- Joseph StiglitzNobel Prize-winning economist, Columbia University professor and chief economist for the Roosevelt Institute. He served as chair of the Council of Economic Advisers under President Bill Clinton and as chief economist of the World Bank. His latest book is People, Power and Profits: Progressive Capitalism for an Age of Discontent.
In Part 2 of our look at President Trump’s response to the coronavirus pandemic, Nobel Prize-winning economist Joseph Stiglitz says Trump’s push for a payroll tax, for example, “would be undermining the fiber of our economy. … It doesn’t help now, and it really hurts going forward.” Stiglitz served as chair of the Council of Economic Advisers under President Bill Clinton and as chief economist of the World Bank. He is now a Columbia University professor and chief economist for the Roosevelt Institute. His latest book is “People, Power and Profits: Progressive Capitalism for an Age of Discontent.”
AMY GOODMAN: This is Democracy Now!, democracynow.org, The War and Peace Report. I’m Amy Goodman, as we bring you Part 2 of our conversation with the Nobel Prize-winning economist Joe Stiglitz. The death toll from the coronavirus pandemic sweeping the globe is nearing 9,000 with over 221,000 confirmed cases, as governments around the world increasingly shut down economies and lock down cities to slow the spread of the disease. We’re going to continue now to look at the economic fallout from the coronavirus pandemic, and particularly President Trump’s response to it, what has led to this point. The early denial of the pandemic, he kept saying, “Who would have thought?” He disbanded his pandemic team on the National Security Council, defunding health agencies. But then, now he says he always said it was a pandemic. Well, on Wednesday, the Dow Jones plummeted 7% at midday, triggering an automatic halt to trading for the fourth time in the last two weeks. The market crash has wiped out nearly all stock market gains since President Trump took office in 2017.
For more, we’re continuing with Joe Stiglitz, the Nobel Prize-winning economist, Columbia University professor, chief economist for the Roosevelt Institute, chair of the Council of Economic Advisers under President Bill Clinton, chief economist of the World Bank, his latest book, People, Power and Profits: Progressive Capitalism for an Age of Discontent.
I don’t think most everyday people in this country are focused on the stock market right now. And also, so often the stock market, which has been rising so much in the past few years, doesn’t reflect what’s happening to people on the ground in the bid economy, if they have a job at all — on the gig economy, or if they have a job at all. But can you talk about and explain in lay terms, Joe Stiglitz, what exactly has happened with the stock market? And is this similar to the Depression of 1929, the Crash?
JOSEPH STIGLITZ: Well, the stock market reflects investors’ expectations about what is going to be happening in years to come. And when Trump became the president and gave this huge tax cut to the corporations, they celebrated. They had a big party. And they focused on the short term, not the long term, not the risks that Trump represented to our economy, to our world. They celebrated the additional money they had in the pocket. And that meant the stock market went way up. It was a shortsighted perspective.
Now that optimism has turned, has flipped into extreme pessimism. They know that the president is incompetent. They know that this is beyond the capabilities of the administration. We’ve seen this incompetence in the areas of testing and the response to the coronavirus. And quite frankly, they’re very worried, and rightly so, as the economy goes down. And one of the things about the stock market is it’s very risk-averse. It always thinks about, when things go bad, the worst possible scenario, just like when things are good, they think about the party going on forever and ever, just like they did before the crisis of 2008. So, what we’re seeing now is, as they focus on the worst-case scenarios, there’s a flight out of the stock market. And interestingly, there was a flight out of the bond market yesterday. People want cash. They’re not sure what’s going to happen to the market. And cash gives them a little bit more security than anything else they can have.
AMY GOODMAN: At this point — I mean, we played on Democracy Now! Naomi Klein’s brilliant analysis of disaster capitalism and what happens at moments like this, whose ideas win out because the whole country is in shock, essentially. But explain what it means. I mean, from the beginning, Trump didn’t want to admit, kept downplaying what happened with the coronavirus, saying, “Oh, there’s only 15, and that’s going to go down to zero. You know, this is going to end in the middle of April,” because he didn’t want to rock the stock market. What happens when it tanks? What happens now?
