Joseph E. Stiglitz: The Vultures’ Victory

NEW YORK – A recent decision by a United States appeals court threatens to upend global sovereign-debt markets. It may even lead to the US no longer being viewed as a good place to issue sovereign debt. At the very least, it renders non-viable all debt restructurings under the standard debt contracts. In the process, a basic principle of modern capitalism – that when debtors cannot pay back creditors, a fresh start is needed – has been overturned.


The trouble began a dozen years ago, when Argentina had no choice but to devalue its currency and default on its debt. Under the existing regime, the country had been on a rapid downward spiral of the kind that has now become familiar in Greece and elsewhere in Europe. Unemployment was soaring, and austerity, rather than restoring fiscal balance, simply exacerbated the economic downturn.

Devaluation and debt restructuring worked. In subsequent years, until the global financial crisis erupted in 2008, Argentina’s annual GDP growth was 8% or higher, one of the fastest rates in the world.

Even former creditors benefited from this rebound. In a highly innovative move, Argentina exchanged old debt for new debt – at about 30 cents on the dollar or a little more – plus a GDP-indexed bond. The more Argentina grew, the more it paid to its former creditors.

Argentina’s interests and those of its creditors were thus aligned: both wanted growth. It was the equivalent of a “Chapter 11” restructuring of American corporate debt, in which debt is swapped for equity, with bondholders becoming new shareholders.

Debt restructurings often entail conflicts among different claimants. That is why, for domestic debt disputes, countries have bankruptcy laws and courts. But there is no such mechanism to adjudicate international debt disputes.

Once upon a time, such contracts were enforced by armed intervention, as Mexico, Venezuela, Egypt, and a host of other countries learned at great cost in the nineteenth and early twentieth centuries. After the Argentine crisis, President George W. Bush’s administration vetoed proposals to create a mechanism for sovereign-debt restructuring. As a result, there is not even the pretense of attempting fair and efficient restructurings.

Poor countries are typically at a huge disadvantage in bargaining with big multinational lenders, which are usually backed by powerful home-country governments. Often, debtor countries are squeezed so hard for payment that they are bankrupt again after a few years.

Economists applauded Argentina’s attempt to avoid this outcome through a deep restructuring accompanied by the GDP-linked bonds. But a few “vulture” funds – most notoriously the hedge fund Elliott Management, headed by the billionaire Paul E. Singer – saw Argentina’s travails as an opportunity to make huge profits at the expense of the Argentine people. They bought the old bonds at a fraction of their face value, and then used litigation to try to force Argentina to pay 100 cents on the dollar.

Americans have seen how financial firms put their own interests ahead of those of the country – and the world. The vulture funds have raised greed to a new level.

Their litigation strategy took advantage of a standard contractual clause (called pari passu) intended to ensure that all claimants are treated equally. Incredibly, the US Court of Appeals for the Second Circuit in New York decided that this meant that if Argentina paid in full what it owed those who had accepted debt restructuring, it had to pay in full what it owed to the vultures.

If this principle prevails, no one would ever accept debt restructuring. There would never be a fresh start – with all of the unpleasant consequences that this implies.

In debt crises, blame tends to fall on the debtors. They borrowed too much. But the creditors are equally to blame – they lent too much and imprudently. Indeed, lenders are supposed to be experts on risk management and assessment, and in that sense, the onus should be on them. The risk of default or debt restructuring induces creditors to be more careful in their lending decisions.

The repercussions of this miscarriage of justice may be felt for a long time. After all, what developing country with its citizens’ long-term interests in mind will be prepared to issue bonds through the US financial system, when America’s courts – as so many other parts of its political system – seem to allow financial interests to trump the public interest?

Countries would be well advised not to include pari passu clauses in future debt contracts, at least without specifying more fully what is intended. Such contracts should also include collective-action clauses, which make it impossible for vulture funds to hold up debt restructuring. When a sufficient proportion of creditors agree to a restructuring plan (in the case of Argentina, the holders of more than 90% of the country’s debt did), the others can be forced to go along.

The fact that the International Monetary Fund, the US Department of Justice, and anti-poverty NGOs all joined in opposing the vulture funds is revealing. But so, too, is the court’s decision, which evidently assigned little weight to their arguments.

For those in developing and emerging-market countries who harbor grievances against the advanced countries, there is now one more reason for discontent with a brand of globalization that has been managed to serve rich countries’ interests (especially their financial sectors’ interests).

In the aftermath of the global financial crisis, the United Nations Commission of Experts on Reforms of the International Monetary and Financial System urged that we design an efficient and fair system for the restructuring of sovereign debt. The US court’s tendentious, economically dangerous ruling shows why we need such a system now.

Joseph E. Stiglitz, a Nobel laureate in economics and University Professor at Columbia University, was Chairman of President Bill Clinton’s Council of Economic Advisers and served as Senior Vice President and Chief Economist of the World Bank. His most recent book is The Price of Inequality: How Today’s Divided Society Endangers our Future.

Joseph E. Stiglitz: Lives versus Profits / 生命與金錢之博弈

NEW YORK – The United States Supreme Court recently began deliberations in a case that highlights a deeply problematic issue concerning intellectual-property rights. The Court must answer the following question: Can human genes – your genes – be patented? Put another way, should someone essentially be permitted to own the right, say, to test whether you have a set of genes that imply a higher than 50% probability of developing breast cancer?

To those outside the arcane world of intellectual-property rights, the answer seems obvious: No. You own your genes. A company might own, at most, the intellectual property underlying its genetic test; and, because the research and development needed to develop the test may have cost a considerable amount, the firm might rightly charge for administering it.

But a Utah-based company, Myriad Genetics, claims more than that. It claims to own the rights to any test for the presence of the two critical genes associated with breast cancer – and has ruthlessly enforced that right, though their test is inferior to one that Yale University was willing to provide at much lower cost. The consequences have been tragic: Thorough, affordable testing that identifies high-risk patients saves lives. Blocking such testing costs lives. Myriad is a true example of an American corporation for which profit trumps all other values, including the value of human life itself.

This a particularly poignant case. Normally, economists talk about trade-offs: weaker intellectual-property rights, it is argued, would undermine incentives to innovate. The irony here is that Myriad’s discovery would have been made in any case, owing to a publicly funded, international effort to decode the entire human genome that was a singular achievement of modern science. The social benefits of Myriad’s slightly earlier discovery have been dwarfed by the costs that its callous pursuit of profit has imposed.

