Joseph Stiglitz Freefall: America, Free Markets, and the Sinking of the World Economy

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George Victor
Joseph Stiglitz Freefall: America, Free Markets, and the Sinking of the World Economy

Stiglitz, winner of the Nobel Prize in economics, has been described by Paul Krugman as "an insanely great economist." He is certainly the most readable.

George Victor

Many Babblers will be delighted to learn that Stiglitz finds Obama's decision to take abord  some of the old guard Wall Streeters in his cabinet...while conceding that at the time, the decisions to forward  recovery - whether to put more aid into the failing financial institutions or elsewhere - was not crystal clear. Stiglitz says the public purse could have been saved several hundred $billions.

"I noted earlier that during the Clinton administration the response from some members of the cabinet to those of us (myself and Robert Reich, for instance) who labeled the billions of dollars of subsidies given to America's wealthy companies as 'corporate welfare' was that we were waging class warfare. If our quiet attempts to curb what seem like from today's perspective mild excesses met with such opprobrium, what might we expect from a direct attack on the unprecedented transfer of money to America's financial sector."

Anyway, in this and many other ways, Stiglitz shows us the political factors at work in decision-making at the top. Tim Geithner comes in for strong disapproval.  "He had been a deputy to Larry Summers and Robert Rubin, two of the architects of the Clinton-era deregulation movement...(and while he)gave speeches warning of the dangers of excessive risk-taking...he was meant to be a regulator, not a preacher."

In the chapter ":Freefall and its Aftermath" Stiglitz notes: "Obama had chosen a team of honest public servants, dedicated to serving the country well. That wasn't the problem. It was a question of how they saw the world and how Americans would see them."And "Revolving doors in Washington and New York also stoked the movement to prevent new regulatory initiatives."

It's clear how the GOP is using the failures of the Bush years to fault Obama and the dems. Last Autumn Stiglits could write: "What may have been viewed asa low-risk strategy, muddling through, avoiding conflicts, was proving to be a high-risk one, economically and politically." In the final four chapters (there's only some 300 pages of well-spaced script and 60 of notes) he describes how economic stimulation has been carried out; how gov't "helped or failed to save homeowners," and how resurrection of the financial system and its re-regulation was attempted. "What worries me is that because of the choices that have already been made, not only will the downturn be far longer and deeper than necessary, but also we will emerge from the crisis with a much larger legacy of debt, with a financial system that is less competitive, less efficient, and more vulnerable toanother crisis, and with an exonomy less prepared to meet the challenges of this century."

I'm going to look again for Stiglitz' own proposals, but beyond his tut-tutting at the choices of financial minds in cabinet and concessions to the finance capital sector, I am so far struck by the absence of specifics, the avoidance of politics and the presence only of wishful thinking, ending: "We have seen the danger. The question is, Will we seize the opportunity to restore our sence of balance between the market and the state, between individualism and the community, between man and nature, between means and ends? We now have the opportunity to create a new financial system that will do what human beings need a financial system to do; to create a new economic system that will create meaningful jobs, decent work for all those who want it, one in which the divide between the haves and have-nots is narrowing, rather than widenting; and, most importantly of all, to create a new society in which each individual is able tofulfill his aspirations and live up to his potential, in which we have created citizens who live up to shared ideals and values, in which we have created a community that treats our planet with the respect that in the long run it will surely demand. These are the opportunities. The real danger now is that we willnot seize them."

Had Stiglitz seen the depth of GOP insanity in the winter and spring of this year, would he have said the danger to such a rational picture clearly lay with the wingnuts of the right? 



Freefall: The Economic Crash on Alternative Radio


It's been the most severe economic crisis since the Great Depression. And it isn't over. Chronic long-term unemployment remains high. The state of many states, cities and towns is dire. Crippling budget cuts result in drastic reductions in services and hikes in such things as tuition fees. And on the housing front? The bubble that burst. More than ten million homeowners are underwater, that is, they owe more on their mortgages than their house is worth. Politicians glibly talk of those well paying jobs with benefits coming back. Who are they kidding? That's not going to happen. The manufacturing sector is eviscerated. What's left? Consumption. Consumer spending now accounts for 70% of the GDP. Meanwhile, while many citizens suffer, the war machine goes its merry way. The Pentagon budget is at record levels. The war on Iraq alone will cost $3 trillion.