JOSEPH STIGLITZ: Well, there will be follow-on effects from the collapse of the stock market. But the stock market is reflecting a deeper problem. You know, if you go back to the Great Depression, the stock market helped bring on the Great Depression, but the stock market was a reflection of some deeper problems that our economy was facing. So it was both cause and consequence. The same thing is true now. The stock market is going down because the realization that the economy is going to be very constrained. People are not going to work. Businesses are shutting down. And at this point, to a large extent, this stock market is reflecting the economic reality that things are not going well.
But going forward, the fact that so much wealth has been destroyed on people’s balance sheet, people — retirement accounts have been wiped out — that will mean that when the economy recovers, when the disease gets under control, people may be not in position to spend in the way that they were before. And so, it could help prolong the economic downturn, unless we take appropriate measures.
And the kind of measures that the Trump administration has proposed are obviously not the right kinds of measures. Let me illustrate. He began by saying, “We ought to have a payroll tax cut.” A payroll tax cut isn’t going to get money into individuals’ pockets. It’s going to put in jeopardy the Social Security program, be underfunded. And so it’s not going to make people more confident about the future. It’s not going to allow them to spend. It just increases the potential of undermining our social safety net, particularly for our elderly. So, it will be undermining the fiber of our economy. So, that’s an example of the wrong kind of economic policy. It doesn’t help now, and it really hurts going forward.
AMY GOODMAN: I wanted to ask you about the billionaire hedge fund investor Bill Ackman, who went on television on Wednesday calling on President Trump to shut down the country for the next 30 days. He tweeted, “With exponential compounding, every day we postpone the shutdown costs thousands, and soon hundreds of thousands, and then millions of lives, and destroys the economy.” Now, he was speaking from isolation. He’s isolated himself so as not to threaten his father’s health, his elderly father. Talk about people like him and what it means to shut down the economy, and what it particularly means for gig workers, for restaurant workers. Yesterday we did a special on restaurant workers. We’re talking about perhaps up to 14 million people who are just now not out on the streets, because — or maybe some are, but in their homes, but they have no jobs to go to, no support.
JOSEPH STIGLITZ: So, what he’s putting his finger on is, we are facing a real problem, the spread of disease. Epidemiologists, anybody who understands epidemiology, would have realized two months ago that there was a great risk. And obviously Trump didn’t. He’s not surrounding himself with anybody with the competence to be able to do that. And that’s why he ignored the warnings.
But you don’t have to shut down an economy to bring it under control. Singapore has provided as a very good example where their economy has continued. They do testing. They do tracing. Whenever there’s a source of contagion, they identify it and make sure it’s contained, quarantined. So they’ve shown that you can bring the disease under control without shutting down the economy.
Now, to the extent that you need to restrain the economy to reduce contact, one can — one needs to address the issue of how are ordinary people going to survive. You know, it’s one thing for a well-off hedge fund to say, “Oh, shut down the economy. I have millions, maybe billions, in my bank account. I’m not gonna worry.” But for ordinary Americans, who have $500 or less in their bank account, no paycheck coming in puts them at great risks. So, I think the answer to that is this proposal of sending everybody a $2,000 check — the $1,000 is not going to be adequate — suspending all evictions, suspending all foreclosure, making sure that the credit card companies don’t charge the usury rates that they’ve been charging — say, going during the period of this pandemic, you can’t charge more than maybe 3, 5% interest rate; after all, the T-bill rate is down to zero — a suspension of student interest — interest on student loans. We will have to respond to the exigency, the crisis of the moment, in ways that make sure that those who are the restaurant workers, those who are low-income workers, wherever the sector they’re in, can survive with dignity and don’t have to be excessively stressed by how they’re going to live.
