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In a globally integrated economy, the biggest challenge is to make sure there is adequate global aggregate demand, achieved through spending, when countries like China feel they must save high levels of dollar reserves to protect against international currency volatility.

Joseph Stiglitz

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Joseph Stiglitz
Age: 81
Born: 1943
Born: February 9
Critic
Economist
Non-Fiction Writer
Professor
Science Writer
University Teacher
Writer
Gary
Indiana
Joseph Eugene Stiglitz
Joseph Stiglitz
Must
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Spending
Globally
Make
Levels
Biggest
Integrated
Like
Challenges
China
Reserves
Economy
Countries
Adequate
High
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Dollar
Sure
International
Currency
Country
Save
Achieved
Volatility
Feel
Demand
Global
Aggregate

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I don't think anybody really thinks that one should get rid of the World Bank. Reform is one thing, but getting rid of it I think would be wrong.
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For 60 years, since World War II, we have been trying to create a rules-based system, a global economic system. We understand that what makes our economy function is what we call the rule of law, and what is true domestically is also true internationally. It is important to have rules by which we govern our relations with other countries.
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In the early 1990s, there was a debate among economists over shock therapy versus a gradualism strategy for Russia. The people in Russia who believed in shock therapy were Bolsheviks a few people at the top that rammed it down everybody's throat. They viewed the democratic process as a real impediment to reform.
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What you measure affects what you do. If you don't measure the right thing, you don't do the right thing.
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I think what they've been doing is largely almost in firefighting mode without a good conceptual framework - either at the micro or the macro level. Micro, you would ask: What kind of financial or banking system do we want? Macro, you would say: What are the underlying problems in the structure of our economy?
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Most people think the Iraq war has increased the probability of an attack. However, it's difficult to put this aspect into financial terms.
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You can't overestimate what happens when you encourage regulators to believe that the goal of regulation is not to regulate.
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For that to happen, growth has to be very strong. To get back to normalcy, we will have to have extended growth of more than 3 percent. That's not in the cards.
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The national debt will have increased by approximately 50% in just eight years! We will have created a new unfunded entitlement - disability and health care benefits for the huge number of disabled veterans returning from the Iraq war.
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Moreover, because we chose to finance the way by borrowing, our deficits and debt has soared, and this means we have less room for maneuver, less money available to stimulate the eocnomy in the way needed.
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In fact, for just about 1/6 of the cost of an Iraq War, we could have put the social security system on sound financial footings for the next 50 to 75 years. The problems can be managed - but not if we continue to fight this war for another 80 years.
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The proposal for a new global reserve currency - or Special Drawing Rights - is a good idea for many reasons. Yes, for the Chinese it would cushion any fall in the value of the dollar per se because it would only be part of a basket of other currencies, including the yen and the euro.
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The country has large unfunded liabilities - social security, health care, and there will have to be some adjustments to these problems. What is scary though is how much worse things have gotten in the last eight years, and the Iraq war is one of the main factors.
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It is unlikely that others would even demand their money back overnight, for doing so would lead to the value of the dollar plummeting what they would get back with be worth little. But what we are already seeing is an erosion of confidence of the dollar, which is seeing the dollar fall in value.
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Amherst was pivotal in my broad intellectual development MIT in my development as a professional economist.
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I grew up in a family in which political issues were often discussed, and debated intensely.
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One has to always ask the question: Where can one be most effective in helping shape policies? It is always difficult when you're inside because you're very constrained.
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I think that for the developing world there are many versions of capitalism, and countries have to choose one that's appropriate.
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GDP tells you nothing about sustainability
Joseph Stiglitz
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The Bush administration has been doing everything it can to hide the huge number of returning veterans who are severely wounded - 17,000 so far including roughly 20 percent with serious brain and head injuries. Even the estimate of $500 billion ignores the lifetime disability and healthcare costs that taxpayers will have to spend for years to come.
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