Joseph E. Stiglitz's Blog

September 6, 2018

Secular stagnation advocates should agree on outcome if their preferred policies had been implemented

As Larry Summers rightly points out, the term “secular stagnation” became popular as the second world war was drawing to a close. Alvin Hansen (and many others) worried that, without the stimulation provided by the war, the economy would return to recession or depression. There was, it seemed, a fundamental malady.

But it didn’t happen. How did Hansen and others get it so wrong? Like some modern-day secular stagnation advocates, there were deep flaws in the underlying micro- and macroeconomic analysis – most importantly, in the analysis of the causes of the Great Depression itself.

Related: Weak economic recovery was down to flawed policies, not secular stagnation | Joseph Stiglitz

Inadequate financial regulation left Americans vulnerable to predatory banking behaviour and saddled with enormous debts

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Published on September 06, 2018 04:14 • 163 views

August 29, 2018

Lesson to be learned from 2008 financial crisis is that the challenge was – and is - political

In the aftermath of the 2008 financial crisis, some economists argued that the US, and perhaps the global economy, was suffering from “secular stagnation” – an idea first conceived in the aftermath of the Great Depression. Economies had always recovered from downturns, but the Great Depression had lasted an unprecedented length of time. Many believed the economy recovered only because of government spending on the second world war and many feared that with the end of the war, the economy would return to its doldrums.

Something, it was believed, had happened, such that even with low or zero interest rates, the economy would languish. For reasons now well understood, these dire predictions fortunately turned out to be wrong.

Related: US will lack fiscal space to respond when next recession comes

Policymakers failed to do enough even to prevent poor households from losing their homes

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Published on August 29, 2018 08:19 • 111 views

June 13, 2018

It was supposed to bring shared prosperity, but instead it has slowed growth and sown discord

The euro may be approaching another crisis. Italy, the eurozone’s third largest economy, has chosen what can at best be described as a eurosceptic government. This should surprise no one. The backlash in Italy is another predictable (and predicted) episode in the long saga of a poorly designed currency arrangement, in which the dominant power, Germany, impedes the necessary reforms and insists on policies that exacerbate the inherent problems, using rhetoric seemingly intended to inflame passions.

Italy has been performing poorly since the euro’s launch. Its real (inflation-adjusted) GDP in 2016 was the same as it was in 2001. But the eurozone as a whole has not been doing well, either. From 2008 to 2016, its real GDP increased by just 3% in total. In 2000, a year after the euro was introduced, the US economy was only 13% larger than the eurozone; by 2016 it was 26% larger. After real growth of around 2.4% in 2017 – not enough to reverse the damage of a decade of malaise – the eurozone economy is faltering again.

Related: The EU v Italy’s new government: which will blink first?

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Published on June 13, 2018 05:55 • 231 views

May 9, 2018

The country is a beacon of Enlightenment – a world leader in democratic, sustainable, and inclusive economic growth, writes Joseph Stiglitz

With authoritarianism and proto-fascism on the rise in so many corners of the world, it is heartening to see a country where citizens are still deeply committed to democratic principles. And now its people are trying to redefine their politics for the 21st century.

Over the years, Costa Rica, a country of fewer than 5 million people, has gained attention worldwide for its progressive leadership. In 1948, after a short civil war, President José Figueres Ferrer abolished the military. Since then, Costa Rica has made itself a centre for the study of conflict resolution and prevention, hosting the UN-mandated University for Peace.

Related: Globalisation: time to look at the past to plot the future | Joseph Stiglitz

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Published on May 09, 2018 01:52 • 284 views

December 5, 2017

Trade deals were hammered out in secret by multinationals at the expense of workers and citizens. Benefits must be shared if the global economy is to work

Fifteen years ago, I published Globalisation and Its Discontents, a book that sought to explain why there was so much dissatisfaction with globalisation within the developing countries. Quite simply, many believed that the system was rigged against them, and global trade agreements were singled out for being particularly unfair.

Now discontent with globalisation has fuelled a wave of populism in the US and other advanced economies, led by politicians who claim that the system is unfair to their countries. In the US, President Donald Trump insists that America’s trade negotiators were snookered by those from Mexico and China.

