More idiocy from Joe Stiglitz

How do you destroy a country’s economy? Well, here are a few ideas. Hike taxes. Overregulate. Ratchet up government spending. Increase welfare entitlements. Make it your goal not to achieve greater prosperity for everyone but to achieve greater income and wealth equality.

Joseph Stiglitz

This, after all, is how the chavistas ran Venezuela, once one of the world’s most prosperous nations, into the ground. And, believe it or not, these are the prescriptions offered by economist Joseph Stiglitz, whom we profiled here at some length in October 2015 and whom we’re revisiting now because of a characteristically wacky article by him that appeared in the Guardian on May 30.

But first, a reminder: this, as we noted four years ago, is a man who has taught at Yale, Oxford, Stanford, Princeton, and Columbia; who served as chief economist at the World Bank; who was a top advisor to the United Nations; who was named one of the world’s 100 most influential people by Time magazine; and who, yes, won the Nobel Memorial Prize in Economic Sciences in 2001.

Paul Krugman

How, you may ask, did a man with such cockeyed economic ideas win a Nobel Memorial Prize in Economics? Well, remember, Paul Krugman won one too. And Yasir Arafat won the Nobel Peace Prize. Not every decision they make in Stockholm or Oslo is a brilliant one.

If you think it’s unfair to compare the economic philosophy of a Nobel laureate with the cockeyed socialist ideas that ruined Venezuela, consider this: Stiglitz is a socialist – an actual member of the Socialist International who, in 2008, headed up a Socialist International commission charged with figuring out a solution to the global financial crisis. He’s an enemy of the nation-state and particularly of American-style democratic capitalism, and would replace the current world order with a socialist global government, complete with a new global currency and a global income tax.

Georg Papandreou

But while we still have nation-states, Stiglitz isn’t above profiting from some of the more poorly run ones in ways that call into question his professional integrity. For example, he weighed in repeatedly in places like Time magazine on the Greek financial crisis, which he blamed entirely on Germany, not on Greece; what he failed to mention was he was a paid advisor to Greek prime minister George Papandreou. In 2014, when New York judge Thomas P. Griesa ordered Argentina to pay its creditors, Stiglitz badmouthed the judge, called the creditors “vultures,” pronounced that “America is throwing a bomb into the global economic system,” and passionately defended Argentinian president Cristina Kirchner; again, he omitted to inform his readers that he had long been on the Kirchner payroll, supposedly serving as an economic advisor, although to many observers it certainly looked as if he was selling his name and reputation to whitewash a kleptocracy.

Cristina Kirchner

Which brings us to Stiglitz’s recent piece for the Guardian. There’s not really anything new in it; what’s remarkable is the timing. Here’s the headline: “Neoliberalism must be pronounced dead and buried. Where next?” And here’s the subhead: “For decades the US and others have pursued a free-market agenda which has failed spectacularly.” An incredible thing to say at a time when the American economy is stronger than it has been in decades and is the world’s most competitive, with record employment and income levels for pretty much every population group and every category of job.

Donald J. Trump

Many people credit President Trump for this extraordinary boom. Not Stiglitz. He not only pretends that the boom isn’t happening; he smears Trump as an avatar of “far-right nationalism,” which to him is even worse than plain old neoliberalism or the “centre-left reformism” of Tony Blair and Bill Clinton. In Stiglitz’s view, all three of these approaches should be junked in favor of a “radically different economic agenda” that he calls “progressive capitalism,” under which free markets would be a thing of the past and state-run economies would be the order of the day.

Stiglitz’s picture of what “progressive capitalism” would look like and how it would work is heavy on abstractions and light on specifics. “Governments have a duty to limit and shape markets…. government [should take] a more active role than neoliberalism prescribes.” Yet by the end of the article it’s clear what he‘s calling for. To be sure, he’s careful not to use the word Communism or even socialism, but those are the generally accepted names for what he prefers to call “progressive capitalism.”

Again, how weird to encounter a brief for socialism at a time when the chavistas’ Venezuela is dying and Trump’s America is thriving! But that’s old Joe for you.

Joe Stiglitz, big-government guru

Looking at his résumé, you’d almost think he could part the Red Sea. He was a Fulbright Scholar at Cambridge; he’s taught at Yale, Stanford, Oxford, Princeton, and Columbia; he chaired President Clinton’s Council of Economic Advisors; he was chief economist at the World Bank; and he won the Nobel Memorial Prize in Economic Sciences.

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Joseph Stiglitz

He’s served as an economic advisor to the UN and other international organizations as well as to heads of government around the world. In 2011, Time Magazine named him one of the world’s 100 most influential people.

But exactly what kind of influence does Joseph Stiglitz wield? What kind of advice does he dispense?

The first thing that’s important to know is that he’s a dyed-in-the-wool Keynesian. Meaning what? Meaning, for one thing, that he’s a guy who blamed the 2008 world financial crisis on U.S. economic deregulation – never mind that, as Samuel Gregg wrote in 2010, Western Europe’s hyper-regulated economies were at that point “in even worse shape than America’s” and Greece, “one of the most regulated and interventionist economies in the entire EU,” was “on financial life support.”

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Stiglitz in Australia earlier this year

He’s a guy who argued that the solution to the 2008 world financial crisis – the way to create jobs and increase employment – was to increase direct government spending, even though, as Matthew Continetti warned in the Weekly Standard, such spending would inevitably “create even larger deficits and add to an already high national debt.”

He’s a guy who summed up the financial crisis in 2009 by saying that one of its “big losers” was “support for American-style capitalism” and that this loss of support had “consequences we’ll be living with for a long time to come.” Two words: wishful thinking. Stiglitz (as we’ll see) would like nothing better than to see support for “American-style capitalism” disappear entirely.

DAVOS-KLOSTERS/SWITZERLAND, 31JAN09 - Joseph E. Stiglitz, Professor, Columbia University, USA, at the Annual Meeting 2009 of the World Economic Forum in Davos, Switzerland, January 31, 2009. Copyright by World Economic Forum swiss-image.ch
Stiglitz at Davos, 2009

He’s a guy who’s tirelessly tried to sell the argument that inequality of income and wealth lies at the root of virtually all economic problems even though, as Patrick Brennan noted in National Review in 2012, there’s “almost no evidence that economic inequality causes financial crises.”

He’s a guy who has praised as a “miracle” the modest economic success of the big-government island nation of Mauritius while ignoring, as Reihan Salam pointed out in 2011, the truly spectacular performance of a country like Singapore, whose hands-off approach to the private sector is utterly at odds with Stiglitz’s prescriptions.

Gregg calls him “an old-line modern liberal,” charging that his response to the 2008 crisis was “worthy of FDR or LBJ.” In fact, the word socialist suits Stiglitz far better than liberal. 

Why? We’ll start answering that question tomorrow.