Magazine article The Spectator

Interview: Joseph Stiglitz

Magazine article The Spectator

Interview: Joseph Stiglitz

Article excerpt

Joseph Stiglitz, the left's favourite economist,on making the free market work

'How do you feel when you go back to Gary?' I ask Joe Stiglitz. 'Well, frankly, I get depressed,' he replies. 'The American middle class was created in places like my home town and is now struggling badly -- which makes me sad.'

Stiglitz, a Nobel prize-winning economist and the closest thing the left has to an intellectual superstar, grew up in Gary, Indiana, during the 1950s, when it was the heart of the booming US steel industry. His father sold insurance and his mother was a teacher. 'We had a modest detached brick house, with a lawn all around -- it was safe and secure,' he recalls. 'Back then, if you worked hard and played by the rules in America, you'd make it -- you could get ahead.'

Gary's steel mills closed in the 1970s and thousands of skilled workers were laid off; the population has since halved, and Stiglitz says parts of his old neighbourhood 'look like a war zone'. Countless cities have suffered the same fate, he says. 'Gary is emblematic of the American Dream and that dream no longer exists.'

For Stiglitz, Gary's demise isn't so much due to globalisation -- foreign competition for the US steel industry -- as to the response in subsequent decades of Reaganite and Thatcherite 'supply-siders' preaching light intervention and low state spending. 'There's a large church in Gary that was once very beautiful but now lies ruined -- in utter disrepair,' he says. 'It's a symbol of what America does to its people and cities -- you've worked for us, served us well and now you're going in the garbage.'

Stiglitz's career passed through Yale, Oxford and Princeton before a relatively smooth mid-1990s spell as chief economic adviser to Bill Clinton's White House. But after joining the World Bank, he surprised many Ivy League colleagues by becoming, in his own words, 'the rebel within'. He launched a fierce critique on the International Monetary Fund, his employer's sister institution, for mishandling the late-1990s Asian financial crisis -- condemning adjustment policies imposed on bailed-out nations as 'brutal'. Eventually, he was sacked.

Since then, having been awarded the Nobel in 2001 for earlier academic work, he has written a string of hard-hitting books and commentaries on western economic policy. When the Occupy Wall Street protest movement emerged, its rallying cry -- 'We are the 99 per cent' -- was an explicit tribute to one of Stiglitz's articles, a jeremiad about inequality and the US financial system titled 'Of the 1 per cent, by the 1 per cent, for the 1 per cent'.

Stiglitz's latest book, The Great Divide , is peppered with factoids about America's growing inequality that the author recites on autopilot. The top 1 per cent commands a quarter of US income, he says, with one in five US schoolchildren now living in poverty. The average real wage of male non-graduates has dropped 12 per cent over the past 25 years, and American chief executives are now paid 300 times the average wage; it was 30 times in the early 1990s.

Unlike Thomas Piketty, whose recent bestseller Capital in the 21st Century argues that capitalism makes rising inequality inevitable, Stiglitz insists the system can be fixed. 'Widening and deepening inequality isn't driven by immutable economic laws,' he says. 'A well-functioning market economy doesn't only create jobs, but should also generate increases in income that are shared.'

So Stiglitz is no anti-capitalist. He stresses that 'getting markets to work like markets' is the core message of his book. …

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