More Fuzzy-Headed Logic in Joseph Stiglitz's New Book
Stiglitz has a new book, "Freefall", where he says that the fiscal policy of the Obama administration is unsustainable. Of course it is ! It is the exact same Keynesianism that Stiglitz has been arguing for at least 5 times as long as Workers has blogged.
Stiglitz is self-admitted Keynesianist, yet he says that the Obama administration policies are "win-win-lose", e.g. the banks win, investors win and the taxpayers lose. That is the very definition of Keynesian economic management. Prof. Stiglitz, please, you can't have it both ways.
When you believe that the government has a role in stabilizing the economy, through fiscal and monetary interventionism, it is the very definition of the "socialized risk and private gain" you proclaim to detest so much. I mean, through who else but the banks, through discounted money offered by the Fed, is monetary policy conducted? And fiscal stimulus is nothing but the government spending money on things they deem as priorities, correct? How is this not 'socialized risk'? Giving grants and contracts to people, by taking money from the taxpayer, is the same thing, "socialized risk" ! What is so hard about understanding this ?
You call for a larger redistribution of money from the rich to the poor (is there not social mobility? Are not yesterday's poor tommorrow's rich, and, well, vice-versa?), is not this as well socialized risk? Those that take risks, by saving and investing and making entrepreneurial decisions, that, with luck and foresight, pay-off, aren't they private risks? You want to create counter-incentives towards doing this with a 'soak the rich' tax policy. That giant sucking sound you hear is American money going to Singapore and Brazil, no doubt you will complain about the lack of quality jobs in the USA, once investment flies off-shore with an overly-progressive tax structure. Local investment is needed to created local jobs; a high-tax rate does not accomplish this needed positive investment climate. It is the taxpayer, e.g., everyone, who loses when investment is not made due to a bad investment climate. Again, why do you argue the opposite?
You want a new International Financial Architecture, e.g., a global central bank. Is that not just creating socialized risk and private gain at a worldwide level? Has it not been shown, the unsustainable Bretton Woods and interwar gold-standards, the Latin American and Asian and Russian currency crisis?, that fixed currencies don't work?
You say that the recent crisis was due to "unrelenting pursuit of profits" in an unregulated economy? Ever hear of (of course you have, you have a Nobel and teach at Columbia) the FDIC, Fannie Mae, Freddie Mac, the FHA, the SEC, the Community Reinvestment Act, the Basel Standards? These aren't regulations?
Wow. It's so hard to understand how and why you can actually believe these things you tie to the problems we face versus the solutions you offer. Time to give it up, and face the logic. Central-planning of the economy is by-definition the very thing you proclaim to detest.