AMY GOODMAN: Reverend Dr. William Barber of the Poor People’s Campaign tweeted, “Congress must go back & pass another bill that covers all workers. They cannot leave out millions by exempting some low-wage workers from paid sick leave. These workers will not be exempted from the disease.” And he talks about the commitment to universal healthcare and many other things, what becomes possible in a moment like this. I mean, how does Congress get away with passing a bill, for example, for paid sick leave, though many people are just simply losing their jobs, for less than 20% of the American workforce?
JOSEPH STIGLITZ: I was shocked about that, quite frankly. I was really shocked, because this is not just a question of corporate selfishness in the usual way — you know, my profits versus the workers’ well-being. This is utter selfishness, because it’s my profits against the containment of the pandemic, because if these workers don’t have sick leave, paid sick leave, they’re going to show up at work. And if they show up to work, it will help spread the disease. But it also illustrates the extraordinary shortsightedness of our corporate leaders, because if customers know this, they’re not going to go to the store. The New York Times provided a real public service by listing the companies that are not providing paid sick leave. So those customers are on notice: Don’t go to those companies, because the workers there may be carrying the disease, because they have no choice. Whether they’re healthy or sick, they have to go to work. So, you know, it is really — to me, it’s shocking, the lack of empathy of these corporate leaders, that they pushed Congress not to — to exclude them from this paid sick leave, but that they aren’t providing it on their own, and their lack of concern for what is happening to our whole society and promoting this pandemic. To me, it’s unbelievable.
AMY GOODMAN: Former Labor Secretary Robert Reich said — he tweeted, “McDonald’s Burger King Pizza Hut Duncan Donuts Wendy’s Taco Bell Subway None give their workers paid sick leave. They should be required to post this sign on their doors: 'Because we don't give our workers paid sick leave, they may be sick when they serve you.’” Joe Stiglitz?
JOSEPH STIGLITZ: I agree with him. And I say The New York Times did a public service by telling us which, these company — the companies that are too dangerous to go eat at, their food. And I hope there’s a public outrage in saying, “We’re not going to eat at these places, because they’re too dangerous.”
AMY GOODMAN: I wanted to go back to the global issue, the effect of the pandemic on the poorest countries of the world. I mean, this has laid bare how interconnected we are. And yet we have, in this week, when we see that Iran is suffering a level of this pandemic and a level of deaths that is just horrifying, that Pompeo, the secretary of state, announces an increased stranglehold, economic stranglehold, on Iran. And you see, for example, with the CDC being cut, the pandemic task force, one of the roles of these health agencies is to be a medical sleuth when there is a pandemic, to send people out to other countries, because the U.S. was prized as, you know, one of the wealthiest countries in the world and could afford to find out what was happening and help. We have, it seems, certainly moved away from that role. But the effect of this pandemic, what it will mean for the poorest countries?
JOSEPH STIGLITZ: Well, first, let me say that, you know, the viruses don’t carry passports. They don’t obey any visa requirements. Global health is a global public good. And if there are these viruses festering in any country around the world, those viruses will go beyond that, that country. So, we are at risk if there is any hot spot in the world. So, this kind of viciousness that we saw from Pompeo is actually not in our self-interest. It’s nasty. It’s brutish. It’s a lack of humanity. But it’s also a lack of concern, lack of knowledge about the nature of global pandemics. So, in that sense, it was so shortsighted.
But there is a broader issue with developing countries and emerging markets. They don’t have the resources to deal with it. And we, as a country, need to help them. The world community needs to be ready to provide assistance. And the question is: How do we do that in the context where every country is going to be running very large deficits? Before the crisis, because of the [inaudible] tax bill that was passed in December 2017, where the benefits went to the billionaires and the corporations, we’re running a $1 trillion deficit. And Trump is now proposing to move that towards a $2 trillion to $3 trillion deficit. The result of this is, I’m afraid, going to be a lack of generosity. But interestingly, we have a mechanism already in place, if we invoke it, and that’s called the special drawing rights at the IMF. It’s basically, the IMF can act as a lender of last resort and could create money, in the same way that the Fed does within our country. And I think it’s time that we begin to think about invoking those powers to provide the money for emerging markets in developing countries.
