LONDON (Reuters Breakingviews) - Joseph Stiglitz does what he does very well. The veteran progressive economist’s latest book provides a solid agenda for traditional centre-left American reformers. However, “People, Power, and Profits: Progressive Capitalism for an Age of Discontent” may not be radical enough for today’s challenges.
The 76-year-old Columbia University professor has both brains and fame. He won the prestigious John Bates Clark medal back in 1979. Since then, he has been chief economist at the World Bank and chair of the U.S. Council of Economic Advisers under President Clinton. He received the Nobel Prize in economics in 2001.
Stiglitz has long used his intelligence and influence to promote a largely conventional American left-wing agenda. He is in favour of big government and opposed to big finance, the enthusiasm of “many conservative economists” for free markets, and pretty much everything connected with the U.S. Republican party. The last enemy is quite relevant to “People, Power, and Profits”, his sixth popular book since 2010.
The first two-thirds of the text explore some of his current favourite themes. A highlight is the discussion of the unequal effects of globalisation on American workers. He also snipes at the 2017 U.S. tax cuts and many other plans promoted by President Trump.
The last third of the book lays out Stiglitz’s policy agenda. Much of this might be expected from an economist in the Clinton administration. After an anti-Republican digression on American political reform, he demands increased support for education, active labour market policies (including job guarantees), greater investment in infrastructure, more action to combat climate change, anti-discrimination policies and fairer taxes.
That is all sensible, but Stiglitz too often seems to be fighting intellectual battles of limited relevance to his largely American audience. For example, he frequently attacks free-market fundamentalism, even though most of his readers probably already recognise that the government does and must play a major active role in any complex modern economy. They might instead have appreciated a more coherent and detailed exposition of how governments should design and integrate their fiscal, monetary, regulatory and administrative policies.
Similarly, frequent calls to adjust to the change from industrial to post-industrial economies hardly seem relevant to the United States, where services have for decades accounted for the majority of output. More generally, the long list of desirable reforms would be more helpful if it came with a hierarchy of importance or a clearer overarching framework.
To be fair, the book is dotted with stimulating insights. For example, its differentiation between the “grabbing wealth” of rent-extraction and what Stiglitz calls “true wealth creation” might provide a helpful starting point for regulatory reforms and tax policy. Unfortunately, he does not refine the distinction or develop its implications. A brief attack on charging more ignorant customers higher prices nicely demonstrates his mastery of the economics of competition, even if this “price discrimination” is not a major economic problem.
Overall, what is missing is more striking than what is on offer. Once a tax radical, Stiglitz does not address Modern Monetary Theory, even though the popular idea could provide a more radical intellectual foundation to his support for big government. Once a leading globalist, he focuses almost exclusively on the United States, giving the book a parochial feel. His tendency to refer to the European Union as “Europe” is typical. Within the national context, Stiglitz hardly talks about the economics of race, skims over the challenges created by demographic changes and only briefly discusses the danger posed by weakened American institutions.
For Stiglitz, as for most of his ideological allies, Trump’s election is a symptom of political decline. It is easy to see why a progressive economist finds the 45th president so repellent. The former reality TV star’s ascent is a repudiation of everything this movement has stood for since at least the 1930s: strong and competent government, social equalisation and harnessing capitalism to serve the common good.
Nonetheless, as the book intermittently and reluctantly recognises, Trump’s appeal reflects a lack of popular enthusiasm for the progressive approach. The rejection is hardly unique to the United States. What Americans call liberalism and Europeans recognise as the centre-left or social democracy is under threat in many countries, both rich and developing.
It is not clear how much of the discontent is fundamentally economic, but progressive economists certainly have an obligation to suggest more politically appealing policies. As numerous references to earlier works make clear, Stiglitz has been thinking about these issues for decades.
“People, Power, and Profits” would have been more interesting, though, if it built on one strand of his previous work: the search for better measures of national economic success than gross domestic product. That quest should have raised a great philosophical question: what counts as the economic good life in an already prosperous society? The answers that will be appealing enough to resist the Trumpian tide may be more radical than anything that Stiglitz currently suggests.
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