Related: Globalisation is dented but not doomed

Related: Business Today: sign up for a morning shot of financial news

Related: Joseph Stiglitz: 'Trump has fascist tendencies'

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Published on December 05, 2017 05:42 • 563 views

October 19, 2017

The current regime is unsustainable. Emerging economies are right to lead the pushback against patenting standards

When the South African government attempted to amend its laws in 1997 to avail itself of affordable generic medicines for the treatment of HIV/Aids, the full legal might of the global pharmaceutical industry bore down on the country, delaying implementation and extracting a high human cost. South Africa eventually won its case, but the government learned its lesson: it did not try again to put its citizens’ health and wellbeing into its own hands by challenging the conventional global intellectual property (IP) regime.

Until now. The South African cabinet is preparing to finalise an IP policy that promises to expand access to medicines substantially. South Africa will now undoubtedly face all manner of bilateral and multilateral pressure from wealthy countries. But the government is right, and other developing and emerging economies should follow in its footsteps.

Related: Protect the drug giants' patents - and harm the health of the poor?

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Published on October 19, 2017 00:42 • 647 views

October 18, 2017

The health and wellbeing of people should be put before corporate profits

When the South African government attempted to amend its laws in 1997 to avail itself of affordable generic medicines for the treatment of HIV/Aids, the full legal might of the global pharmaceutical industry bore down on the country, delaying implementation and extracting a high human cost. South Africa eventually won its case, but the government learned its lesson: it did not try again to put its citizens’ health and wellbeing into its own hands by challenging the conventional global intellectual property (IP) regime.

Until now. The South African cabinet is preparing to finalise an IP policy that promises to expand access to medicines substantially. South Africa will now undoubtedly face all manner of bilateral and multilateral pressure from wealthy countries. But the government is right, and other developing and emerging economies should follow in its footsteps.

Related: Protect the drug giants' patents - and harm the health of the poor?

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Published on October 18, 2017 08:13 • 600 views

October 4, 2017

The Republicans’ proposals dodge necessary changes and will leave the country with a mountain of debt

Having failed to “repeal and replace” the 2010 Affordable Care Act (“Obamacare”), Donald Trump’s administration and the Republican congressional majority have now moved on to tax reform. Eight months after assuming office, the administration has been able to offer only an outline of what it has in mind. But what we know is enough to feel a deep sense of alarm.

Tax policy should reflect a country’s values and address its problems. And today, the United States – and much of the world – confronts four central problems: widening income inequality, growing job insecurity, climate change and anaemic productivity growth. America faces, in addition, the need to rebuild its decaying infrastructure and strengthen its underperforming primary and secondary education system.

Related: The great unwinding: Fed begins slow demise of its post-crash stimulus

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Published on October 04, 2017 06:33 • 537 views

September 8, 2017

We should have learned the lessons of Hurricanes Katrina and Sandy – we need political action to help prevent disasters

Tropical Storm Harvey has left in its wake upended lives and enormous property damage, estimated by some at $150-$180bn. But the storm that pummelled the Texas coast for the better part of a week also raises deep questions about the United States’ economic system and politics.

It is ironic, of course, that an event so related to climate change would occur in a state that is home to so many climate-change deniers – and where the economy depends so heavily on the fossil fuels that drive global warming. Of course, no particular climate event can be directly related to the increase in greenhouse gases in the atmosphere. But scientists have long predicted that such increases would boost not only average temperatures, but also weather variability – and especially the occurrence of extreme events such as Harvey. As the Intergovernmental Panel on Climate Change concluded several years ago, “There is evidence that some extremes have changed as a result of anthropogenic influences, including increases in atmospheric concentrations of greenhouse gases.” Astrophysicist Adam Frank succinctly explained: “Greater warmth means more moisture in the air which means stronger precipitation.”

Related: After the storm: how should cities rebuild post hurricanes like Harvey and Irma?

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Published on September 08, 2017 02:58 • 687 views

July 27, 2017

The president thinks lower taxes and deregulation will solve the US’s problems. They won’t work, because they never have

Although America’s rightwing plutocrats may disagree about how to rank the country’s major problems – for example, inequality, slow growth, low productivity, opioid addiction, poor schools, and deteriorating infrastructure – the solution is always the same: lower taxes and deregulation, to “incentivise” investors and “free up” the economy. Donald Trump is counting on this package to make America great again.

It won’t, because it never has. When Ronald Reagan tried it in the 1980s, he claimed that tax revenues would rise. Instead, growth slowed, tax revenues fell, and workers suffered. The big winners in relative terms were corporations and the rich, who benefited from dramatically reduced tax rates.

Related: How about a little accountability for economists when they mess up? | Dean Baker

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Published on July 27, 2017 03:42 • 928 views

Joseph E. Stiglitz's Blog

Joseph E. Stiglitz
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