AMY GOODMAN: Finally, your book is called People, Power and Profits: Progressive Capitalism for an Age of Discontent. How does progressive capitalism differ from Bernie Sanders’ democratic socialism?
JOSEPH STIGLITZ: Well, actually, it’s not that much difference. It’s words. I think what I try to do in my book, that’s a little bit different from what Bernie has emphasized in his campaign, is to try to diagnose this from a systemic point of view. Yes, there are important programs of the kind that Bernie has emphasized — healthcare for all, making sure that everybody has access to a university education without getting into enormous debt, having a secure retirement, ensuring that we do something — that we have a Green New Deal. All these are constituents. But we also need a systemic approach to realize that we have excessive monopoly power. And that’s why the word “power” is in the title. We’ve had excessive financialization. We’ve had mismanaged globalization.
So, what I try to do as an economist is to look at this from a systemic point of view and say, “How can we actually reform the market economy to make it serve all of our citizens? How can we actually make our economy stronger and more resilient?” And here I emphasized two almost obvious things, not obvious in Washington right now, but two obvious to me. But first, there needs to be an important role for government. We turn to government for social protection. We turn to government for developing the vaccine, for providing the finance for R&D. And that’s the second big idea. The reason our standards of living are higher than they were 250 years ago, the reason that we can respond by developing the vaccine, is the advancement of science, the advancement of our social organization, our ability to work together.
And one of my concerns is that the Trump administration has been so anti-science, so anti-the bases of our democracy, with checks and balances, separation of powers. And a modern society has to rest on these pillars of science and social organization. And unfortunately, they’re being undermined. And whether you call it progressive capitalism or democratic socialism, the fact is, these are the pillars that will enable us to work together, not only to combat this pandemic, but also to combat the climate change crisis and our inequality crisis and, I think, in a broader sense, our moral crisis, that we’ve seen so evident in our drug companies taking advantage of us in the opioid crisis, the childhood diabetes crises, the oil companies polluting our atmosphere, the cigarette companies trying to encourage addiction. We have a real problem in our — not only in our economy now, but in our — I would say, in our whole social fabric. And what I try to lay out in my book is this alternative vision, which I think is attainable, for a new form, a reformed form, of economy and society.
AMY GOODMAN: Finally ask, how are you protecting yourself and your family?
JOSEPH STIGLITZ: The way we’re protecting ourselves is basically self-isolation. And what we’ve done, actually, is keep in contact with our friends all over the world, finding out what’s going on, through Skype, through Zoom. Fortunately, the advances of modern technology mean that while we’re self-isolated, we’re not isolated from what is going on in the world, so that we can actually engage in lots of discussions, finding out how other countries and other places are dealing with the crisis, and debating the question of what is the best way for America to respond to this critical test.
AMY GOODMAN: Well, I want to thank you so much for being with us, Joe Stiglitz, Nobel Prize-winning economist, Columbia University professor, chief economist for the Roosevelt Institute. He served as chair of the Council of Economic Advisers under President Bill Clinton and as chief economist of the World Bank. His latest book, now out in paperback, just coming out, People, Power and Profits: Progressive Capitalism for an Age of Discontent.
And if you’d like to see Part 1 of our discussion, go to democracynow.org.
And a special thanks to those who came in today to make the Democracy Now! broadcast possible, and to all of our colleagues who are self-isolating at home. Democracy Now! is produced by a remarkable group of people, absolutely dedicated to independent information, to independent information serving a democratic society. And I want to thank each and every one of them for working to make this broadcast possible each day, to maintain the website, to do everything in this very perilous time. They are my heroes and heroines. I’m Amy Goodman. Thanks so much.