More broadly, there is increasing recognition that the patent system, as currently designed, not only imposes untold social costs, but also fails to maximize innovation – as Myriad’s gene patents demonstrate. After all, Myriad did not invent the technologies used to analyze the genes. If these technologies had been patented, Myriad might not have made its discoveries. And its tight control of the use of its patents has inhibited the development by others of better and more accurate tests for the presence of the gene. The point is a simple one: All research is based on prior research. A poorly designed patent system – like the one we have now – can inhibit follow-on research.

That is why we do not allow patents for basic insights in mathematics. And it is why research shows that patenting genes actually reduces the production of new knowledge about genes: the most important input in the production of new knowledge is prior knowledge, to which patents inhibit access.

Fortunately, what motivates most significant advances in knowledge is not profit, but the pursuit of knowledge itself. This has been true of all of the transformative discoveries and innovations – DNA, transistors, lasers, the Internet, and so on.
A separate US legal case has underscored one of the main dangers of patent-driven monopoly power: corruption. With prices far in excess of the cost of production, there are, for example, huge profits to be gained by persuading pharmacies, hospitals, or doctors to shift sales to your products.

The US Attorney for the Southern District of New York recently accused the Swiss pharmaceutical giant Novartis of doing exactly this by providing illegal kickbacks, honoraria, and other benefits to doctors – exactly what it promised not to do when it settled a similar case three years earlier. Indeed, Public Citizen, a US consumer advocacy group, has calculated that, in the US alone, the pharmaceutical industry has paid out billions of dollars as a result of court judgments and financial settlements between pharmaceutical manufacturers and federal and state governments.

Sadly, the US and other advanced countries have been pressing for stronger intellectual-property regimes around the world. Such regimes would limit poor countries’ access to the knowledge that they need for their development – and would deny life-saving generic drugs to the hundreds of millions of people who cannot afford the drug companies’ monopoly prices.

The issue is coming to a head in ongoing World Trade Organization negotiations. The WTO’s intellectual-property agreement, called TRIPS, originally foresaw the extension of “flexibilities” to the 48 least-developed countries, where average annual per capita income is below $800. The original agreement seems remarkably clear: the WTO shall extend these “flexibilities” upon the request of the least-developed countries. While these countries have now made such a request, the US and Europe appear hesitant to oblige.

Intellectual-property rights are rules that we create – and that are supposedto improve social well-being. But unbalanced intellectual-property regimes result in inefficiencies – including monopoly profits and a failure to maximize the use of knowledge – that impede the pace of innovation. And, as the Myriad case shows, they can even result in unnecessary loss of life.
America’s intellectual-property regime – and the regime that the US has helped to foist upon the rest of the world through the TRIPS agreement – is unbalanced. We should all hope that, with its decision in the Myriad case, the Supreme Court will contribute to the creation of a more sensible and humane framework.

Joseph E. Stiglitz, a Nobel laureate in economics and University Professor at Columbia University, was Chairman of President Bill Clinton’s Council of Economic Advisers and served as Senior Vice President and Chief Economist of the World Bank. His most recent book is The Price of Inequality: How Today’s Divided Society Endangers our Future.

生命與金錢之博弈

紐約——美國最高法院最近開始審議一宗案件——該案件突顯出了知識產權引發起的深層次問題。最高法院必須對以下面問題提供答案：就是你我都有的基因——能否被人列為專利呢？換句話說，法律是否容許某人有權決定你可不可以接受一個檢查，驗出是否擁有一對令你有超個百分之五十罹患乳癌的基因。

對那些不曉知識產權的人來說，當然是不可以。你固然擁有自己的基因，一間公司極其量是擁有測試基因的知識產權﹔因為公司所費不菲來研究及發展該測試，公司亦當收取合理檢驗費用。

但美國猶他州的麥利亞德基因公司（Myriad Genetics）不止於此，它稱擁有與乳腺癌兩個關鍵基因所有測驗的專利，並且毫不留情地行使這權利，儘管其測試不及由耶魯大學所提供較便宜的檢驗。其後果是可悲的：對高危病人提供徹底且可負擔的檢查可以挽救生命。不準許這種檢查會賠上生命。麥利亞德是唯利是圖的典型美國企業，甚至罔顧人命。

這是一個尤其觸目的事件。通常，經濟學家慣常談及得與失：他們認為較小保護知識產權會減小推陳出新的動力。最諷刺是就算沒有麥利亞德公司，它的研究最終都會出由政府資助及國際間的努力去發現人類整套基因排列，一項現代科學的非凡成就。麥利亞德公司稍早的發現帶給社會的好處遠不如它不惜一切圖利為社會換來的悪果。

更多人越來越覺得現有的專利制度不獨令社會付上沉重 的代價，更如麥利亞德公司的這基因專利般未能擴大創新。何況分析基因的技術不是麥利亞德公司發明，如果那些技術都有專利權，麥利亞德公司就不能有所發現了。而它對其專利權的緊密控制已經阻礙了發展更好更準確之基因測試研究。其實很簡單 , 所有的研究都是建基於已往的相關研究。像目前這個設計糟糕的專利權制度會阻礙往後的研究。

這就是為什麼我們不允許專利權出現於數學的基本知識之原因。這也是為什麼基因專利權實際上會減少了關於基因的新知識：新知識最重要是靠以往的研究成果，然而這些研究成果卻因專利權而被禁止使用。

所幸的是知識重要的演進是由於求知慾而不是利潤，革命性的發現和創新如DNA、晶體管、激光、互聯網皆如此。

一宗美國法院案件突顯了靠專利權而壟斷會帶出一嚴重危險：貪污腐敗。由於專利產品價格遠遠高於其生產成本，因此經藥房、醫院或醫生推銷產品就可以謀取暴利。

紐約南區的聯邦檢察官最近就指控告瑞士巨型制藥廠諾華（Novartis)正正如此，藥廠向醫生提供非法回扣、酬金和其他好處, 該公司三年前在一宗訴訟和解中應承不會如此做。確實，美國消費者權益組織【公民】就計算過，僅僅是在美國醫藥行業就因與聯邦及州政府的法庭裁決和金錢和解都支付了數以億計美元。

可哀的是，美國和其他發達國家一直 催逼加強全球知識產權管制。這種制度會限制貧窮國家得到發展所需的知識——並且會讓數以億計的人因支付不起藥物公司靠壟斷而生的高價藥物而無法得到用來救命的非專利藥物 (genric drugs)。

