The 2001 winner of the Nobel Prize in Economics, Joseph Stiglitz, spoke on “Economics and the Election” last night in front of an overflow crowd in SCI 101. The talk consisted of an overview of the last four years in American economics, focusing on the problems that have arisen during the recent economic recovery, followed by possible explanations for their occurrence. Stiglitz closed by synthesizing the problems and their causes into a list of economic principles that he described as “the material that will be in future economics textbooks.”
Swarthmore economics professor Bernard Saffran introduced Stiglitz by reading a passage out of one Stiglitz’s books and briefly summarizing Stiglitz’s impressive list of past positions held. He was Chairman of the Council of Economic Advisors during the Clinton administration, served as Chief Economist and Senior Vice-President at the World Bank, and is currently a professor of economics and finance at Columbia University.
The talk began with an explanation of three problems facing our economy today: the gap between actual and potential GDP, the “quadruple deficits” of jobs, trade, fiscal, and households, and issues relating to energy and health care policy. Stiglitz noted that while our economy has improved, it has not done so at the rate one would expect coming out of a recession and that in fact growth has lagged behind the recent gains in productivity, creating a $1.7 trillion gap between actual GDP and potential GDP, the GDP we would have if we were using our technology and labor force correctly. The lack of growth is a strong rebuttal of President Bush’s economic policies and tax cuts.
Although Stiglitz largely stuck to verifiable facts, it was clear that he is disenchanted with the Bush economic plan. He expressed worry that America’s recent budget deficits have been caused by undisciplined government spending (and tax cuts) and will have repercussions for future generations. The argument for the creation of deficits is that they stimulate the economy, but such stimulation has not occurred. Along with finding fault in our recent economic policy (or lack thereof), Stiglitz offered suggestions for the future such as increasing unemployment insurance and making the production of greenhouse gases a taxable action. This would create a focus on conservation and would also reduce demand for oil.
In closing, Stiglitz listed off some lessons that can be learned from the failures of the past four years. They included the ideas that lower interest rates may lead to increased consumption rather than investment, bubbles such as the 1990s internet bubble can have strong adverse affects over the long term, certain things such as energy and health care cannot simply be left to the market, and that the government must try to combat market-produced inequalities. A lengthy question and answer period followed the talk and was highlighted by a shattering of the “myth of an impartial central bank,” showing how Alan Greenspan’s positions over the years have been politically motivated and demonstrate a commitment to a government-reduction agenda.