Joseph Stiglitz: Defying the Economic Classicists with Logic and Fact

jsPlain reason and simple truth are often easiest to ignore. Why opt for a burst of common sense when a much more elaborate and complex explanation – wrapped in fancy words of learning – may be available? Most politicians, and the pundits who travel in their wake, study the art of evasion long and hard in order to offer meaningless sound bites that use the greatest number of words to say the least. Both reason and truth are often lost in the process.

It is therefore quite refreshing when somebody finds the courage – and the words – to state the obvious: Over the last quarter century, people in Europe and North America have experienced a decrease in average personal wealth. In the US, the median income of male workers is now lower than it was forty years ago. European workers are not faring much better.

Former World Bank chief economist Joseph Stiglitz, recipient of the 2001 Nobel Memorial Prize in Economic Sciences, is a plain talker and delivers his message in a straightforward, almost punch-like, way. Mr Stiglitz argues that the policies imposed after the 2008 financial meltdown have mostly benefitted banks and their stockholders while society at large is expected to foot the bill, presented in the form of strict austerity.

“Mr Stiglitz is also one of only a select few economists who steadfastly refuse to let the all-mighty rating agencies off the hook for their pivotal role in the run-up to the meltdown.”

Mr Stiglitz is also one of only a select few economists who steadfastly refuse to let the all-mighty rating agencies off the hook for their pivotal role in the run-up to the meltdown. Though these agencies were instrumental in enabling banks to sell massive loads of junk bonds as prime-quality investment vehicles, their monumental ineptitude – verging on criminal negligence – did not result in a revision of their procedures or, indeed, a reduction of their power.

The global economy needs eminent thinkers like Mr Stiglitz to bluntly point out the inconsistencies of its error-prone, business-as-usual ways. As the stock portfolios of the rather self-complacent elites are soaring, the rest of us are being told to adjust for permanently lower standards of living. Young people are waned off outdated notions regarding job availability and stability, living wages, housing affordability and upward mobility. You’re lucky to get a job and shouldn’t push your luck.

Time and again, Mr Stiglitz has pointed out that there are plenty other ways to reinvigorate economic life, and by extension social development. For a start, it might be a sensible idea to formulate policy on the fact that free markets do not exist and neither does the invisible hand Adam Smith conjured.

Mr Stiglitz knows little fear when it comes to shattering economic myths. In 2000 that courage cost him his job at the World Bank after he had voiced dissent over the harmful policy guidelines imposed on the countries of Eastern Europe as they transitioned to market economies.

As an economist of both note and daring, and one who refuses to toe the neoliberal line, Mr Stiglitz is undoubtedly a hero in the classical sense of the word.

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