Stiglitz: “The belief in free and unfettered markets brought the world to the brink of ruin.”

Joesph Stiglitz says supply-side economics almost destroyed the world in 2008, and its back again to try to finish the job.

Just a few years ago, a powerful ideology – the belief in free and unfettered markets – brought the world to the brink of ruin. Even in its hey-day, from the early 1980s until 2007, US-style deregulated capitalism brought greater material well-being only to the very richest in the richest country of the world.

Indeed, over the course of this ideology’s 30-year ascendance, most Americans saw their incomes decline or stagnate year after year.

Moreover, output growth in the United States was not economically sustainable. With so much of US national income going to so few, growth could continue only through consumption financed by a mounting pile of debt.

I was among those who hoped that, somehow, the financial crisis would teach Americans (and others) a lesson about the need for greater equality, stronger regulation, and a better balance between the market and government.

Alas, that has not been the case.

On the contrary, a resurgence of right-wing economics, driven, as always, by ideology and special interests, once again threatens the global economy – or at least the economies of Europe and America, where these ideas continue to flourish….

Just another voice of warning, but a big voice. Are our political leaders bound not to hear it?

 

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5 thoughts on “Stiglitz: “The belief in free and unfettered markets brought the world to the brink of ruin.”

    • Isn’t it debatable whether unfettered markets alone are responsible for the increase in the general standard of living? Just as debatable as that they alone are responsible for the dying oceans and other environmental disasters that might kill us all in the next 200 years (or less).

  1. I mean… not really. Lol. At least not in the field of economics. Capitalism has the extraordinary ability to unleash human potential and is responsible for our increase in standard of living over such a long period. Government can and should regulate…but history has shown that the less regulation over long periods of time, the better.

    I totally agree that a trade off of industry is environmental pollution…. but I that by seeking a solution in the framework of our system… like empowering entrepreneurs to start green companies…. it would be a lot better a solution than having overbearing government regulation on pollution.

    • But I think Stiglitz’s point, which is very difficult to ignore, is that a fetish for free financial markets, in particular, is what brought the world to ruin. Maybe the problem is not capitalism in and of itself, but the worship of it as and end rather than a means. That’s what enabled our political leaders to make the huge mistake of letting financial profiteers run amok over the last 30 years.

      I also believe that a society has the right to limit environmental destructiveness. The environment we hold in common. We have a right to put tight restrictions on how it’s used and abused.

  2. If we’re talking about the mortgage backed securities crisis and the housing bubble… It’s no different than any other bubble when investors lose their head and don’t think that the prices will ever stop going up. When major crises happen… the government re-evaluates its role in the economy. For example, the great depression caused the government to establish the FDIC to insure against bank runs. Now the government is taking measures so that it can insure investment banks if need be. So yea, I agree with you that the government does play some role in the economy, but it should not be a controlling force.

    Speculation is the mother of all evils and I think a fetish for that and the financial markets definitely did encourage the crisis.

    I don’t think there is anything wrong with loving capitalism…the problem comes when people love speculation. Warren buffet loves capitalism but his investment ideas are grounded in sound analysis. When people speculate on tech stocks or in this case, kept thinking housing prices would go up, there are always consequences. There is nothing wrong with profit. The problems come when unsound speculation is added to the mix.

    Yea, society definitely should limit environmental destructiveness if only for it’s own survival… but the question I was addressing was how to go about doing it. Instead of putting tight restrictions on pollution, I think that the government should encourage entrepreneurs to develop green technologies.

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