Nobel laureate Joseph Stiglitz on economic recovery after COVID-19
The kind of capitalism that brought...the financial crisis...that kind of capitalism is not going to survive
What COVID-19 has left in its wake is no ordinary economic crisis. This is not merely a recession or downturn. According to the World Bank, what we're seeing is the most extensive global economic meltdown in at least 150 years.
The dynamics of this global slump are different too. This time around, we deliberately shut down well-functioning economies to fight a health crisis. But while we learned that it is indeed possible to demobilize the world economy overnight, we now face the daunting question of how best to come out of that hibernation once the immediate crisis has passed.
The Sunday Edition's Michael Enright spoke to Nobel Prize-winning economist Joseph Stiglitz about what our economies and our lives will look like in a post-COVID world — and whether capitalism, as we know it, can meet the challenges of our time.
Joseph Stiglitz is a professor at Columbia University and the former chief economist of the World Bank. His most recent book is called People, Power, and Profits: Progressive Capitalism for an Age of Discontent.
Here are some highlights from his interview, edited for clarity and condensed.
How would you assess the U.S. government's stimulus response? Who has it served and who has it left behind?
In the United States, one can't fault the magnitude of the spending, but it was very much of a bazooka or a firehose — not very well designed and even more poorly implemented. And the result is that it hasn't achieved any one of its goals.
One goal was to protect the health of the country and the people. But America has a very poor social protection system. A second objective was to maintain employment. That failed. America's increase in unemployment is greater than in countries all over the world. The third was to give money to those that were most vulnerable. Again, it failed.
In the United States, one can't fault the magnitude of the spending, but it was very much of a bazooka or a firehose — not very well designed and even more poorly implemented.- Joseph Stiglitz
The available data suggests that COVID-19 has disproportionately affected African Americans in the U.S. You have written extensively about a racist undertone to the economic system. For ordinary African Americans, just how bad is it economically?
We have had persistent racism in the United States.
It compounds discrimination in the labour market, in the housing market, police brutality. And to me, the pandemic has brought this out so vividly. African Americans are dying in large proportions, for several reasons. This is not an equal opportunity virus. It goes after those with poor health and they have poorer health because we are the only advanced country that doesn't recognize the right of access to health care.
It's more than that. These are the frontline workers who are serving us, who are working in hospitals, are doing lots of the things that are essential to our very well-being, [while] paid miserably. And because they come in contact, they are dying in higher numbers.
And I think there is a sense that this has combined with that vivid, vivid video of murder that echoed so many other scenes that we've seen. It wasn't a one-time event. It is a systematic pattern.
The question of equality comes up time and time again and is in the forefront, I think, as your country leads up to the election. Is it possible to talk about racial equality without addressing the economic divide?
No, it's not. And Martin Luther King Jr. made this point very forcefully. The March on Washington in 1963 was called a march for racial justice but also for economic justice and economic governance. Because he recognized you can't separate the two.
The pandemic has ... shown that we share a small planet together, and a disease can go from one country to another very easily. And so our response should be a global cooperative response.- Joseph Stiglitz
The Great Recession of 2007-08 was followed by what can fairly be described as bailouts for corporations and austerity and belt-tightening for everybody else. Are we likely to see a repeat of that this time around?
We're already seeing some glimpses of that. The airlines got billions and billions of dollars. Some of our most essential institutions have gotten a pittance. The jobs report that came out just a couple of weeks ago pointed out the huge increase in unemployment for workers in state and local governments. These are workers who are providing health care, education, welfare — the basic support systems of our society.
When you go into an economic downturn such as 2008, revenues plummet — at twice the rate of GDP. This is happening right now. These states and localities have balanced-budget frameworks. They can't borrow. And so when the revenues go down, they have to cut. And the Republicans are refusing to give assistance. They say, let them go bankrupt.
Looking beyond the U.S., what is the global economy going to look like after COVID-19? Are we looking at a series of little countries, where there isn't any kind of economic cooperation?
I worry about that a great deal. A kind of irony that the pandemic has shown is that we share a small planet together, and a disease can go from one country to another very easily. And so our response should be a global cooperative response, working together very, very strongly.
Unfortunately, there is what has been called vaccine nativism. Again, the United States has led the way in a shortsighted way. At one point, the president said we're not going to allow exports of N95 masks, not realizing that the United States imports far more medical supplies than it exports. And if every country reciprocated, we would be in a really bad, bad position.
The market was not able to respond. We had created a market economy that lacked resilience.- Joseph Stiglitz
Ever since the 1980s, the dominant economic theory has been that governments should take a backseat and let the market do its work. How much has the pandemic challenged this free market orthodoxy?
I think it has challenged it in fundamental ways. First, we've realized that the market was not as resilient as it should be. We weren't even, in the United States, able to produce the masks, the protective gear, the ventilators, or even the tests that we needed. The market was not able to respond. We had created a market economy that lacked resilience.
At the same time, as we always do, we turned to government to help us address the crisis. But then we found out that 40 years of denigrating the role of the government aided in weakening the government. And we were not prepared. We had underfunded the CDC, the Centre for Disease Control. We had let our stockpiles weaken. Trump had abandoned and disbanded the White House office on pandemics. We forgot all the lessons that we should have learnt from SARS and MERS and just abandoned that whole effort.
Is capitalism going to survive the pandemic in its current form — or will it, too, have to be fundamentally transformed?
I think that no complex society can work without having a strong market economy. In my book, I talk about progressive capitalism. You need a market economy, but I use the word progressive to highlight the fact that it's markedly different from unfettered capitalism — the Reagan kind of capitalism that we've had for the last 40 years, a capitalism that doesn't recognize climate change, that is willing to exploit workers if it can get away with it.
The kind of capitalism that brought us the opioid crisis, the childhood diabetes crisis, the financial crisis, Dieselgate — I think that kind of capitalism is not going to survive. I think the outrage is just too great.
Click 'listen' above to hear the full interview.