這事在正在進行的世界貿易組織（WTO）談判中會達到高潮。世貿的知識產權協議，簡稱TRIPS，原本是向全球48個最不發達的國家，即是國家人均收入每年在800美元以下，彈性處理。原本協議非常清晰：WTO應該對這些最不發達國家彈性處理。然而當這些最不發達國家正式請求時，美國和歐洲卻對履行承諾踟躕不進。

知識產權是我們造出來的規矩，改善社會本是原意，但不公平的知識產權制度造就低效率，包括壟斷利潤及不能善用知識，阻礙了創新步伐。而且如麥利亞德案例，這些知識產權規則會引致無謂的生命損失。

美國的知識產權制度是美國借助TRIPS協議強推到世界各地，是一個不公平的制度。我們均希望美國最高法院藉著對麥利亞德案例的裁決，締造一個更合理和更人道的架構。

Joseph E. Stiglitz: What is Italy Saying?

NEW YORK – The outcome of the Italian elections should send a clear message to Europe’s leaders: the austerity policies that they have pursued are being rejected by voters.

The European project, as idealistic as it was, was always a top-down endeavor. But it is another matter altogether to encourage technocrats to run countries, seemingly circumventing democratic processes, and foist upon them policies that lead to widespread public misery.

While Europe’s leaders shy away from the word, the reality is that much of the European Union is in depression. The loss of output in Italy since the beginning of the crisis is as great as it was in the 1930’s. Greece’s youth unemployment rate now exceeds 60%, and Spain’s is above 50%. With the destruction of human capital, Europe’s social fabric is tearing, and its future is being thrown into jeopardy.

The economy’s doctors say that the patient must stay the course. Political leaders who suggest otherwise are labeled as populists. The reality, though, is that the cure is not working, and there is no hope that it will – that is, without being worse than the disease. Indeed, it will take a decade or more to recover the losses incurred in this austerity process.
In short, it is neither populism nor shortsightedness that has led citizens to reject the policies that have been imposed on them. It is an understanding that these policies are deeply misguided.

Europe’s talents and resources – its physical, human, and natural capital – are the same today as they were before the crisis began. The problem is that the prescriptions being imposed are leading to massive underutilization of these resources. Whatever Europe’s problem, a response that entails waste on this scale cannot be the solution.

The simplistic diagnosis of Europe’s woes – that the crisis countries were living beyond their means – is clearly at least partly wrong. Spain and Ireland had fiscal surpluses and low debt/GDP ratios before the crisis. If Greece were the only problem, Europe could have handled it easily.

An alternative set of well-discussed policies could work. Europe needs greater fiscal federalism, not just centralized oversight of national budgets. To be sure, Europe may not need the two-to-one ratio of federal to state spending found in the United States; but it clearly needs far more European-level expenditure, unlike the current miniscule EU budget (whittled down further by austerity advocates).

A banking union, too, is needed. But it needs to be a real union, with common deposit insurance and common resolution procedures, as well as common supervision. There will also have to be Eurobonds, or an equivalent instrument.

European leaders recognize that, without growth, debt burdens will continue to grow, and that austerity by itself is an anti-growth strategy. Yet years have gone by, and no growth strategy is on the table, though its components are well known: policies that address Europe’s internal imbalances and Germany’s huge external surplus, which now is on par with China’s (and more than twice as high relative to GDP). Concretely, that means wage increases in Germany and industrial policies that promote exports and productivity in Europe’s peripheral economies.

What will not work, at least for most eurozone countries, is internal devaluation – that is, forcing down wages and prices – as this would increase the debt burden for households, firms, and governments (which overwhelmingly hold euro-denominated debts). And, with adjustments in different sectors occurring at different speeds, deflation would fuel massive distortions in the economy.

If internal devaluation were the solution, the gold standard would not have been a problem in the Great Depression. Internal devaluation, combined with austerity and the single-market principle (which facilitates capital flight and the hemorrhaging of banking systems) is a toxic combination.

The European project was, and is, a great political idea. It has the potential to promote both prosperity and peace. But, rather than enhancing solidarity within Europe, it is sowing seeds of discord within and between countries.

Europe’s leaders repeatedly vow to do everything necessary to save the euro. European Central Bank President Mario Draghi’s promise to do “whatever it takes” has succeeded in providing a temporary calm. But Germany has consistently rejected every policy that would provide a long-term solution. The Germans, it seems, will do everything except what is needed.

Of course, the Germans have reluctantly come to accept the necessity of a banking union that includes common deposit insurance. But the pace with which they accede to such reforms is out of kilter with the markets. Banking systems in several countries are already on life support. How many more will be in intensive care before a banking union becomes a reality?

Yes, Europe needs structural reform, as austerity advocates insist. But it is structural reform of the eurozone’s institutional arrangements, not reforms within individual countries, that will have the greatest impact. Unless Europe is willing to make those reforms, it may have to let the euro die to save itself.

The EU’s Economic and Monetary Union was a means to an end, not an end in itself. The European electorate seems to have recognized that, under current arrangements, the euro is undermining the very purposes for which it was supposedly created. That is the simple truth that Europe’s leaders have yet to grasp.


Joseph E. Stiglitz, a Nobel laureate in economics and University Professor at Columbia University, was Chairman of President Bill Clinton’s Council of Economic Advisers and served as Senior Vice President and Chief Economist of the World Bank. His most recent book is The Price of Inequality: How Today’s Divided Society Endangers our Future.

Joseph E. Stiglitz: Complacency in a Leaderless World

DAVOS – The World Economic Forum’s annual meeting in Davos has lost some of its pre-crisis panache. After all, before the meltdown in 2008, the captains of finance and industry could trumpet the virtues of globalization, technology, and financial liberalization, which supposedly heralded a new era of relentless growth. The benefits would be shared by all, if only they would do “the right thing.”

Those days are gone. But Davos remains a good place to get a sense of the global zeitgeist.

It goes without saying that developing and emerging-market countries no longer look at the advanced countries as they once did. But a remark by one mining company executive from a developing country caught the spirit of change. In response to one development expert’s heartfelt despair that unfair trade treaties and unfulfilled promises of aid have cost the developed countries their moral authority, he retorted: “The West never had any moral authority.” Colonialism, slavery, the splintering of Africa into small countries, and a long history of resource exploitation may be matters of the distant past to the perpetrators, but not so to those who suffered as a result.

