Joseph E. Stiglitz's Blog

Salvaging global democratic politics requires far-reaching economic reforms | Joseph Stiglitz

Resolving economic and political inequality is vital if we want people to reject authoritarianism

There has been much handwringing about the retreat of democracy and the rise of authoritarianism in recent years – and for good reason. From the Hungarian prime minister, Viktor Orbán, to the former Brazilian president Jair Bolsonaro and the former US president Donald Trump, we have a growing list of authoritarians and would-be autocrats who channel a curious form of rightwing populism. Although they promise to protect ordinary citizens and preserve longstanding national values, they pursue policies that protect the powerful and trash longstanding norms – and leave the rest of us trying to explain their appeal.

While there are many explanations, one that stands out is the growth of inequality, a problem stemming from modern neoliberal capitalism, which can also be linked in many ways to the erosion of democracy. Economic inequality inevitably leads to political inequality, albeit to varying degrees across countries. In a country like the US, which has virtually no constraints on campaign contributions, “one person, one vote” has morphed into “one dollar, one vote”.

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Silicon Valley Bank’s failure is predictable – what can it teach us? | Joseph Stiglitz

The collapse of SVB highlights deep failures in the conduct of regulatory and monetary policy

Live coverage of Silicon Valley Bank collapseGlobal banking shares slide as SVB fallout spreadsWhy did it collapse and is this the start of a banking crisis?

The run on Silicon Valley Bank – on which almost half of all venture-backed tech startups in the US depend – is in part a rerun of a familiar story, but it’s more than that. Once again, economic policy and financial regulation have proven inadequate.

The news about the second-biggest bank failure in US history came only days after the Federal Reserve chair, Jerome Powell, assured Congress that the financial condition of US banks was sound. But the timing should not be surprising. Given the large and rapid increases in interest rates Powell engineered – probably the most significant since the former Fed chair Paul Volcker’s interest-rate hikes of 40 years ago – it was predicted that dramatic movements in the prices of financial assets would cause trauma somewhere in the financial system.

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How to fight inflation? (Spoiler alert: not with interest rate rises) | Joseph Stiglitz

US inflation is mainly supply-side driven so further rate hikes will have little to no effect – and cause deep problems of their own

Despite favourable indices, it is too soon to tell whether inflation has been tamed. Nonetheless, two clear lessons have emerged from the recent price surge.

First, economists’ standard models – especially the dominant one that assumes the economy always to be in equilibrium – were effectively useless. And, second, those who confidently asserted it would take five years of pain to wring inflation out of the system have already been refuted. Inflation has fallen dramatically, with the December 2022 seasonally adjusted consumer prices index coming in just 1% above that for June.

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Raising interest rates to tame inflation will only cause more pain | Joseph Stiglitz

Central banks are set on a path to cause recession – and marginalised people will pay the price

Central banks’ unwavering determination to increase interest rates is truly remarkable. In the name of taming inflation, they have deliberately set themselves on a path to cause a recession – or to worsen it if it comes anyway. Moreover, they openly acknowledge the pain their policies will cause, even if they don’t emphasise that it is the poor and marginalised, not their friends on Wall Street, who will bear the brunt of it. And in the US, this pain will disproportionately befall people of colour.

As a new Roosevelt Institute report that I co-authored shows, any benefits from the extra interest rate-driven reduction in inflation will be minimal, compared with what would have happened anyway. Inflation already appears to be easing. It may be moderating more slowly than optimists hoped a year ago – before Russia’s war in Ukraine – but it is moderating nonetheless, and for the same reasons that optimists had outlined. For example, high auto prices, caused by a shortage of computer chips, would come down as the bottlenecks were resolved. That has been happening, and car inventories have indeed been rising.

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The Fed should pause interest rate rises as US inflation slows | Joseph Stiglitz and Dean Baker

It would be irresponsible to create much higher unemployment – and the US economy could be pushed into recession

The US Federal Reserve Board will meet again on 20-21 September, and while most analysts expect another big interest-rate rise, there is a strong argument for the Fed to take a break from its aggressive monetary-policy tightening. While its rate increases so far have slowed the economy – most obviously the housing sector – their impact on inflation is far less certain.

Monetary policy typically affects economic performance with long and variable lags, especially in times of upheaval. Given the depth of geopolitical, financial and economic uncertainty – not least about the future course of inflation – the Fed would be wise to pause its rate rises until a more reliable assessment of the situation is possible.

