Hugh Gault on economic power in the US
The Road to Freedom: Economics and the Good Society by Joseph Stiglitz published by Allen Lane
Well-known for dismantling globalisation and explaining why inequality is in none of our interests, Stiglitz takes aim here at neoliberal capitalism itself, his title a rejoinder to Hayek’s The Road to Serfdom. Stiglitz is even more dismissive of monetarism and the misleading arguments Milton Friedman and his colleagues put forward. Thatcher was just one of those who subscribed, Pinochet another. Their devastating impact on 1980s Chile was soon apparent, while the legacy is still unwinding in Britain.
In the de-regulated free-for-all that followed, a wealthy few thrived but most of us lost out, particularly due to feeble and unfettered regulation around the privatised utilities or lack of housing. One of Stiglitz’s points is that the rich and powerful set rules that suit themselves rather than society. A clear example are the travesties English water companies have been allowed to get away with, paying dividends to their shareholders while polluting our environment in the most egregious ways. So much is already well known. Rarely mentioned though are the one-sided terms of reference for the regulators written by Michael Fallon when at the BIS department in about 2012. The shroud waved was that regulation should not be allowed to hamper growth (by which Fallon meant “wealth”).
This would have made an excellent illustration of Stiglitz’s argument that those in power “tilt [the] rules to serve their own interests’. Instead, the US Constitution is invoked, before Stiglitz goes on to assert that “progressive governments today [focus] on changing these rules to generate a more equitable distribution …” Unfortunately, the references cited are not to practical illustrations in the real world but to economic treatises that may have caused a stir in the higher reaches of academia but have had negligible impact on anybody’s living conditions.
There are several debatable propositions and statements:
Stiglitz applauds governments” “long history of publicly funded research” for the development of the Covid vaccine but downplays the role of the private sector, which “was eventually involved, but only towards the end”. This may have been the US story for Moderna and Pfizer, but it would be questioned in the UK. (Stiglitz makes a similar US-centric argument regarding the development of the internet.) Where the public sector was predominant in the UK was in the roll-out, getting the vaccine into people’s arms. What illustrates his wider theme of one person’s or country’s freedom constraining the freedom of others is that western countries virtually monopolised the available vaccines for their own populations, with the less well-off being reliant on what in effect were hand-outs – sometimes from UK vaccine developers such as Astra-Zeneca selling on supplies at cost.
“The underlying problem [of increased inflation post-pandemic] was not an excess of aggregate demand but supply constraints and demand shifts,” writes Stiglitz. Profiteering, strangely, is not mentioned.
“The US is perhaps distinctive in the influence it has on what is considered acceptable or desirable behaviour by its leaders and government.” Really!
“In the US, one of the two major parties has been taken over by politicians and voters willing to stare facts in the face and deny them.” This may be a legitimate domestic argument but people living in the non-western world might think the US imposition of its ideology through “might is right” more critical. The CIA fomented wars in Africa, Asia, South America and elsewhere during the terms of Democrat presidents as well as Republicans.
Stiglitz appears to believe that science is value-free. Some may be but that doesn’t mean it all is; though perhaps relative to much of the economics he is arguing against it appears so.
This leads on to my major concern with Stiglitz’s book. There are some UK examples, but they are few and far between. Similarly, one might expect the United Nations to be critical to ensuring global equity, especially at a time when planetary climate crisis is one of the greatest threats to people’s futures – not only in the less wealthy and less well-developed countries for the migration consequences affect us all. It is mentioned once in relation to the US block on the UN as the developing countries” preferred forum for discussing global digital taxation. There may be an issue over enforcing UN resolutions, but they surely ought to be the global regulator par excellence. That the Security Council is frequently split between the interests of the west and the rest is thought a weakness by some. For at least half the world it is a strength.
Stiglitz comes close to an alternative to neoliberal capitalism but never gets there, hoping that “there’s a good chance the next generation” will come up with the answer. Realistic or cop out?