If there is a single topic that concerned the assembled leaders the most, it is economic inequality. The shift in the debate from just a year ago seems dramatic: no one even mentions the notion of trickle-down economics anymore, and few are willing to argue that there is a close congruence between social contributions and private rewards.

While the realization that America is not the land of opportunity that it has long claimed to be is as disconcerting to others as it is to Americans, inequality of opportunity at the global scale is even greater. One cannot really claim that the world is “flat” when a typical African receives investment in his or her human capital of a few hundred dollars, while rich Americans get a gift from their parents and society in excess of a half-million dollars.

A high point of the meeting was the speech by Christine Lagarde, the International Monetary Fund’s managing director, who stressed the marked change in her institution, at least at the top: deep concern about women’s rights; renewed emphasis on the link between inequality and instability; and recognition that collective bargaining and minimum wages could play an important role in reducing inequality. If only the IMF programs in Greece and elsewhere fully reflected these sentiments!

The Associated Press organized a sobering session on technology and unemployment: Can countries (particularly in the developed world) create new jobs – especially good jobs – in the face of modern technology that has replaced workers with robots and other machines in any task that can be routinized?

Overall, the private sector in Europe and America has been unable to create many good jobs since the beginning of the current century. Even in China and other parts of the world with growing manufacturing sectors, productivity improvements – often related to job-killing automated processes – account for most of the growth in output. Those suffering the most are the young, whose life prospects will be badly hurt by the extended periods of unemployment that they face today.

But most of those in Davos put aside these problems to celebrate the euro’s survival. The dominant note was one of complacency – or even optimism. The “Draghi put” – the notion that the European Central Bank, with its deep pockets, would and could do whatever necessary to save the euro and each of the crisis countries – seemed to have worked, at least for a while. The temporary calm provided some support for those who claimed that what was required, above all, was a restoration of confidence. The hope was that Draghi’s promises would be a costless way of providing that confidence, because they would never have to be fulfilled.

Critics repeatedly pointed out that the fundamental contradictions had not been resolved, and that if the euro was to survive in the long run, there would have to be a fiscal and banking union, which would require morepolitical unification than most Europeans are willing to accept. But much of what was said in and around the meetings reflected a deep lack of solidarity. One very senior government official of a northern European country did not even put down his fork when interrupted by an earnest dinner companion who pointed out that many Spaniards now eat out of garbage cans. They should have reformed earlier, he replied, as he continued to eat his steak.

IMF growth forecasts released during the Davos meeting highlight the extent to which the world has become decoupled: GDP growth in the advanced industrial countries is expected to be 1.4% this year, while developing countries continue to grow at a robust 5.5% annual rate.

While Western leaders talked about a new emphasis on growth and employment, they offered no concrete policies backing these aspirations. In Europe, there was continued emphasis on austerity, with self-congratulations on the progress made so far, and a reaffirmation of resolve to continue along a course that has now plunged Europe as a whole into recession – and the United Kingdom into a triple-dip downturn.

Perhaps the most optimistic note came from the emerging markets: while the risk of globalization was that it implied a new interdependence, so that flawed economic policies in the US and Europe could torpedo developing countries’ economies, the more successful emerging markets have managed globalization well enough to sustain growth in the face of failures in the West.

With the US politically paralyzed by the Republicans’ infantile political tantrums, and Europe focused on ensuring the survival of the ill-conceived euro project, the lack of global leadership was a major complaint at Davos. In the last 25 years, we have moved from a world dominated by two superpowers to one dominated by one, and now to a leaderless, multi-polar world. While we may talk about the G-7, or G-8, or G-20, the more apt description is G-0. We will have to learn how to live, and thrive, in this new world.


Joseph E. Stiglitz, a Nobel laureate in economics and University Professor at Columbia University, was Chairman of President Bill Clinton’s Council of Economic Advisers and served as Senior Vice President and Chief Economist of the World Bank. His most recent book is The Price of Inequality: How Today’s Divided Society Endangers our Future.

Joseph E. Stiglitz: A Year on the Brink

NEW YORK – The year 2012 turned out to be as bad as I thought. The recession in Europe was the predictable (and predicted) consequence of its austerity policies and a euro framework that was doomed to fail. America’s anemic recovery – with growth barely sufficient to create jobs for new entrants into the labor force – was the predictable (and predicted) consequence of political gridlock, which prevented the enactment of President Barack Obama’s jobs bill and sent the economy toward a “fiscal cliff.”

The two main surprises were the slowdown in emerging markets, which was slightly sharper and more widespread than anticipated, and Europe’s embrace of some truly remarkable reforms – though still far short of what is needed.
Looking to 2013, the biggest risks are in the US and Europe. By contrast, China has the instruments, resources, incentives, and knowledge to avoid an economic hard landing – and, unlike Western countries, lacks any significant constituency wedded to lethal ideas like “expansionary austerity.”

The Chinese rightly understand that they must focus more on the “quality” of growth –rebalancing their economy away from exports and toward domestic consumption – than on sheer output. But, even with China’s change in focus, and despite adverse global economic conditions, growth of around 7% should sustain commodity prices, thereby benefiting exports from Africa and Latin America. A third round of quantitative easing by the US Federal Reserve could help commodity exporters as well, even if it does little to promote US domestic growth.

The US, with Obama re-elected, is likely to muddle on, much as it has for the past four years.  Inklings of recovery in the real-estate market will be enough to discourage dramatic policy measures, like a write-down of principal on “underwater” mortgages (where the outstanding loan exceeds the market value of the house). But, with real (inflation-adjusted) house prices still 40% below the previous peak, a strong recovery for real estate (and the closely related construction industry) seems unlikely.

Meanwhile, even if Obama’s Republican opponents do not push the country over the fiscal cliff of automatic tax increases and spending cuts on January 1, they will ensure that America’s own form of mild austerity will continue. Public-sector employment is now roughly 600,000 below its pre-crisis level, while normal expansion would have meant 1.2 million additional jobs, implying a public-sector jobs deficit of almost two million.

But the real risk for the global economy is in Europe. Spain and Greece are in depression, with no hope of recovery in sight. The eurozone’s “fiscal compact” is no solution, and the European Central Bank’s purchases of sovereign debt are at most a temporary palliative. If the ECB imposes further austerity conditions (as it seems to be demanding of Greece and Spain) in exchange for financing, the cure will only worsen the patient’s condition.

