Amanda Lang: Ne-INFj (Creative subtype) [INFj-ENTp or EII-IXE] (Delta NF)
I think Kevin O’Leary might be Te-ENTj (Dominant subtype) [ENTj-ESTj or ENTj-ENFj].
Joseph Stiglitz [who may be Alpha (NT) – ILE-Ti? Normalizing subtype (ENTp-INTj) or LII-Ne??] was interviewed by Amanda Lang.
This was from the Lang and O’Leary Exchange –
Amanda Lang: As Europe struggles to maintain its fragile union, the United States of America is fighting to keep its head above water. With Merrill warning of another downgrade by year-end and unemployment stubbornly high, America's future appears more precarious by the day. Earlier today I spoke with Nobel-prize winning economist Joseph Stiglitz and asked him what options government has left.
Joseph Stiglitz: First of all, monetary policy is not going to work. What we need to do is stimulate our economy. The problem is lack of demand: You're not going to get it from consumers, you're not going to get it from investments given the weakness of the economy, you're not going to get it from exports given the problems in Europe . . . Only one other area, and that's government; and so the government needs to have another round of job creation, stimulus, whatever you want to call it. Unfortunately, that's not likely to happen in any significant extent. And in fact, what's happening is about a third of all government expenditures in the United States are at the state and local level and they are contracting. So if you look at the comparison between 2007 and today, government has not been stimulating: There has actually been a loss of government jobs. It's been one of the contributors to the slowdown of the economy.
Amanda Lang: The hope was, I think by many (certainly in our country as well), that as government stimulus tapered off after we hit the recession, the private investment sector would pick up. Where is the private sector in the U.S.? Corporations are sitting on cash -- where is it?
Joseph Stiglitz: Well, they made a very big mistake: What they thought was at the core of the problem was, you might call, a financial accident. We repair the financial sector, and we go back to normal. The big mistake was back in 2007, 2008, the economy was sick. It was sick in the sense that what kept it going was a bubble. Savings rate in the United States went down to zero. Well we're not going to be, or we shouldn't go back to that world. But with Americans saving still only 5, 6% there isn't anything to fill that hole, that consumption. So why shouldn't the private sector come back?
Amanda Lang: So let's talk about the role of government here because the rhetoric is really now around austerity, a concern about debt and deficits. Can the U.S. government afford to spend more, even if it's the only answer, even if they're the only solution.
Joseph Stiglitz: Yes, the U.S. government, particularly, can borrow short-term zero, long-term 2-3%; and I jokingly say the good news is that we've underinvested for 20 years. So we have a lot of very high return investment projects, and if you think of yourself as the firm where if you could borrow at zero or 1% and you have projects that could deal 20-30%, then it would be very foolish not to undertake those projects, and in five years' time the revenue from those projects would more than pay off the debt. And that's really where the U.S. government is in today. So if we borrow for those investments, in a few years time our fiscal position, our debt GDP ratio will be much lower.
Amanda Lang: When does the lightbulb go off if so far what we have seen is an unwillingness to pursue any more government stimulus -- when does it become clear that that is the only thing that's going to work?
Joseph Stiglitz: I think that it's going to take a long time. And the reason I say that is economic systems are very complex, and different people look at the same experience and interpret it in different ways. In the middle ages when they engaged in -- the standard practice for medicine was blood letting, and when the patient was getting weaker and weaker, the response of the doctors (the blood letters) was we need to let/take out more blood, until of course the patient died and they said, "Well, things didn't go quite right this time . . ." ...And there's some story always that you can tell. I'm afraid that the answer, as the economy gets weaker, from those who believe in this austerity religion, will be more austerity.
Amanda Lang: So where does it leave the American people -- because there is a growing chorus, whether it's Occupy Wall Street or the people that aren't there, the people that are just trying to get by and don't have time to sit in a square in New York -- that there is a feeling that something's gone wrong. This land of opportunity is not offering the opportunities for all anymore. First of all, do you think that's an accurate view?
Joseph Stiglitz: Oh, very much so. You look at the data and they totally substantiate that view. It`s not just the short run problem of 9.1% unemployment. Youth unemployment is probably twice that. It`s not just the inequality where the top 1% gets now more than a fifth of all the income and has more than 40% of all the wealth. It`s really America-Dream: America is the land of opportunity -- the chance that somebody at the bottom goes to the middle or the top, or somebody in the middle goes to the top, is worse than many of the countries of Old Europe.
Amanda Lang: So how do you solve that problem, and is, I guess more importantly, is there a willingness to tackle it, because that`s a big one. That`s not a recession-solving problem, that`s much...
Joseph Stiglitz: No, it`s a long-term problem. First there has to be recognition that this is a problem and too much rhetoric in Washington is based on optimism: We have to keep spirits high . . . And if you`re in that frame you`re not going to be talking about the problems; you`re not going to say ``The End of the American Dream.`` As a politician, what you want to do is lift up people`s spirits. The problem is if you don`t recognize the problem, you`re obviously not going to solve it. And so I think it`s going to be a very difficult process for the political system (and it`s at the core a political problem) to recognize and then deal with the problem.
Amanda Lang: Because of the way your politicians are financed, campaigns are expensive, especially the higher you go up the ladder the more expensive it is to become a senator, congressman . . . Will we always see politicians loathe to make real change to the biggest industries, to finance, to Pharma, whatever it is that has got them there in the first place?
Joseph Stiglitz: You put your finger on, I think, one of the core problems in our political system in the United States -- expensive, the expensive campaign, running a campaign . . . They`re talking about a billion dollar campaign for 2012, I mean in a time when we have so many needs, to spend that money . . . But what`s worse is that it eviscerates the political process because the vested interest, whether it`s in finance, oil -- their voices are heard very, very loud.
Amanda Lang: Isn`t there a simple fix for that?
Joseph Stiglitz: There is a simple fix -- public finance of campaigns and strong regulations about lobbying and revolving doors. There is an easy fix, but those who make the contributions run the political process and don`t want the change. So we`re in a bind right now because it will be very difficult. In the United States we have one other problem that`s been very serious, which is the Supreme Court, which now has a very loud voice from those who have been connected with that kind of agenda, have ruled that corporations are people. And as people they have the right to make unbridled contributions. Now that case called Citizens United almost says it`s constitutionally allowed to have government bought. Now many people disagree with that interpretation; and there are many things if you had a Congress that was willing could deal with. I mean for instance, you could make the corporation, if they decide to do it as a matter of corporate governance, vote on it and they would never get through.
Amanda Lang: We`re out of time, but I gotta ask you if you`re optimistic about America`s future. If you`re telling your grand-daughter where to put a $1000 investment -- is it in America or is it in Brazil or India or some other country?
Joseph Stiglitz: Well, I guess as an economist I say, “Diversify your portfolio.” But it’s clear that Brazil (you mentioned it) is a country that has come to grapple with their inequality, and for the last 20 years has been investing in the poor, in education for all . . . They still have more inequality than the United States, but their trajectory is going in the other direction. They’re trying to deal with their problem. In a way it’s a hopeful sign because their country had growing inequality, high levels of inequality for a very long time, and then, suddenly, and I can’t quite explain it, they got together and said, ‘We can’t go on that direction; our country won’t survive.’ And they’ve gotten together, and you see it – the kind of social cohesion where even the rich say, ‘For our own interest we have to deal with this problem.’ And it’s been transformative.
Amanda Lang: So, that’s reason for optimism for America?
Joseph Stiglitz: That’s a reason for optimism for America.
Amanda Lang: Alright, we’ve got to leave it there. We appreciate your time today.
Joseph Stiglitz: Thank you.