Posted on 09/18/2002 2:09:03 PM PDT by liberallarry
As the chairman of Bill Clinton's Council of Economic Advisers, and subsequently as the chief economist of the World Bank during the East Asian financial crisis, Joseph Sitglitz was deeply involved in many of the economic-policy debates of the past ten years. What did this experience tell him? That much of what we think we know about the prosperity of the 1990s is wrong. Here is a revised history of the decade, by the winner of the 2001 Nobel Prize in Economics
This guy is still politically in line with his mainstream, but he doesn't try to paint it like Bill would.
BS, as already shown by Virginia Postrel in the NYT just a little while ago, and also at her website.
Stiglitz of course makes some valid observations in the article, but every kumbaya leftist bromide he lists, like the one above, is horse manure.
Since you mention you may not understand all of the article, allow me to suggest that you check for Mickey Kaus' reaction. He's a liberal himself (with serious reservations), but there is no better interpreter of liberal economic jibberish on the web. I don't know if he's written about this piece yet, but he probably will someday soon.
He repeats the tired old argument that higher taxes and lower interest rates spur economic growth by increasing bond yields. The fact is that there was a brief recession in 1991 due to the savings and loan mess, then soaking up huge tax dollars. Clinton took office with the recession over, the S&L mess cleaned up and low interest rates. The Reagan boom resumed, and not even the modest tax increase at the beginning of the Clinton administration could stop it. With a Republican Congress stopping new spending programs and Republican Greenspan keeping interest rates low, all Clinton had to do was take the credit.
Stiglitz makes the lame argument that Reagan's tax cuts created a "bubble" in real estate that burst in the S&L crisis and thus wasn't a real boom. First, the growth rates during the Reagan boom (1983-1990) were higher than the Clinton boom. Second, the real estate Investment Tax Credit was demanded by Congressional Democrats as a price for support of Reagan's rate cuts, which is all Reagan wanted. Moreover, the S&L problem at root was caused by the fedearl mandate that S&L's could pay more interest on savings than banks, which was a New Deal Democrat program that could not continue in any rational banking system. The confluence of bad tax and bad regulatory policy by Democrats attracted predatory speculators to the S&L's and led to their ruin. Bush 41 had to clean up the mess of paying off depositors and cleaning up bad loans. But the bottom line is that it is really sleazy economics to claim there was no Reagan boom because we had an S&L crisis or that the Reagan boom was a bubble - not much of a bubble to trigger a one quarter recession.
On the other hand, how are Mr. Stiglitz and his fellow Clintonistas going to explain the stock market bubble they caused and which was the subject of two Economist cover stories before they left office, the bursting of which has lost American stockholders billions in retirement savings? Can't blame Bush, the stock market bubble burst before Bush took office.
Another clintoon apologist trying to rationalize and rewrite history. (Is this why he got a nobel award?) Examples include, but are not limited to, statements such as:
"Fortunately, owing in part to Clinton's success in cutting the deficit..."
For the record, clinton fought this tooth-and-nail.
"As a result of Reagan's tax cuts and the increases in expenditures that both his Administration and Congress had pushed for..."
Self-explanatory, for those who know the truth...
"we tried, as far as possible, to "back load" the deficit reduction—that is, to have greater deficit reduction in future years."
In other words, buy now, pay forever...
Buried deep in the article is:
"The Glass-Steagall Act of 1933, which separated investment banking from commercial banking, recognized the conflicts of interest that can arise when the two are conflated. But concerns about keeping them separate were put aside after the arrival at the Treasury Department of Robert Rubin, in 1995."
But then returns to his apologist mentality by saying:
Early in the Clinton Administration, Labor Secretary Robert Reich, along with the Council of Economic Advisers, pushed for reducing what is now commonly known as "corporate welfare"..."
And finally, the BIGGEST example of his distorted viewpoint:
Instead of curbing consumption to finance our boom, we borrowed—heavily, year after year—from abroad. We did this to fill the widening gap between what we were saving and what we were investing—a gap that opened in earnest under Ronald Reagan but grew under George H. W. Bush and Bill Clinton, and has reached new dimensions under the new President Bush. (At least during the Clinton years borrowing went to finance investment, rather than—as in the Reagan and first Bush Administrations—a national consumption binge.)
This guy's a hack. Obviously the standards for a Nobel prize have been lowered... Who'll win it next year, Whoopi Goldberg???
On the strictly economic issues I don't expect any resolution and I do expect people to adopt positions along party/ideological lines. Good, strong arguments are the best that can be expected.
What disturbed me on first reading was something that Capitalist Eric also noticed; the author politely, but harshly, criticizes Robert Rubin for blatantly favoring friends on Wall Street and in the international banking community (on more than one occasion). Later he gives credit to Rubin for some policies he likes. And he leaves it at that! I don't think that's right.
Having re-read the article and thought about Stiglitz's numerous vanities of interpretation (he even manages to squeeze in a meniton of his Nobel win!), I now think Kaus may not even address this article. It is lightweight tendentious folderol dressed to impress.
As I said in subsequent posts I expected a certain partisan bias in the arguments with no possible definitive resolution. By the way there's an even more interesting article in the October issue of "The Atlantic" - "The New Christianity". I'm going to post it late today if I can get it free off their website.
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