1 a day. Most of the poor are in Asia and Africa. The incidence of poverty is greater in women than in men and higher in rural areas than in urban areas. Vulnerable groups such as the elderly, ethnic minorities, refugees, or the disabled are much more affected by poverty. Since 1987, the incidence of poverty has decreased, and the proportion of people living below the dollar-a-day...

  9. PART 5. REPORTING AND WRITING
    • CHAPTER TWENTY-FOUR COVERING THE WORLD BANK
      (pp. 289-299)
      ABID ASLAM

      Journalists have long covered the World Bank in its many guises: lending institution, development agency, think-tank, forum for intergovernmental politics and economic diplomacy, bureaucracy, and employer of 10,000 people.

      The bank was founded in 1944 to lend money to governments seeking to rebuild their economies after World War II. By the 1960s, it had redefined itself as an institution dedicated to fighting world poverty. Today, it lends and guarantees around $20 billion per year in near-market-rate loans and some $6 billion more in no-interest loans to borrowing countries in the developing world and the former Soviet Union. In turn, the...

    • CHAPTER TWENTY-FIVE INTERNET REPORTING
      (pp. 300-321)
      JANE M. FOLPE

      This section deals with Internet sourcing and research tools for journalists from developing countries. It reviews a number of Web sites that provide good general background information on the economic situation in various parts of the world, and it discusses how to get the most out of the online resources offered by governments (both the U.S. and foreign), international organizations, universities, think tanks, and activists, among others.

      It is fair to say that the Internet has transformed the job of a journalist—so much key information is just a couple of clicks away. Of course, Internet reporting should not replace...

    • CHAPTER TWENTY-SIX WRITING TIPS
      (pp. 322-329)
      GRAHAM WATTS

      Imagine how exciting it would have been if South Korea had made it to the finals of the 2002 World Cup. The plucky host nation—the first Asian country to get that far—against the greatest of all, Brazil. Asia vs. Latin America. Even people who know nothing about football would have loved it.

      Now imagine the story was written by a reporter from the business pages:

      At the Yokohama International Stadium in Japan, attended by 76,371 spectators, including his excellency the President of the Federation of International Football Associations, Joseph Sepp Blatter, an encounter took place today between the...

  10. List of Contributors
    (pp. 330-332)
  11. INDEX
    (pp. 333-340)