May 22, 2013
'Our focus should be on how growth, income distribution and poverty develop,' Stiglitz
By Liliana Franco.-
While speaking at a seminar in Buenos Aires, economist and Nobel Prize winner Joseph Stiglitz assured that "our focus should be on how growth, income distribution and poverty develop,” adding that “the consequences of inflation” should be de real cause for alarm. He also avoided discussing the country’s current levels of inflation and other local issues.
The economist avoided mentioning the inflation index affecting the country since 2006 and criticizing import restrictions as well as the high level of currency issuance and the restrictions on foreign currency purchase that led to a flourishing black market.
Stiglitz's only mention of inflation came in generic terms, and took place during his speech at his seminar on “Debt crisis and its resolution” at the Economics School of the University of Buenos Aires. “Inflation can only affect growth when it’s very high,” he said, and warned that if the markets worry about elevated prices it is not out of concern for the poor.
During his speech, Stiglitz praised the Government’s export duties policies, assuring that thanks to them benefits that went for the exporters as a consequence of leaving the crisis behind, helped in the process of income distribution.”
The Noble Prize winner also warned about a slowing down of global growth. When asked by Ambito.com on his opinion on the alleged “stagflation” that according to some local economists Argentina is entering, Stiglitz replied: “I have no detailed information on what is going on in Argentina. Growth is slowing down on a global scale. Europe is in a recession, China and India are seeing less growth, which will lead Argentina into implementing good policies to avoid such deceleration. And if the wrong policies are implemented, the slowing down of the economy could be even more severe.”
However, when asked what those “wrong policies” could be, the economist avoided a straight answer: “that would demand getting into details about policy and I don’t feel in any condition to exercise an opinion on it.”
Regarding the future of the Euro-zone, he seemed extremely pessimistic and did not hesitate to say that “the depression will extend for several years.” He once again called for the debt-restructuring process of several countries that can be sustained over time.
Stiglitz also predicted that Germany should abandon the Euro, although this would not mean the currency’s disappearance. “Some Euro-zone countries should continue to use the currency, but in this case they should maintain similar fundamentals. This way they would be able to lower their debt levels in relation to their GDP,” he assured.
He admitted, however, that such an initiative is nowhere close to being considered. Stiglitz agrees with other economists who assure that Germany is the only competitive country in all of Europe and stands out from the rest.
While holding a one-on-one conversation with journalists, the American economist did not stray from his kind words towards Argentina. Inflation is one of the most controversial issues, but Stiglitz skillfully avoided any statements on the matter, assuring that he is in favour of “governments having independent statistics agencies that can provide reliable data,” as he admitted that “there is always great controversy regarding how those statistics are built.”
When Ambito.com told him that, even by official rates, the inflation index in the country is high and asked for a solution to this matter, Stiglitz appealed to his professorial skills to respond. “Analyzing the causes of inflation is absolutely essential to understanding what to do about it. Inflation is not an index in itself. What we must really be focused on is the consequences of inflation. We must focus on what is happening with growth, income distribution and poverty,” he replied, avoiding any advice.
He was also very critical of economists focusing solely on the inflation index. He cited as an example the current crisis in Europe, which is a consequence of focusing only on inflation and leaving out other aspects of the economy.
“Focusing solely on inflation in the US and Europe before 2008 was one of the reasons why we spiraled into a crisis. Because they were not focusing on financial stability, unemployment and other several aspects they should have paid attention to,” he explained.
He later repeated that inflation is only a thermometer and assured that on some levels “inflation paranoia ends up being a problem worse than inflation itself.” He said that the causes for inflation may come from abroad in a country that is forced to import oil or food. He also said sometimes the causes be domestic, but in this case he did not go into detail.
When faced with questions regarding how state intervention affects a country, Stiglitz replied that “there isn’t a single action that can measure the level of intervention. Governments always intervene. Markets only exist in a context of laws, regulations, rules and policies. There will always be rules in regulations and what matters is having the correct regulations available.”
Just as Fernández de Kirchner before, Stiglizt said he was against applying any austerity measures. “No economy ever recovers with austerity. In the only case that austerity can be linked to a recovery is when exports increase, not because austerity plans,” he explained.
He closed by criticizing orthodox economists, although he defended his profession by stating that “we shouldn’t protest against economists because people listen to what they want to hear.” He said that there are always other economists simultaneously “warning that everything is a mess.”