Nobel prize-winning economist Joseph Stiglitz answered questions from a diverse group of students in an informal question-and-answer session at the School of Public Policy (SPP) at Central European University on November 11th. SPP Dean Wolfgang Reinicke moderated the event that was co-organized by SPP and CEU’s Department of Economics.
In response to opening remarks from Reinicke regarding the fundamental weakness of current global governance structures and institutions, Stiglitz commented that although we now have some elements of global governance, the challenge is how to govern globally without a global government. He went on to note that the absence of a global government is a problem as there are a growing number of important issues, such as climate change, in which collective action is required. “We are moving gradually,” Stiglitz said, “but the problems are not waiting.” He faulted the United States in particular for failing to agree to impose a global carbon emissions tax. “The world should say to the United States, ‘either you agree to impose the tax or we will move ahead and impose tariffs on your exports of carbon intensive goods.’” Stiglitz noted that under WTO rules, Europe could impose such tariffs on the United States.
Stiglitz also commented on the decision of the BRICS to establish the New Development Bank in June 2014. He said that it was the U.S. refusal to change the governance structure of the World Bank and to adequately recapitalize the Bank that provided part of the impetus to the decision to establish a bank to finance infrastructure and other priority needs of developing countries. Stiglitz pointed to this as yet another example of how “the U.S. is not recognizing that the world is changing rapidly.”
In response to a question about the current state of international trading regimes, Stiglitz observed that the nature of trade agreements has changed. “They used to be about bringing down tariffs.” He went on to say that the challenge now is to address non-tariff barriers to trade such as environmental standards, consumer protection laws, and labor codes. Stiglitz said that these barriers are more difficult to overcome as they go to the heart of a country’s domestic political structure. Moreover, the barriers to trade for many developing countries are even greater, as they often lack critical infrastructure and face other supply constraints. It is to address these non-tariff barriers that “aid for trade” has become a central policy tool.
One student asked Stiglitz what could be done to create trust in a society. Stiglitz agreed that this was an important topic in economics. He said that one of the costs of high levels of inequality, a topic he spoke about during his public lecture at CEU on November 10th, was the erosion of trust.
Responding to another question, Stiglitz described the Chinese economic model as one of “constant adaptation.” He explained that the Chinese were focused on learning, and aware that they did not have all the answers. “The Chinese are also very open to getting a wide range of views…. At each stage, they are open to outside—even conflicting—opinions,” noted Stiglitz.
Although there was “an unusual degree of openness on the economic side,” Stiglitz described the political side in China as “not so open.” Even here though, there have been some interesting developments. He pointed to instances when the Chinese government had encouraged the press to root out corruption as one example.
Stiglitz also commented extensively on the future of the dollar as a reserve currency. He said that he thought it was inevitable that the use of the Chinese yuan as a medium of exchange would increase, but noted that what the world economy needed was a new global reserve currency to help ameliorate the consequences of trade imbalances, to ensure an adequate level of global aggregate demand, and to promote global financial stability.
Watch Professor Stiglitz’s appearance at SPP here.