Since his childhood in Gary, Ind., an archetypal dying city of the passing industrial age, where, as he once said, "the poverty, the discrimination, the episodic unemployment could not but strike an inquiring youngster," Joseph Stiglitz has been asking essential questions about how and why economic policies work or fail. Drawing on his experiences from inside the Clinton administration, as well as on the economic theories he honed at America's elite universities (ideas for which he won a Nobel prize for economics in 2001), he seems particularly well suited to deal with the financial boom of the Clinton era and the bust that followed.
As an economic adviser to President Clinton and a World Bank official, Nobel Prize winner Stiglitz (Globalization and Its Discontents) had a front-row seat for the financial boom of the 1990s. He discusses how, contrary to all theory, reducing the national deficit led to the economic upswing, but his interest lies not in how the bubble happened but in those qualities that eventually led to its collapse. One of his chief arguments is that although efficient markets depend upon the free flow of information, deregulation enabled corporations like Enron to present distorted financial data, "stealing money from their unwary shareholders" in the process. Financial analysts also withheld frank assessments from investors to maintain their insider status, and the "conflicts of interest gone out of control" inevitably led to disaster. The book suggests Federal Reserve chairman Alan Greenspan could have slowed things down, but failed to back up tentative public remarks with firm action. The Clinton administration also comes in for some of the blame for pressuring foreign countries to adopt policies it wouldn't apply to its own economy. But the largest portion of the blame is doled out to George W. Bush for mishandling the initial stages of the recession, allowing it to spiral dangerously in the name of free markets. Instead, Stiglitz calls for just enough regulation to promote what he dubs "Democratic Idealism," a fairly standard liberal platform of social justice and economic reform. Whatever one thinks of his long-term goals, the straightforward and well-reasoned summation of the last decade's market trends has a convincing ring of truth. (Oct.) Copyright 2003 Reed Business Information.
This interesting book is a critique of the Clinton administration by a Nobel Prize-winning economist who served on Clinton's Council of Economic Advisers. It is partly a mea culpa and partly an effort by the author to distance himself from administration decisions, which were dominated by a Treasury Department too often beholden to the financial industry. But Stiglitz's more general message concerns the balance struck in a free society between the government and the market a balance that even under Clinton, not to mention under the current administration, tilted too heavily toward nonintervention.
Stiglitz submits that although politicians often wrongly claim credit for positive economic developments that occur on their watch, their actions do in some instances make a difference. He lauds Clinton's efforts to reduce the deficit and predicts that Bush's tax cuts will produce budget shortfalls that plague the country for many years. He goes on to argue that the mantra of free markets has been accepted far too uncritically by policymakers, as was evident in the flawed deregulation of the energy, telecommunications, and financial industries. He emphasizes, accordingly, the importance of timely, accurate information for both policymakers and the informed public and the corresponding need to be aware of the incentives that motivate decision-makers, especially businesspeople and their close advisers. Stiglitz's arguments are well written, cogent, and nontechnical and will likely make their way into electoral debate.
So why is the economy tanking? A Nobel prize-winning economist points to the Nineties' fanatical commitment to free markets and deregulation. Copyright 2003 Reed Business Information.
A best-of-times, worst-of-times overview of the previous decade by whip-smart economist and presidential advisor Stiglitz (Economics/Columbia Univ.; Globalization and Its Discontents, 2002). Adam Smith’s playing field-leveling invisible hand, observes Stiglitz, sometimes can’t be seen because it is in fact not there. So it seemed through much of the 1990s, which saw American capitalism claw its way up staggering new heights of inequity and avarice. Take the stock market’s ever more pronounced dislike, throughout the decade, of giving the small investor an even break with equal access to intelligence, about which Stiglitz remarks, "Unfettered markets, rampant with conflicts of interest, can lead to inefficiency. We can never eliminate the problems; we can, however, mitigate them. In the nineties, we made them worse." Some of the ways in which the economy was made worse, Stiglitz writes, were political in nature; the Clinton administration, which he served as a member of the Council of Economic Advisors, failed to get a handle on such things as funny corporate accounting practices and the endless corporate appropriation of the public domain. Fault Clinton Stiglitz does, and at many points as he turns from NAFTA to the WTO to the Enron scandal and on. Yet, he warns, it is a mistake to attribute to that administration the collapse of the great bubble and the dive into recession that closed the decade: though Clinton may earn middling marks, Stiglitz slyly notes, as a teacher he grades on a curve, and Clinton positively shines by comparison with what came before and after. That collapse brought with it the evaporation of trillions and a subsequent performance well below the economy’spotentialbut no real curbing of such matters as executive compensation, merger mania, and unemployment. Contra many of his colleagues, Stiglitz calls for more rather than less regulation, noting that the bursting bubble did bring at least some useful reforms in accounting practices and the public disclosure of information. Likely to cause indigestion among some Wall Streeters, but a thoughtful, accessible survey of a history that’s still unfolding. Author tour
“An excellent primer.”
Joe Stiglitz is the economist I want guarding my back if a bloody firefight is about to break out with free-market fundamentalists. John Leonard
“Solidly rooted in [Stiglitz's] path-breaking work on the economics of risk and information.”
“In this groundbreaking work, Stiglitz argues that much of what we understood about '90s prosperity is wrong, that the theories are outdated.”
“A powerfully argued brief...about the lessons to be gleaned from the new-economy bubble.”
“Stiglitz brings unsurpassed expertise and an insider's perspective to the subject of corporate greed.”
“Joe Stiglitz is the economist I want guarding my back if a bloody firefight is about to break out with free-market fundamentalists.”