In what is, certainly, one of the most socially and politically pertinent and powerful interviews I’ve read in a very long while--at least if you’re a follower of Nobel Prize-winner and Columbia University Professor Joseph Stiglitz—I strongly urge you to checkout this world-renowned economist’s commentary wherein he pulls no punches on a variety of topics, from just the past 24 hours, over at the online eZine, The European Magazine.
Entitled, “Austerity and a New Recession,” this Stiglitz interview is chock-full of eminently quotable quotes that’ll have many economics geeks, and for that matter virtually anyone that follows politics and the economy anywhere, exclaiming “Wow!” countless times in just the five or ten minutes that it will take them to read it.
There’s a bold quote from the interview that acts as a header for the page: “Politics Is at the Root of the Problem.”
(NOTE: The interview is a discussion about the state of the economies of both Europe and the U.S. I’m focusing on the U.S.-related commentary in this post. But, to be clear, his incisive commentary on present-day economic matters in Europe, and his comparisons with regard to what’s happening there versus what we’re now witnessing on this side of the pond are where you’ll find some of his most powerful words.)
[BREAKING NEWS UPDATE (see bottom of this post for links and blockquote): Bloomberg is running a story, as of the past hour, announcing that the UK has officially entered into a double-dip recession.]
Stiglitz leads off talking about the failure of traditional academic economists with regard to their handling of the current global financial crisis that started in the U.S…
…Academic economists played a big role in causing the crisis…
…
…I have been even more disappointed [in] American policy-making. Ben Bernanke gives a speech and says something like, there was nothing wrong with economic theory, the problems were a few details in implementation. In fact, there was a lot wrong with economic theory and with the basic policy framework that was derived from theory. If your mindset is that nothing was wrong, you will not demand new models. That’s a big disappointment…
…
… Some American policy-makers have recognized the danger of “too big to fail,” but they are a minority…
On economic growth satisfying
“the criteria of social fairness”…
…When you look at America, you have to concede that we have failed. Most Americans today are worse off than they were fifteen years ago. A full-time worker in the US is worse off today than he or she was 44 years ago. That is astounding – half a century of stagnation. The economic system is not delivering. It does not matter whether a few people at the top benefitted tremendously – when the majority of citizens are not better off, the economic system is not working…
On the consequences of the “austerity movement,” Stiglitz refers to his article in Vanity Fair, from last year: “
Of the 1%, by the 1%, for the 1%.” He discusses how that resonated with so many people…particularly within the Occupy Wall Street movement…
… the Occupy movement has been very successful in bringing those ideas to the forefront of political discussion…Protests like the ones at Occupy Wall Street are only successful when they pick up on these shared concerns…
…
…If my forecast about the consequences of austerity is correct, you will see a new round of protest movements. We had a crisis in 2008. We are now in the fifth year of crisis, and we haven’t solved it. There’s not even a light at the end of the tunnel. When we come to that conclusion, the discourse will change.
The European: The situation needs to be really bad before it will get better?
Stiglitz: Yes, I fear.
The European: You recently wrote about the “irreversible decay” of the American Midwest. Is this crisis a sign that the US has begun an irreversible economic decline, even while we still regard the country as a potent political player?
Stiglitz: We are facing a very difficult transition from manufacturing to a service economy. We have failed to manage that transition smoothly. If we don’t correct that mistake, we will pay a very high price. Already, the average American is suffering from the failed transition. My concern is that we have set in motion an adverse economics and an adverse politics. A lot of American inequality is caused by rent-seeking: Monopolies, military spending, procurement, extractive industries, drugs. We have some economic sectors that are very good, but we also have a lot of parasites. The hopeful view is that the economy can grow if we rid ourselves of the parasites and focus on the productive sectors. But in any disease there is always the risk that the parasites will devour the healthy body parts. The jury is still out on that…
I’m giving you enough here to whet your whistle; but, this interview is quite powerful throughout. There’s a
lot more meat to it than just the blockquotes above. I strongly urge you to give a full read. Again, here’s the
LINK to it.
2:03 AM PT: A big h/t to Kossack Leo Flinnwood, who brings to our attention the following breaking news story from Bloomberg, “U.K. Returns to Recession in First Quarter on Building Slump,” in his much more illustrative comment (heh), farther down below.
The U.K. economy shrank in the first quarter as construction output slumped, pushing Britain into its first double-dip recession since the 1970s.
Gross domestic product contracted 0.2 percent from the fourth quarter of 2011, when it shrank 0.3 percent, the Office for National Statistics said today in London. The median of 40 estimates in a Bloomberg News survey was for a gain of 0.1 percent. A technical recession is defined as two straight quarters of contraction...