Likewise, common European banking supervision will not suffice to prevent the continuing exodus of funds from the afflicted countries. That requires an adequate common deposit-insurance scheme, which the northern European countries have said is not in the cards anytime soon. While European leaders have repeatedly done what previously seemed unthinkable, their responses have been out of synch with markets. They have consistently underestimated their austerity programs’ adverse effects and overestimated the benefits of their institutional adjustments.

The impact of the ECB’s €1 trillion ($1.3 trillion) long-term refinancing operation (LTRO), which loaned money to commercial banks to buy sovereign bonds (a bootstrap operation that seemed as peculiar as the ECB’s financing of sovereigns to shore up the banks), was impressively short-lived. Europe’s leaders have recognized that the debt crisis in the periphery will only worsen in the absence of growth, and they have even (sometimes) recognized that austerity will not help on that front; nonetheless, they have failed to deliver an effective growth package.

The depression that European authorities have imposed on Spain and Greece already is having political consequences. In Spain, independence movements, especially in Catalonia, have revived, while neo-Nazism is on the march in Greece. The euro, created for the avowed purpose of fostering the integration of a democratic Europe, is having precisely the opposite effect.

The lesson is that politics and economics are inseparable. Markets on their own may be neither efficient nor stable, but the politics of deregulation gave scope to unprecedented excesses that led to asset bubbles and the rolling crisis that has followed their collapse.
And the politics of crisis has led to responses that are far from adequate. Banks have been saved, but the underlying problems were left to fester – no surprise there, given that, in both Europe and America, the task of fixing them was assigned to the policymakers who had caused them. In Europe, it was politics, not economics, that drove the creation of the euro; and it was politics that led to a fundamentally flawed structure that created ample room for bubbles, but little scope for dealing with the aftermath.

To forecast 2013 is to predict how divided government in the US and a divided Europe respond to their respective crises. Economists’ crystal balls are always cloudy, but those of political scientists are even cloudier. That said, the US will probably muddle through another year, neither pushed over the cliff nor put on the road to robust recovery. But, on both sides of the Atlantic, the polarized politics of bravado and brinkmanship will be much in evidence. The problem with brinkmanship is that, sometimes, one does go over the brink.


Joseph E. Stiglitz, a Nobel laureate in economics and University Professor at Columbia University, was Chairman of President Bill Clinton’s Council of Economic Advisers and served as Senior Vice President and Chief Economist of the World Bank. His most recent book is The Price of Inequality: How Today’s Divided Society Endangers our Future.

Joseph E. Stiglitz: America’s Hope Against Hope

NEW YORK – After a hard-fought election campaign, costing well in excess of $2 billion, it seems to many observers that not much has changed in American politics: Barack Obama is still President, the Republicans still control the House of Representatives, and the Democrats still have a majority in the Senate. With America facing a “fiscal cliff” – automatic tax increases and spending cuts at the start of 2013 that will most likely drive the economy into recession unless bipartisan agreement on an alternative fiscal path is reached – could there be anything worse than continued political gridlock?

In fact, the election had several salutary effects – beyond showing that unbridled corporate spending could not buy an election, and that demographic changes in the United States may doom Republican extremism. The Republicans’ explicit campaign of disenfranchisement in some states – like Pennsylvania, where they tried to make it more difficult for African-Americans and Latinos to register to vote – backfired: those whose rights were threatened were motivated to turn out and exercise them. In Massachusetts, Elizabeth Warren, a Harvard law professor and tireless warrior for reforms to protect ordinary citizens from banks’ abusive practices, won a seat in the Senate.

Some of Mitt Romney’s advisers seemed taken aback by Obama’s victory: Wasn’t the election supposed to be about economics? They were confident that Americans would forget how the Republicans’ deregulatory zeal had brought the economy to the brink of ruin, and that voters had not noticed how their intransigence in Congress had prevented more effective policies from being pursued in the wake of the 2008 crisis. Voters, they assumed, would focus only on the current economic malaise.

The Republicans should not have been caught off-guard by Americans’ interest in issues like disenfranchisement and gender equality. While these issues strike at the core of a country’s values – of what we mean by democracy and limits on government intrusion into individuals’ lives – they are also economic issues. As I explain in my book The Price of Inequality, much of the rise in US economic inequality is attributable to a government in which the rich have disproportionate influence –& and use that influence to entrench themselves. Obviously, issues like reproductive rights and gay marriage have large economic consequences as well.
In terms of economic policy for the next four years, the main cause for post-election celebration is that the US has avoided measures that would have pushed it closer to recession, increased inequality, imposed further hardship on the elderly, and impeded access to health care for millions of Americans.

Beyond that, here is what Americans should hope for: a strong “jobs” bill – based on investments in education, health care, technology, and infrastructure – that would stimulate the economy, restore growth, reduce unemployment, and generate tax revenues far in excess of its costs, thus improving the country’s fiscal position. They might also hope for a housing program that finally addresses America’s foreclosure crisis.

A comprehensive program to increase economic opportunity and reduce inequality is also needed – its goal being to remove, within the next decade, America’s distinction as the advanced country with the highest inequality and the least social mobility. This implies, among other things, a fair tax system that is more progressive and eliminates the distortions and loopholes that allow speculators to pay taxes at a lower effective rate than those who work for a living, and that enable the rich to use the Cayman Islands to avoid paying their fair share.

America – and the world – would also benefit from a US energy policy that reduces reliance on imports not just by increasing domestic production, but also by cutting consumption, and that recognizes the risks posed by global warming. Moreover, America’s science and technology policy must reflect an understanding that long-term increases in living standards depend upon productivity growth, which reflects technological progress that assumes a solid foundation of basic research.

Finally, the US needs a financial system that serves all of society, rather than operating as if it were an end in itself. That means that the system’s focus must shift from speculative and proprietary trading to lending and job creation, which implies reforms of financial-sector regulation, and of anti-trust and corporate-governance laws, together with adequate enforcement to ensure that markets do not become rigged casinos.

Globalization has made all countries more interdependent, in turn requiring greater global cooperation. We might hopethat America will show more leadership in reforming the global financial system by advocating for stronger international regulation, a global reserve system, and better ways to restructure sovereign debt; in addressing global warming; in democratizing the international economic institutions; and in providing assistance to poorer countries.