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Davos 2022 meeting was a missed opportunity over globalisation | Joseph Stiglitz

Business and political elite embraced new ethos at WEF without reflecting on past mistakes

The World Economic Forum’s first meeting in more than two years was markedly different from the many previous Davos conferences that I have attended since 1995. It was not just that the bright snow and clear skies of January were replaced by bare ski slopes and a gloomy May drizzle. Rather, it was that a forum traditionally committed to championing globalisation was primarily concerned with globalisation’s failures: broken supply chains, food and energy price inflation, and an intellectual property (IP) regime that left billions without Covid-19 vaccines just so that a few drug companies could earn billions in extra profits.

Among the proposed responses to these problems are to “reshore” or “friend-shore” production and to enact “industrial policies to increase country capacities to produce”. Gone are the days when everyone seemed to be working for a world without borders; suddenly, everyone recognises that at least some national borders are key to economic development and security.

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Credit Suisse has allowed the morally bankrupt to steal from the poor for too long | Joseph Stiglitz

How many exposés will it take for Switzerland and other countries to change their laws on banking secrecy?

Joseph E Stiglitz is a Nobel laureate in economics

The bombshell revelations of the Suisse secrets, reported by the Guardian and a number of international outlets, are a continuation of the path-breaking work of the Panama Papers and the Paradise Papers. In one sense, it’s the same old story over and over again. Every time journalists lift the financial sector’s curtain of secrecy, a web of corruption and nefarious activities is revealed, disproportionately from shady customers and families of dictators, with a smattering of seemingly respectable politicians in democracies caught in the net.

But this time, there’s something different. This time it’s not a small, obscure offshore island or a struggling developing country trying to figure out an alternative business model to drugs. It’s a major bank in the middle of Europe, in one of the most prosperous countries in the world; a country where the “rule of law” is supposed to reign supreme. Even more disappointing, given that the country and bank involved have made promises of transparency and doing better. And that’s the point: without more transparency, there can’t be accountability.

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If Olaf Scholz is serious about progress, he must back a patent waiver for Covid vaccines | Joseph Stiglitz

Germany is already out of step with the rest of the EU on this and needs to send a strong signal to Joe Biden

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Announcing a “new era” for Germany last month, the country’s new chancellor, Olaf Scholz, made his bold intentions clear. “We are united by our belief in progress and that politics can achieve something good,” he said, launching his SPD-Green-FDP coalition’s programme, under the slogan “dare more progress”.

This self-described “progress coalition” promises a series of socially liberal domestic policies – but it could make its greatest impact of all if it dares to join the global movement to make Covid-19 vaccines available to all as global public goods. The statement “no one is safe until everyone is safe” must be more than a nice-sounding slogan: Germany has the opportunity and the obligation to help it become a reality.

Joseph E Stiglitz is a Nobel laureate in economics and a professor at Columbia University

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Why the Federal Reserve chair Jerome Powell must go

Joe Biden needs someone at the top who shares his values – so step forward then please … Lael Brainard

The US president, Joe Biden, faces a critical decision: whom to appoint as chair of the Federal Reserve – arguably the most powerful position in the global economy.

The wrong choice can have grave consequences. Under Alan Greenspan and Ben Bernanke, the Fed failed to regulate the banking system adequately, setting the stage for the worst global economic downturn in 75 years. That crisis and policymakers’ response to it have had far-reaching political consequences, exacerbating inequality and nurturing a lingering sense of grievance in those who lost their houses and jobs.

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Does Joe Biden’s spending plan really risk high inflation?

We should expect price increases in the Covid recovery phase – and we have the tools to cool the economy

Slight increases in the rate of inflation in the United States and Europe have triggered financial market anxieties. Has Joe Biden’s administration risked overheating the economy with its $1.9tn (£1.3tn) rescue package and plans for additional spending to invest in infrastructure, job creation and bolstering American families?

Such concerns are premature, considering the deep uncertainty we still face. We have never before experienced a pandemic-induced downturn featuring a disproportionately steep service sector recession, unprecedented increases in inequality and soaring savings rates. No one even knows if or when Covid-19 will be contained in the advanced economies, let alone globally. While weighing the risks, we also must plan for all contingencies. In my view, the Biden administration has correctly determined that the risks of doing too little far outweigh the risks of doing too much.

Related: A shortage of workers is driving up wages: are we entering a new economic era? | John Harris

Related: Post-lockdown summer: Americans out for fun and with money to spend

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