Prof. Joseph Stiglitz: People, Power, Profits
Jul 05-2020
BiMBA Business School and Huazhang Books held an online event on July 3rd to commemorate the publication of the Chinese edition of People, Power, Profits by Nobel laureate Prof. Joseph Eugene Stiglitz Prof. Justin Lin Yifu, Honorary Dean of the NSD and Dean of both the Institute of New Structural Economics and the Institute of South-South Cooperation and Development at PKU, and Prof. Stiglitz of Columbia University each gave a speech and then had a dialogue with Mr. Wang Guan, a presenter of CGTN, with an aim to unearth “the truth”. The following is a recap of Prof. Stiglitz’s speech.
Prof. Stiglitz said that his book begins with a take on the classical question raised by Adam Smith: What is the origin of national wealth? Living quality nowadays is drastically higher than that of 250 years ago, and he has distilled two major reasons: science and institutions. The former is about deeper knowledge of nature and continual innovation in technology, and the latter centers around the capability to organize and coordinate political and economic activities.
To ensure the continuous improvement in living quality, Prof. Stiglitz drew attention to two points: First and foremost, a society must have rules and regulations to play by in light of the positive and negative externalities of people’s activities; Secondly, the government should support and invest in public goods, which tends not to solicit enough investment from the private sector. Given governments’ dominant position in some other areas such as education, healthcare, and infrastructure construction, Prof. Stiglitz aims to prove in his book that governments, just like the market, should play a critical role. A well-functioning society requires a good balance among the market, country, and civil society.
In the US and many other parts of the world, growing inequality remains one of the most important issues. The development of the American economy has rendered the country wealthy, but with extensive poverty among its people. The alarming situations in the US might get even worse as AI, globalization and technological transformation have the potential of escalating inequality. Not to leave pessimistic sentiments to the readers, Prof. Stiglitz said that he offers a set of policy recommendations in his book – some are generic and others specific.
His prescription focuses on two parts: The first part is about how governments should get their policies right, including regulatory, investment, and social security policies; The second part hopes to shed light on how to enable the vast majority of people to live a truly middle-class lifestyle. While commending China’s outstanding achievement over the last 40 years, he conceded that a middle-class lifestyle is getting out of reach for many American citizens. He suggested that the solution might lie in the concept of ‘right of public selection’, i.e. giving the public a choice between government offerings and private offerings to improve competition and efficiency. While upholding the dominant role of the market, he pointed out that the market has its own limitations and governments have a duty to step in where the market fails to meet the needs of the people.
The road ahead for the US, in his words, will be progressive capitalism, or what’s called social democratic system in some European countries, which has done a better job in handling all sorts of questions brought about by the neo-liberal economic system over the last 40 years. It’s time to admit that the US’s experiment with neo-liberalism and some other philosophies such as the Trickling-down Economics has ended in failure. It can lumber along on this road, but the alternative path – progressive capitalism – will allow the people to share in the prosperity, as it does not rely on the unequal secondary distribution or exploitation, but on the virtuous cooperation and synergy among the market, government, and civil society.