Americans should hope for all of this, though I am not sanguine that they will get much of it.& More likely, America will muddle through – here another little program for struggling students and homeowners, there the end of the Bush tax cuts for millionaires, but no wholesale tax reform, serious cutbacks in defense spending, or significant progress on global warming.
With the euro crisis likely to continue unabated, America’s continuing malaise does not bode well for global growth. Even worse, in the absence of strong American leadership, longstanding global problems – from climate change to urgently needed reforms of the international monetary system – will continue to fester. Nonetheless, we should be grateful: it is better to be standing still than it is to be heading in the wrong direction.


Joseph E. Stiglitz, a Nobel laureate in economics and University Professor at Columbia University, was Chairman of President Bill Clinton’s Council of Economic Advisers and served as Senior Vice President and Chief Economist of the World Bank. His most recent book is The Price of Inequality: How Today’s Divided Society Endangers our Future.

Joseph E. Stiglitz: America’s Global Election

NEW YORK – Most people around the world will not be able to vote in the United States’s upcoming presidential election, even though they have a great deal at stake in the result. Overwhelmingly, non-US citizens favor Barack Obama’s re-election over a victory for his challenger, Mitt Romney. There are good reasons for this.

In terms of the economy, the effects of Romney’s policies in creating a more unequal and divided society would not be directly felt abroad. But, in the past, for better and for worse, others have often followed America’s example. Many governments quickly subscribed to Ronald Reagan’s mantra of deregulated markets – policies that eventually brought about the worst global recession since the 1930’s. Other countries that followed America’s lead have experienced growing inequality – more money at the top, more poverty at the bottom, and a weaker middle class.

Romney’s proposed contractionary policies – the attempt to reduce deficits prematurely, while the US economy is still frail – will almost surely weaken America’s already anemic growth, and, if the euro crisis worsens, it could bring on another recession. At that point, with US demand shrinking, the rest of the world would indeed feel the economic effects of a Romney presidency quite directly.

That raises the question of globalization, which entails concerted action on many fronts by the international community. But what is required with regard to trade, finance, climate change, and a host other areas is not being done. Many people attribute these failures partly to an absence of American leadership. But, while Romney may summon bravado and strong rhetoric, other world leaders would be unlikely to follow him, owing to the belief (correct in my judgment) that he would take the US – and them – in the wrong direction.

American “exceptionalism” may sell well at home, but it does poorly abroad. President George W. Bush’s Iraq war – arguably a violation of international law – showed that though America spends almost as much on defense as the rest of the world combined, it could not pacify a country with less than 10% of its population and less than 1% of its GDP.

Moreover, it turned out that US-style capitalism was neither efficient nor stable. With most Americans’ incomes stagnating for a decade and a half, it was clear that the US economic model was not delivering for most citizens, whatever official GDP data said.

Indeed, the model blew up even before Bush left office. Together with the abuses of human rights under his administration, the Great Recession – the predictable (and predicted) consequence of his economic policies – did as much to weaken America’s soft power as the wars in Iraq and Afghanistan did to weaken the credibility of its military power.

In terms of values – namely, the values of Romney and his running mate, Paul Ryan – things are not much better. For example, every other advanced country recognizes the right to accessible health care, and Obama’s Affordable Care Act represents a significant step toward that goal. But Romney has criticized this effort, and has offered nothing in its place.
America now has the distinction of being among the advanced countries that afford the least equality of opportunity to their citizens. And Romney’s drastic budget cutbacks, targeted at the poor and middle class, would further impede social mobility. At the same time, he would expand the military, spending more money on weapons that do not work against enemies that do not exist, enriching defense contractors like Halliburton at the expense of desperately needed public investment in infrastructure and education.

While Bush is not on the ballot, Romney has not really distanced himself from the Bush administration’s policies. On the contrary, his campaign has featured the same advisers, the same devotion to higher military spending, the same belief that tax cuts for the rich are the solution to every economic problem, and the same fuzzy budget math.

Consider, for example, the three issues that are at the center of the global agenda mentioned earlier: climate change, financial regulation, and trade. Romney has been silent on the first, and many in his party are “climate deniers.” The world cannot expect genuine leadership from Romney there.

As for financial regulation, while the recent crisis has highlighted the need for stricter rules, agreement on many issues has proven to be elusive, partly because the Obama administration is too close to the financial sector. With Romney, though, there would be no distance at all: metaphorically speaking, he is the financial sector.

One financial issue on which there is global agreement is the need to close down offshore bank havens, which exist mainly for purposes of tax evasion and avoidance, money laundering, and corruption. Money does not go to the Cayman Islands because sunshine makes it grow faster; this money thrives on the absence of sunshine. But, with Romney unapologetic about his own use of Cayman banks, we are unlikely to see progress even in this area.

On trade, Romney promises to launch a trade war with China, and to declare it a currency manipulator on Day One – a promise that gives him little wiggle room. He refuses to note the renminbi’s large real appreciation in recent years, or to acknowledge that, while changes in China’s exchange rate may affect the bilateral trade deficit, what matters is America’s multilateral trade deficit. A stronger renminbi would simply mean a switch in the US from China to lower-cost producers of textiles, apparel, and other goods.

The irony – again lost on Romney – is that other countries are accusing the US of currency manipulation. After all, one of the main benefits of the Federal Reserve’s policy of “quantitative easing” – perhaps the only channel with a significant effect on the real economy – derives from the depreciation of the US dollar.

The world has a lot riding on America’s election. Unfortunately, most people who will be affected by it – almost the entire world – will have no influence on the outcome.


Joseph E. Stiglitz, a Nobel laureate in economics and University Professor at Columbia University, was Chairman of President Bill Clinton’s Council of Economic Advisers and served as Senior Vice President and Chief Economist of the World Bank. His most recent book is The Price of Inequality: How Today’s Divided Society Endangers our Future.

Joseph E. Stiglitz: Monetary Mystification / 貨幣迷局

NEW YORK – Central banks on both sides of the Atlantic took extraordinary monetary-policy measures in September: the long awaited “QE3” (the third dose of quantitative easing by the United States Federal Reserve), and the European Central Bank’s announcement that it will purchase unlimited volumes of troubled eurozone members’ government bonds. Markets responded euphorically, with stock prices in the US, for example, reaching post-recession highs.

