Stiglitz warns of hard times ahead for Greece and world

As any child will tell you, it is around this time of year that Father Christmas prepares his list of presents. If Santa happens to be a Nobel Prize-winning economist and former vice president of the World Bank, do not expect to receive anything flashy. His gift to the world is to tirelessly struggle to tell us where it all went wrong for the global economy and how to put it right. Joseph Stiglitz was in Greece on Friday to deliver a speech on public finance and globalization at a conference organized by Naftemboriki newspaper. He was introduced as «one of the greatest economists of our generation» by Economy and Finance Minister Giorgos Alogoskoufis. Stiglitz is jovial and stout and has a beard which, if a little bushier, would make him the ideal Santa Claus. However, there was nothing cheery about this season’s message. «Greece is at a crossroads. It has the deficit to deal with. Europe is weak, the US is weak. Times are tough,» he says. Trouble ahead Stiglitz, a Columbia University professor, achieved prominence with his 2002 publication «Globalization and its Discontents» (W.W. Norton), a critique of the policies employed by the International Monetary Fund (IMF), the World Bank and the World Trade Organization (WTO) and an account of the dark side of globalization. He followed it up with «The Roaring Nineties» (W.W. Norton, 2003), an evaluation of what went right during the Clinton boom years before it all went disastrously wrong. So, does a man who is so deeply convinced about the humanitarian and environmental cost of the current global economy have an epithet in mind to describe the decade we’re living in? «No, no. It is too early to say,» he chuckles. He has a good idea how things might turn out though. «I see a global economy that is being pressed between normal restorative forces and some very big restraints at global and national level,» Stiglitz says. There is no doubt in his mind that the United States, and specifically the current government, is the main source of problems. «Bush is committed to making things worse,» he says. Stiglitz has made no secret of his contempt for the presidency of George W. Bush and his economic policies in particular. According to Stiglitz’s calculations, during the last four years, the US economy has foregone $1.7 trillion in potential gains due to blinkered policies. In March last year, he was one of 350 top economists who sent a letter to the US president warning him that continued deficits would put public pensions and healthcare at risk. What bothers Stiglitz even more is the way that he feels the Republicans put the wants of the few ahead of the needs of the many. Bush’s infamous high-end tax cuts are the prime example. «The bad news is that Bush’s tax cuts did not stimulate the economy. Public and private debt is now weighing down the economy, which means recovery will take longer and interest rates will be higher. Meanwhile, the fiscal deficit will lead to a greater trade deficit,» he says. The prospects for the immediate future are not good: «Hundreds of billions of dollars will be added each year to the deficit,» says Stiglitz, perched on his hotel room sofa like a teenager exuberantly telling his parents about his first date. Apart from being a failed economic policy, Stiglitz believes the way the tax cuts were rammed through is a symptom of how special interests and dogmatic ideology are running the global economy into ruin. «The dominant factor in the US is the move to the Right. There has been an abuse of economics, such as using ‘deficit stimulation’ as an excuse for tax cuts. The level of dishonesty in public discourse has been very high,» he says. The professor is concerned that others might be catching on to this trick. «A few European countries have caught the same disease, although not to the same extent,» he adds. With the flash of a disarming smile, he declines an offer to name some names. His message is clear though – there is an increasing need for global collective action to protect what he calls ‘global public goods,’ such as the environment, health, political and economic security from the extending tentacles of global interests. Deficit The term «deficit» keeps cropping up in the conversation. Stiglitz is well aware that it has become the latest economic buzzword in Greece as well. «It is a controversial issue and there is a lot of public misunderstanding over it,» he says. Stiglitz, who was the chairman of the council of economic advisers to President Bill Clinton, says that governments can become too focused on tightly managing their deficit at the expense of other sectors of the economy. «As the deficit liabilities got larger during the Clinton years, we sacrificed investment into research, which we should not have,» he says. With regard to Greece’s current deficit problem, Stiglitz prefers to highlight what he believes are the shortcomings of the system that binds eurozone members. «The Stability and Growth Pact is a peculiar institution because it focuses on the liability and not the asset. Also, using an annual basis for calculating these figures is not right. Assessing them over a business cycle would be right,» he says. The area where he thinks Europe is doing better is corporate responsibility. Groucho Marx once said the term «military intelligence» is a contradiction in terms but Stiglitz does not think the same applies to «corporate responsibility.» He believes European firms have been much better at achieving the «triple bottom line» of profitability and social, as well as environmental, responsibility. The same is true in the US, he says. «There is a real problem in US corporate governance. The only thing that matters is shareholder value. The remedy lies in moving toward greater democratic liability,» he says, constantly removing his spectacles, like a superhero removing his mask. Instead of shooting webs with a flick of his wrists, Stiglitz derives his power from the use of words like «redistribution» and «inequalities.» The trouble is that, as with the term «democratic liability,» his opponents seem to posses the kryptonite to undo it. Hope The electorate, of course, has the power to ensure greater liability but even in this respect Stiglitz has been let down recently. The re-election of George W. Bush put a dent in the professor’s hope for a brighter future but he refuses to be defeated. «I am still hopeful because of the strength and passion of the anti-Bush movement,» he says. Stiglitz, who flew into Athens for one day from Asia, does not have the demeanor of a man who will not expend energy in support of his chosen cause. His fervor does not make him blind to the fact that globalization and some of its damaging side effects will continue to spread. «Some markets will be devastated,» he says. So should those involved in the dwindling textile industry in northern Greece, which has been decimated in recent years by cheaper imports flooding the market and factories moving to Balkan neighbors, where costs are lower, simply give in to the inevitable? «The hope is that you move into other industries where you have a competitive advantage,» Stiglitz says, speaking like a soldier who has witnessed the horrors of battle and doesn’t want to scare off the new recruits. Does he ever feel like a lone voice up against an opponent that is just too dominant? As you would expect from a man constantly crisscrossing the globe, he prefers to look at the bigger picture. «One of the aspects of globalization is that one is a citizen of the world. When you look at things from a global point of view, you can see that I am not in a minority.» Ultimately, what keeps Stiglitz going is a supreme conviction in his ideas. «They are right,» he says.