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Stiglitz: Europe Can Do Better


by Vaska

Here’s Nobel Laureate Joseph Stiglitz on how Europe can return to a more sustainable economic path.  Stiglitz delivered this keynote speech at the European Dialogue 2016 conference  held in Brussels on April 14 and 15.  For Stiglitz’s speech, please click on the top-left three-bar icon on the YouTube video and scroll down to #3. The event was organized by the Hans Böckler Stiftung and the European Trade Union Institute.


7 Comments

  1. Where to start!?
    Apparently the US has/is recovering from the 2008 downturn by posting up a none too impressive 2% growth per annum. What sort of growth we might ask? Well stock markets in the US have risen threefold since the nadir of the slump in 2008. Sounds impressive enough but then this was not really growth – although it has been counted as such – it was actually asset price inflation. The same thing happened in the UK. Commercial banks, and other investors simply borrowed from the central bank – QE monies – and engaged in speculative spending in property, stock and bonds. However, this is not wealth creation it is financial speculation. Speculative debt financing as growth, neat trick.
    As for ordinary Americans, well they must be wondering what happened to the American dream. The labor force participation rate has declined over the “recovery” that allegedly began in June 2009 and continues today. This is highly unusual. Normally, as an economy recovers jobs rebound, and people flock into the labor force. Based on what he was told by his economic advisors, President Obama attributed the decline in the participation rate to baby boomers taking retirement. In actual fact, over the so-called recovery, job growth has been primarily among those 55 years of age and older. For example, all of the July payroll jobs gains were accounted for by those 55 and older. Those Americans of prime working age (25 to 54 years old) lost 131,000 jobs in July.
    Over the previous year (July 2014 — July 2015), those in the age group 55 and older gained 1,554,000 jobs. Youth, 16-18 and 20-24, lost 887,000 and 489,000 jobs.
    Today there are 4,000,000 fewer jobs for Americans aged 25 to 54 than in December 2007. From 2009 to 2013, Americans in this age group were down 6,000,000 jobs. Those years of alleged economic recovery apparently bypassed Americans of prime working age.
    As of July 2015, the US has 27,265,000 people with part-time jobs, of whom 6,300,000 or 23% are working part-time because they cannot find full time jobs. There are 7,124,000 Americans who hold multiple part-time jobs in order to make ends meet, an increase of 337,000 from a year ago.
    Presumably this is what Europe is supposed to emulate? Oh, and of course Stiglitz let the cat out of the bag on two occasions. Firstly, America’s ability to pay sovereign debts in its own currency. This ‘exorbitant privilege’ means that the US can run huge trade deficits ad infinitum, a policy that no other country possesses. Of course having control of the world’s reserve currency backed by the Marine Corps is the key to US dominance.
    Turning to Europe and its failings (which are real enough) Stiglitz seemed to regard the Euro(zone) crisis as something specific to Europe. Whereas in fact it was/is part of a more general global crisis. Needless to say that the Sovereign debt crisis in Europe had its origins in the bursting of the credit-property bubble in the US in 2008. What made things worse was the various mortgage backed derivatives purchased from US Investment banks by dumb European banks. When the subprime mortgagees defaulted this risky investment instruments turned from assets to liabilities overnight. This morphed into a broader euro debt crisis. And the US was exposed to a spillover effect from this. Secretary to the US Treasury Dept. Timothy Geithner who, in no uncertain terms stated:
    ‘’Our financial system has relatively little exposure to the five European economies at the heart of the crisis, but we have significant financial ties to Germany and France and the continent as a whole.’’
    Roughly translated this meant the US banks and other investors had high levels of exposure to French and German banks, who in their turn had high levels of exposure to insolvent Greek banks. This crisis had to be contained and not infect the core banks of the EU since this would ultimately spill over into the US banking system: the Greek people instead had to be bled. Enter the IMF and its infamous structural adjustment policies – aka austerity.
    The rest of Stiglitz’s lecture consisted of the usual debunking of neo-liberalism – fine, but like shooting fish in a barrel, and of course the usual Keynesian recipe for growth, stability and prosperity, purported to be an alternative. Capitalism to be made to work for everyone, capitalism with a human face. Trouble is that growth as a concept is becoming increasingly problematic given environmental costs of this policy, and secondly to the law of diminishing returns raising its ugly head. For every dollar invested in the 1950s you would get one dollar fifty growth in national income, now you need to invest $3 or $4 to get one dollar fifty. Let it be understood that growth costs. Take a look at the US or for that matter any country’s debt to GDP ratio for confirmation of this. Debt is rising faster than growth. Ultimately, and in the not too distant future, there will be a massive bust and prolonged deflation.
    One could write several books on this, but I think that I have imposed myself on the patience of readers too long and will therefore stop at this point.

    Liked by 1 person

    • Seamus Padraig says

      I second Franks’s thoughts completely. I just want to add one minor point that would strengthen his argument slightly:

      “The labor force participation rate has declined over the “recovery” that allegedly began in June 2009 and continues today. This is highly unusual. Normally, as an economy recovers jobs rebound, and people flock into the labor force. Based on what he was told by his economic advisors, President Obama attributed the decline in the participation rate to baby boomers taking retirement.”

      Obama, as usual, is full of shit. The retirement argument can’t possibly be true because:

      a.) Social Security recently raised the (full) retirement age from 65 to 67; and …
      b.) hardly any private-sector workers have defined-benefit pensions anymore

      What people are doing, more likely, is faking back injuries to get disability insurance from Social Security, moving in with relatives, and going on foodstamps–nearly 40% of the US population is now on foodstamps.

      Liked by 1 person

      • Jen says

        The job growth is likely to be in part-time, casual or temporary employment. These are jobs that people aged 55 years plus are picking up. People aged 25 – 54 years don’t want that kind of work, they want full-time work.

        And if part-time, casual or temporary employment is booming, that’s because full-time work is being chopped up into lesser categories of employment so that employers can avoid the obligations they would normally owe to full-time workers like holiday and sick leave, 401 schemes and health insurance.

        Liked by 1 person

    • MichaelK says

      So, forgive me if I’m misreading, you don’t like Stiglitz very much? But what about the substance of his arguments, themselves?

      Like

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