Others, especially on the political right, worried that the latest monetary measures would fuel future inflation and encourage unbridled government spending.
In fact, both the critics’ fears and the optimists’ euphoria are unwarranted. With so much underutilized productive capacity today, and with immediate economic prospects so dismal, the risk of serious inflation is minimal.

Nonetheless, the Fed and ECB actions sent three messages that should have given the markets pause. First, they were saying that previous actions have not worked; indeed, the major central banks deserve much of the blame for the crisis. But their ability to undo their mistakes is limited.

Second, the Fed’s announcement that it will keep interest rates at extraordinarily low levels through mid-2015 implied that it does not expect recovery anytime soon. That should be a warning for Europe, whose economy is now far weaker than America’s.

Finally, the Fed and the ECB were saying that markets will not quickly restore full employment on their own. A stimulus is needed. That should serve as a rejoinder to those in Europe and America who are calling for just the opposite – further austerity.

But the stimulus that is needed – on both sides of the Atlantic – is a fiscal stimulus. Monetary policy has proven ineffective, and more of it is unlikely to return the economy to sustainable growth.

In traditional economic models, increased liquidity results in more lending, mostly to investors and sometimes to consumers, thereby increasing demand and employment. But consider a case like Spain, where so much money has fled the banking system – and continues to flee as Europe fiddles over the implementation of a common banking system. Just adding liquidity, while continuing current austerity policies, will not reignite the Spanish economy.

So, too, in the US, the smaller banks that largely finance small and medium-size enterprises have been all but neglected. The federal government – under both President George W. Bush and Barack Obama – allocated hundreds of billions of dollars to prop up the mega-banks, while allowing hundreds of these crucially important smaller lenders to fail.

But lending would be inhibited even if the banks were healthier. After all, small enterprises rely on collateral-based lending, and the value of real estate – the main form of collateral – is still down one-third from its pre-crisis level. Moreover, given the magnitude of excess capacity in real estate, lower interest rates will do little to revive real-estate prices, much less inflate another consumption bubble.

Of course, marginal effects cannot be ruled out: small changes in long-term interest rates from QE3 may lead to a little more investment; some of the rich will take advantage of temporarily higher stock prices to consume more; and a few homeowners will be able to refinance their mortgages, with lower payments allowing them to boost consumption as well.

But most of the wealthy know that temporary measures result only in a fleeting blip in stock prices – hardly enough to support a consumption splurge. Moreover, reports suggest that few of the benefits of lower long-term interest rates are filtering through to homeowners; the major beneficiaries, it seems, are the banks. Many who want to refinance their mortgages still cannot, because they are “underwater” (owing more on their mortgages than the underlying property is worth).

In other circumstances, the US would benefit from the exchange-rate weakening that follows from lower interest rates – a kind of beggar-thy-neighbor competitive devaluation that would come at the expense of America’s trading partners. But, given lower interest rates in Europe and the global slowdown, the gains are likely to be small even here.

Some worry that the fresh liquidity will lead to worse outcomes – for example, a commodity boom, which would act much like a tax on American and European consumers. Older people, who were prudent and held their money in government bonds, will see lower returns – further curtailing their consumption. And low interest rates will encourage firms that do invest to spend on fixed capital like highly automated machines, thereby ensuring that, when recovery comes, it will be relatively jobless. In short, the benefits are at best small.

In Europe, monetary intervention has greater potential to help – but with a similar risk of making matters worse. To allay anxiety about government profligacy, the ECB built conditionality into its bond-purchase program. But if the conditions operate like austerity measures – imposed without significant accompanying growth measures – they will be more akin to bloodletting: the patient must risk death before receiving genuine medicine. Fear of losing economic sovereignty will make governments reluctant to ask for ECB help, and only if they ask will there be any real effect.

There is a further risk for Europe: If the ECB focuses too much on inflation, while the Fed tries to stimulate the US economy, interest-rate differentials will lead to a stronger euro (at least relative to what it otherwise would be), undermining Europe’s competitiveness and growth prospects.

For both Europe and America, the danger now is that politicians and markets believe that monetary policy can revive the economy. Unfortunately, its main impact at this point is to distract attention from measures that would truly stimulate growth, including an expansionary fiscal policy and financial-sector reforms that boost lending.

The current downturn, already a half-decade long, will not end any time soon. That, in a nutshell, is what the Fed and the ECB are saying. The sooner our leaders acknowledge it, the better.

Joseph E. Stiglitz: 貨幣迷局

紐約—大西洋兩岸的央行在9月份都採取了不同尋常的貨幣政策措施：讓人們久等的“QE3”（美聯儲的第三輪量化寬鬆），以及歐洲央行宣布將無限量購買受困歐元區成員國的國債。市場對此反應熱烈，比如，美國股市重新回到危機前的高點。

其他人，特別是政治右翼，擔心最近的貨幣措施會助長未來通脹、鼓勵不受約束的政府支出。

事實上，批評者的擔心和樂觀者的熱情都不是板上釘釘之事。如今，未利用產能規模龐大，而即期經濟前景黯淡，這意味著嚴重通脹的風險極小。

儘管如此，美聯儲和歐洲央行的行動給出了三個本應讓市場冷靜下來的信號。首先，它們說，此前的動作並未取得成效﹔事實上，主要央行要承擔危機的主要責任。但它們收回錯誤的能力太差了。

其次，美聯儲宣布將在2015年之前將利率維持在極低水平，這意味著它預期短期內不會有復蘇發生。對於經濟遠弱於美國的歐洲來說，這是個警示信號。

最後，美聯儲和歐洲央行說，市場不可能很快自力更生恢復充分就業。必須予以刺激。這不啻完全否定了歐洲和美國關於採取相反措施——進一步緊縮的呼聲。

但大西洋兩岸所需要的刺激是財政刺激。貨幣政策已証明是無效的，更多貨幣手段並不會讓經濟回到可持續增長上來。

根據國際經濟學模型，流動性的增加會增加借貸——主要流向投資者，也有一些流向消費者——從而增加需求和就業。但考慮以下西班牙的例子。大量資金從西班牙銀行系統中出逃，而隨著歐洲在共同銀行系統的問題上繼續扯皮，外逃之勢還在延續。在維持目前緊縮政策的局面下增加流動性並不能提振西班牙經濟。

美國也是如此，主要向中小企業提供貸款的小銀行被完全忽視了。聯邦政府——不管是小布什政府還是奧巴馬政府——用數千億美元支持大銀行，卻放任數百家具有關鍵重要性的小貸款商倒閉。

