|GREED AND STUPIDITY IN THE NEW GILDED AGE|
|Australian Financial Review,
by Jonathan Shapiro||15 Nov 2018|
|General News - Page 44 - 1111 words - ID 1036773266 - Photo: Yes - Type: News Item - Size: 838.00cm2|
Economics Renowned economist Joseph Stiglitz is incredulous about the lack of opposition among corporate leaders in the United States to the administration and its trade policies, writes Jonathan Shapiro.
Nobel Prize-winning eco nomist Joseph Stiglitz says there is a greater than 50 per cent chance that the United States enters into a trade war with China, and he is cer tain American workers will lose.
In an interview with The Australian Financial Review, the acclaimed Columbia University professor outlined why he is fearful American democracy is heading into a "dangerous" phase under the Trump administration while monopolistic technology companies are undermining "the market economy".
"Like all wars, at first you say - oh it won't happen, it is so stupid, who is going to win?" he said. "You don't realise there is a lot of stupidity in the world. It's just beginning to sink in that we are going to go to a trade war of a serious proportion."
Stiglitz, 75, is more certain that in doing so the United States will not bring back manufacturing jobs.
"Even if we manage to bring some manufacturing to the US, it will be robots, it will be machines, not jobs, and it will be in different places [to where they were lost]."
Stiglitz says the only rationale is an emotional response to the reality that the US will be eclipsed by China as the world's economic superpower.
"Americans don't want to think of themselves as being number two," he says.
Stiglitz is in town to accept the Sydney Peace Prize, awarded to him by the Sydney Peace Foundation at the University of Sydney.
He has served in various roles under several Democrat administrations, including chairing former president Bill Clinton's Council of Economic Advisers. Stiglitz also advised President Obama but was highly critical of his bail-out package. He was awarded the Nobel Prize in 2001 for his work on "information asymmetry". While Stiglitz has cited globalisation as a reason for the decline of the middle class, he has subsequently blamed technology and the interests of large companies for stagnant incomes.
What Stiglitz appears most incredulous about is the lack of opposition among corporate leaders in the United States to the Trump administration and its trade policies. He says there are two reasons why they are not pushing back.
"The business community are just celebrating their tax cuts to billionaires and corporations. It is unbelievable selfishness that they are willing to overlook misogyny, racism and bigotry to get more money in their pocket."
The second reason is that US companies are increasingly giving up on the China opportunity. "China is not the goldmine they hoped it would be. Wages are rising, environmental conditions are changing and Chinese firms are more competitive."
Stiglitz also harbours deep concerns about the rising power of technology companies such as Google, Amazon and Facebook, which he says are "destroying the efficiency of the market economy". "We are on the cusp of another era to the gilded age where a few giants dominate the economy."
That these companies have access and control to data that they can use to "shape you, to affect you, exploit you, and extract a consumer surplus" troubles him.
"In other words, they can figure out what you are willing to pay and take that from you. You got charged a higher price because you are willing to pay it.
"The law of the single price, which is a basic law of efficient markets, is no longer true. That destroys the efficiency of the market economy. It is very serious."
The monopolistic power of the technology companies is harder to dislodge, he says.
"Standard Oil could be broken up. Tobacco could be broken up. It is not clear that it is as easy to break up technology platforms."
Stiglitz is being awarded the Sydney Peace Prize on Thursday for his contribution to the debate on income inequality which is emerging as the issue of our time.
Wealth disparity, he says, has been exacerbated by the failure to enforce monopoly rules, the bargaining power of workers being undermined by globalisation and weaker unions, education systems that he says favour the privileged, and tax rules that discriminate against workers.
That is fuelling anxiety and populism, particularly among young Americans - many of whom are saddled with student loans. "You cannot discharge the debt. You can borrow to buy a yacht and discharge it, but you borrow to get ahead in life and you can't."
He says technology will be a major factor in influencing inequality, and it can either replace workers or make them more efficient. The key is to make sure machines "augment" with labour.
"We already have too much unskilled employed people.
"Why spend the energy doing research making more people unemployed? When you do that it drives down wages and increases inequality."
One proposal is the introduction of a "universal basic income" where citizens who don't work are compensated with a wage.
It's a controversial idea and Stiglitz is not an advocate. "We have so many needs in our society - caring, education, health, aged care, beautifying our cities. The first obligation should be to make sure that everyone that wants a job can get one, and that they pay decent incomes."
But he admits his younger friends are comfortable with the idea of not having to work. "They tell me they know how to live a spiritual life without working in a meaningful way, and that I am too much into the notion of work as a necessity."
So does he agree with the comments of billionaire money manager Ray Dalio that capitalism is no longer working for most people?
"It has worked for him," Stiglitz quips. "But it is important for people like him to say this and recognise it and not shy away from it.
'The median income for a full-time worker in the US, and they are the lucky ones, is the same as it was 42 years ago.
"We are not just talking about the bottom.
It is the average American that has not done well. It is not serving just the bottom. It is not serving the middle." AFR In fighting a trade war the United States will not bring back manufacturing jobs.
Professor Joseph Stiglitz is in Australia to receive the Sydney Peace Prize, which will be awarded at the City of Sydney Peace Prize Lecture tonight, and will also speak at Melbourne's Athenaeum Theatre on Monday.
The first obligation should be to make sure that everyone that wants a job can get one, and that they pay decent incomes, says Joseph Stiglitz, right. PHOTOS: BLOOMBERG, JAMES BRICKWOOD
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