Stiglitz on the Perils of 2012

Joseph E. Stiglitz of Columbia University, winner of a Nobel Prize in Economics, paints a fairly dismal portrait of this year if we continue chasing snopes through the forest — those ideas that our short term debt and deficit crisis requires unprecedented austerity and draconian budget cuts — and fail to enact economic policy that stimulates growth.

This year is set to be even worse. It is possible, of course, that the United States will solve its political problems and finally adopt the stimulus measures that it needs to bring down unemployment to 6% or 7% (the pre-crisis level of 4% or 5% is too much to hope for). But this is as unlikely as it is that Europe will figure out that austerity alone will not solve its problems.   On the contrary, austerity will only exacerbate the economic slowdown. Without growth, the debt crisis – and the euro crisis – will only worsen. And the long crisis that began with the collapse of the housing bubble in 2007 and the subsequent recession will continue.

If the right policies and points of view are taken, it is not all doom :

Meanwhile, long-term problems – including climate change and other environmental threats, and increasing inequality in most countries around the world – have not gone away. Some have grown more severe. For example, high unemployment has depressed wages and increased poverty.

The good news is that addressing these long-term problems would actually help to solve the short-term problems. Increased investment to retrofit the economy for global warming would help to stimulate economic activity, growth, and job creation. More progressive taxation, in effect redistributing income from the top to the middle and bottom, would simultaneously reduce inequality and increase employment by boosting total demand. Higher taxes at the top could generate revenues to finance needed public investment, and to provide some social protection for those at the bottom, including the unemployed.

The Obama administration rode in with much hope, but stacking his cabinet and economic team with those that created the conditions that led to disaster, and marginalizing those whose proscriptions are proving out to be what is needed to speed recovery and reduce unemployment, a repeat of the same old program does not bode well for the near future, nor the far.

Advertisements

About sdemetri
Portland, Maine freelance photographer, writer, activist

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: