Stiglitz and Sen profit and pain
Every economist - and Joseph Stiglitz and Amartya Sen are iconic
iconoclasts within the tribe - is career-habit-and-hide-bound to pay
his homage to the wisdom of market forces, even when he is critical of them
ASEEM SHRIVASTAVA/ Hardnews/ DELHI
An economic transaction is a solved political problem. Economics has
gained the title of queen of the social sciences by choosing solved
political problems as its domain - Abba Lerner
NOBEL ECONOMIST JOSEPH Stiglitz has recently expressed his views on
the ongoing food crisis around the world. Given his pre-eminence in
the profession and his vast experience as an advisor to governments,
his views deserve to be scrutinised carefully.
The Stiglitz diagnosis
Stiglitz traces the problem of inflation in food and energy prices
around the world to the policies that have been enacted in the US and
elsewhere during the past few decades. He finds fault with the
massive financial deregulation and generous tax cuts for the rich in
the Anglo-Saxon world since the Thatcher-Reagan years, attributing to
them rightly the "huge increase in inequalities in most countries,"
the dramatic fall in household savings rate in the US, significant
declines in employment prospects for most people everywhere and most
worryingly, threats to nutrition standards even in the so-called
developed world. A less flattering catalogue of global failures would
be hard to summon.
The proliferation of opaque financial products in the wake of
deregulation didn't so much manage risk as enhance it, converting the
world economy into a gambler's paradise (since most countries were
made to choose similar policies of deregulation - by the IMF and the
World Bank), which has been systematically transferring wealth and
real income from the poor to the rich globally, relying on the
unerring precision of market forces.
Additionally, Stiglitz points to two significant policies of the Bush
administration that have exacerbated food and energy crises in recent
years. He points to Washington's war on Iraq. Bush's foolish policies
have made the connection between food and energy markets tight,
thanks to a misguided biofuels programme during the past few years.
Stiglitz makes it a point to underscore how Third World agriculture
has been put in severe jeopardy not just because of benign neglect by
governments, international financial institutions and aid agencies,
but also because of unfair competition from a systematically and
heavily susbsidised agriculture in the rich world. This last is a
criminal hypocrisy (the West being at the forefront of the messianic
crusade for 'free' markets) too banal to belabour. The powerful World
Bank is once again waking up slowly to the resilient truth that there
is simply no way to reduce (let alone eliminate) poverty in the world
without paying special attention to agriculture.
The Stiglitz remedy
What according to Stiglitz is the solution?
"Rich countries must reduce, if not eliminate, distortional
agriculture and energy policies, and help those in the poorest
countries improve their capacity to produce food. But this is just a
start: we have treated our most precious resources - clean air and
water - as if they were free. Only new patterns of consumption and
production - a new economic model - can address that most fundamental
resource problem."
Other than a euphemistc argot all too familiar in Orwellian times and
the habit-bound economist's search for the universally right 'model'
to implement everywhere, a technocratically enlightened formula for
guaranteed success, the above words could have come from Jesus Christ himself.
So where does Stiglitz fall short?
Stiglitz wants rich countries to "reduce, if not eliminate
distortional agriculture and energy policies". But don't we already
know they will never do this? Stiglitz keeps appealing to a
constituency he already knows has long been morally deaf. For someone
sacked by the US Treasury from his plum position near the top of the
World Bank not so long ago, Stiglitz certainly knows this. Under the
revolving door system the Americans have between their highest public
and corporate offices, it is a sure wager that it was precisely the
annoyance at Stiglitz on the part of the global investor class that
prompted his sacking. Then why does he pretend otherwise?
"The world" he appeals to for merciful economic policies in the
future is in actual fact the world's tiny and shrinking class of
corporate captains, precisely the bunch which sponsors the lobbies
and policy elites which have led the relentless, decades-long
campaign for financial deregulation, the very phenomenon Stiglitz
holds responsible for the mess around us. This band of global
corporate czars lives better than the royalty of other ages of
humanity. It takes a dozen flights on private jets every week and
dines every evening on wine and caviar which have been flown half way
around the world especially for their banquets. Why should they
listen to mad men like Stiglitz?
For at least half a generation many have been trying to persuade the
governments of the rich nations to remove the unjust agricultural
subsidies that harm Third World agriculture. Why have the governments
of the rich nations not followed this morally impeccable advice? Is
it not because they are influenced by transnational businesses
maximising profits globally? Is it not because they are cynically
Machiavellian?
full: http://www.hardnewsmedia.com/2008/08/2301
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