European, US Austerity Drive is Suicidal: Nobel Economist Stiglitz

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Common Dreams

European, US Austerity Drive is Suicidal: Nobel Economist Stiglitz

'The Occupy movement has been very successful in bringing those ideas to the forefront of political discussion.'

by
Common Dreams staff

Austerity is suicidal public policy warns US economist Joseph Stiglitz.

Europe is headed down the same path that most Republicans -- and many Democrats -- are suggesting for the US: reductions in the public sector, cuts in benefits, slashing investments in infrastructure and education.

Nobel Prize-winning U.S. economist Joseph Stiglitz speaking in Vienna, Austria Thursday night said that it's a suicidal path for Europe -- and that such a policy has never worked in any large country.

Youth unemployment in Spain has been at 50 percent since the crisis in 2008 with “no hope of things getting better anytime soon,” said Stiglitz, who is a professor for economics at Columbia University. “What you are doing is destroying the human capital, you are creating alienated young people.”

In an interview earlier this week in The European, Stiglitz said, "When you look at America, you have to concede that we have failed. Most Americans today are worse off than they were fifteen years ago. A full-time worker in the US is worse off today than he or she was 44 years ago. That is astounding – half a century of stagnation. The economic system is not delivering. It does not matter whether a few people at the top benefitted tremendously – when the majority of citizens are not better off, the economic system is not working."

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Reuters is reporting:

VIENNA - Europe's attempt to save its way back to health is tantamount to economic suicide that could wreck the euro currency block, Nobel Prize-winning U.S. economist Joseph Stiglitz said, calling for the continent to focus instead on fostering growth.

"I think Europe is headed to a suicide...There has never been any successful austerity program in any large country," the former World Bank economist told a panel discussion in Vienna late on Thursday. [...]

He urged rich European countries like Germany to invest more in infrastructure, education and technology, arguing that "the returns on those investments are an order of magnitude greater than the cost of capital".

Insisting on cutting debt and deficits as the way to shore up confidence in euro zone countries - as agreed by the currency bloc's leaders late last year - could end up having the opposite impact, Stiglitz said.

"What they have agreed to do last December is a recipe to make sure that (the euro zone) dies as we know it," he said, although he imagined a "core euro" shared among a handful of countries with the strongest economies could survive.

"I hope...the debate will be what are the things we can do to promote growth rather than how do we strangle each other together."

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From The European interview:

When you look at America, you have to concede that we have failed. Most Americans today are worse off than they were fifteen years ago. A full-time worker in the US is worse off today than he or she was 44 years ago. That is astounding – half a century of stagnation. The economic system is not delivering. It does not matter whether a few people at the top benefitted tremendously – when the majority of citizens are not better off, the economic system is not working. [...]

"The economic system is not delivering. It does not matter whether a few people at the top benefitted tremendously – when the majority of citizens are not better off, the economic system is not working."The countries that are doing very well in Europe are the Scandinavian countries. Denmark is different from Sweden, Sweden is different from Norway – but they all have strong social protection and they are all growing. The argument that the response to the current crisis has to be a lessening of social protection is really an argument by the 1% to say: “We have to grab a bigger share of the pie.” But if the majority of people don’t benefit from the economic pie, the system is a failure. I don’t want to talk about GDP anymore, I want to talk about what is happening to most citizens. [...]

Yes, the Occupy movement has been very successful in bringing those ideas to the forefront of political discussion. I wrote an article for Vanity Fair in 2011 – “Of the 1%, by the 1%, for the 1%” – that really resonated with a lot of people because it spoke to our worries. Protests like the ones at Occupy Wall Street are only successful when they pick up on these shared concerns. There was one newspaper article that described the rough police tactics in Oakland. They interviewed many people, including police officers, who said: “I agree with the protesters.” If you ask about the message, the overwhelming response has been supportive, and the big concern has been that the Occupy movement hasn’t been effective enough in getting that message across. [...]

Let me put it this way: Some people criticize by saying that we have become too focused on inequality and are not concerned enough about opportunity. But in the United States, we are also the country with the biggest inequality of opportunity. Most Americans understand that fraud political processes play in fraud outcomes. But we don’t know how to break into that system. Our Supreme Court was appointed by moneyed interests and – not surprisingly – concluded that moneyed interests had unrestricted influence on politics. In the short run, we are exacerbating the influence of money, with negative consequences for the economy and for society.

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