Joseph Stiglitz,
Dec.6, 2012.
NEW YORK – After a
hard-fought election campaign, costing well in excess of $2 billion, it seems
to many observers that not much has changed in American politics: Barack Obama
is still President, the Republicans still control the House of Representatives,
and the Democrats still have a majority in the Senate. With America facing a
“fiscal cliff” – automatic tax increases and spending cuts at the start of 2013
that will most likely drive the economy into recession unless bipartisan
agreement on an alternative fiscal path is reached – could there be anything
worse than continued political gridlock?
In fact,
the election had several salutary effects – beyond showing that unbridled
corporate spending could not buy an election, and that demographic changes in
the United States may doom Republican extremism. The Republicans’ explicit
campaign of disenfranchisement in some states – like Pennsylvania, where they
tried to make it more difficult for African-Americans and Latinos to register
to vote – backfired: those whose rights were threatened were motivated to turn
out and exercise them. In Massachusetts, Elizabeth Warren, a Harvard law
professor and tireless warrior for reforms to protect ordinary citizens from
banks’ abusive practices, won a seat in the Senate.
Some of Mitt Romney’s advisers seemed taken aback
by Obama’s victory: Wasn’t the election supposed to be about economics? They
were confident that Americans would forget how the Republicans’ deregulatory
zeal had brought the economy to the brink of ruin, and that voters had not
noticed how their intransigence in Congress had prevented more effective
policies from being pursued in the wake of the 2008 crisis. Voters, they
assumed, would focus only on the current economic malaise.
The Republicans should not have been caught
off-guard by Americans’ interest in issues like disenfranchisement and gender
equality. While these issues strike at the core of a country’s values – of what
we mean by democracy and limits on government intrusion into individuals’ lives
– they are also economic issues. As I explain in my book The Price of
Inequality, much of the rise in US economic inequality is attributable to a
government in which the rich have disproportionate influence –& and use
that influence to entrench themselves. Obviously, issues like reproductive
rights and gay marriage have large economic consequences as well.
In terms of economic policy for the next four
years, the main cause for post-election celebration is that the US has avoided
measures that would have pushed it closer to recession, increased inequality,
imposed further hardship on the elderly, and impeded access to health care for
millions of Americans.
Beyond that, here is what Americans should
hope for: a strong “jobs” bill – based on investments in education, health care,
technology, and infrastructure – that would stimulate the economy, restore
growth, reduce unemployment, and generate tax revenues far in excess of its
costs, thus improving the country’s fiscal position. They might also hope for a
housing program that finally addresses America’s foreclosure crisis.
A comprehensive program to increase economic
opportunity and reduce inequality is also needed – its goal being to remove,
within the next decade, America’s distinction as the advanced country with the
highest inequality and the least social mobility. This implies, among other
things, a fair tax system that is more progressive and eliminates the
distortions and loopholes that allow speculators to pay taxes at a lower
effective rate than those who work for a living, and that enable the rich to
use the Cayman Islands to avoid paying their fair share.
America – and the world – would also benefit from
a US energy policy that reduces reliance on imports not just by increasing
domestic production, but also by cutting consumption, and that recognizes the
risks posed by global warming. Moreover, America’s science and technology
policy must reflect an understanding that long-term increases in living
standards depend upon productivity growth, which reflects technological
progress that assumes a solid foundation of basic research.
Finally, the US needs a financial system that
serves all of society, rather than operating as if it were an end in itself.
That means that the system’s focus must shift from speculative and proprietary
trading to lending and job creation, which implies reforms of financial-sector
regulation, and of anti-trust and corporate-governance laws, together with
adequate enforcement to ensure that markets do not become rigged casinos.
Globalization has made all countries more
interdependent, in turn requiring greater global cooperation. We might hopethat
America will show more leadership in reforming the global financial system by
advocating for stronger international regulation, a global reserve system, and
better ways to restructure sovereign debt; in addressing global warming; in
democratizing the international economic institutions; and in providing
assistance to poorer countries.
Americans should hope for all of this, though I
am not sanguine that they will get much of it.& More likely, America will
muddle through – here another little program for struggling students and
homeowners, there the end of the Bush tax cuts for millionaires, but no
wholesale tax reform, serious cutbacks in defense spending, or significant
progress on global warming.
With the euro crisis likely to continue unabated,
America’s continuing malaise does not bode well for global growth. Even worse,
in the absence of strong American leadership, longstanding global problems –
from climate change to urgently needed reforms of the international monetary
system – will continue to fester. Nonetheless, we should be grateful: it is
better to be standing still than it is to be heading in the wrong direction.
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