但即使銀行變得更加健康，貸款也不會有很大起色。畢竟，小企業依賴於抵押貸款，而房地產——最重要的抵押品——價格距離危機前水平仍有三分之一。此外，房地產業產能嚴重過剩，這意味著低利率並不能提振房地產價格，從而不能吹起新的消費泡沫。

當然，邊際效應是不可忽視的：QE3所帶來的長期利率的微小變化可能會催生更多的投資﹔一些富人會利用暫時性的股票價格高企更多地消費﹔也有一些家庭能夠得以進行按揭再融資，下降的按揭負擔則有助於刺激他們的消費。

但大部分富豪明白，暫時性手段隻能造成股價的暫時波動，遠遠不足以支持炫耀性消費。此外，報告顯示，長期利率下降的好處隻有很少一部分流向了屋主﹔最大的受益者似乎是銀行。許多想對按揭進行再融資的人並沒有成功，因為它們的房產仍然“在水面以下”（即他們欠銀行的錢比房屋的當前價值還多）。

在其他環境中，美國可以從低利率導致的匯率貶值中獲利——即以鄰為壑式的競爭性貶值，受害者將是美國的貿易伙伴。但是，由於歐洲利率也很低，而全球經濟正在減速，美國得到的好處將十分有限。

一些人擔心新的流動性會帶來更糟糕的結果——比如相當於對美國和歐洲消費者征稅的商品繁榮。勤儉節約、將錢都投給國債的老一輩人將承受更低的回報，從而進一步抑制他們的消費。低利率還會鼓勵正在做投資的企業將錢投給固定資本，比如高度自動化的機器，這意味著即使經濟復蘇，失業率也會相對較高。簡言之，就是好處極其有限。

在歐洲，貨幣干預提振經濟的潛力更大，但也存在類似的讓情況更糟糕的風險。為了減輕人們對政府恣意揮霍的憂慮，歐洲央行在其債券購買計劃中加入了條件。但如果這些條件實施起來和緊縮政策無異——沒有相應的增長措施作為補充——則更有可能起到放血的作用：病人很有可能在獲得真正的靈藥之前就死掉了。擔心失去經濟主權讓然各國政府不願向歐洲央行求助，而隻有他們開口求助，才會有真正的效果。

歐洲還有令一個風險：如果歐洲央行過度關注通脹，那麼當美聯儲試圖刺激美國經濟時，利差會導致歐元升值（至少相對於不那麼做的情形），從而破壞歐洲的競爭力和增長前景。

對歐洲和美國來說，現在的危險是政客和市場相信貨幣政策可以拯救經濟。不幸的是，目前貨幣政策的主要效應將是將人們的注意力從真正可以刺激增長的措施（包括擴張性財政政策和提振貸款的金融部門改革）上移開。

此次衰退已經延續了五年，而且仍不會馬上結束。這其實就是美聯儲和歐洲央行晦澀地表達的意思。我們的領導人越早承認這一點越好。

Joseph E. Stiglitz, a Nobel laureate in economics and University Professor at Columbia University, was Chairman of President Bill Clinton’s Council of Economic Advisers and served as Senior Vice President and Chief Economist of the World Bank. His most recent book is The Price of Inequality: How Today’s Divided Society Endangers our Future.

Joseph E. Stiglitz: The Price of 9/11

NEW YORK – The September 11, 2001, terror attacks by Al Qaeda were meant to harm the United States, and they did, but in ways that Osama bin Laden probably never imagined. President George W. Bush’s response to the attacks compromised America’s basic principles, undermined its economy, and weakened its security.

The attack on Afghanistan that followed the 9/11 attacks was understandable, but the subsequent invasion of Iraq was entirely unconnected to Al Qaeda – as much as Bush tried to establish a link. That war of choice quickly became very expensive – orders of magnitude beyond the $60 billion claimed at the beginning – as colossal incompetence met dishonest misrepresentation.

Indeed, when Linda Bilmes and I calculated America’s war costs three years ago, the conservative tally was $3-5 trillion. Since then, the costs have mounted further. With almost 50% of returning troops eligible to receive some level of disability payment, and more than 600,000 treated so far in veterans’ medical facilities, we now estimate that future disability payments and health-care costs will total $600-900 billion. But the social costs, reflected in veteran suicides (which have topped 18 per day in recent years) and family breakups, are incalculable.

Even if Bush could be forgiven for taking America, and much of the rest of the world, to war on false pretenses, and for misrepresenting the cost of the venture, there is no excuse for how he chose to finance it. His was the first war in history paid for entirely on credit. As America went into battle, with deficits already soaring from his 2001 tax cut, Bush decided to plunge ahead with yet another round of tax “relief” for the wealthy.

Today, America is focused on unemployment and the deficit. Both threats to America’s future can, in no small measure, be traced to the wars in Afghanistan and Iraq. Increased defense spending, together with the Bush tax cuts, is a key reason why America went from a fiscal surplus of 2% of GDP when Bush was elected to its parlous deficit and debt position today. Direct government spending on those wars so far amounts to roughly $2 trillion – $17,000 for every US household – with bills yet to be received increasing this amount by more than 50%.

Moreover, as Bilmes and I argued in our book The Three Trillion Dollar War, the wars contributed to America’s macroeconomic weaknesses, which exacerbated its deficits and debt burden. Then, as now, disruption in the Middle East led to higher oil prices, forcing Americans to spend money on oil imports that they otherwise could have spent buying goods produced in the US.

But then the US Federal Reserve hid these weaknesses by engineering a housing bubble that led to a consumption boom. It will take years to overcome the excessive indebtedness and real-estate overhang that resulted.

Ironically, the wars have undermined America’s (and the world’s) security, again in ways that Bin Laden could not have imagined. An unpopular war would have made military recruitment difficult in any circumstances. But, as Bush tried to deceive America about the wars’ costs, he underfunded the troops, refusing even basic expenditures – say, for armored and mine-resistant vehicles needed to protect American lives, or for adequate health care for returning veterans. A US court recently ruled that veterans’ rights have been violated. (Remarkably, the Obama administration claims that veterans’ right to appeal to the courts should be restricted!)

Military overreach has predictably led to nervousness about using military power, and others’ knowledge of this threatens to weaken America’s security as well. But America’s real strength, more than its military and economic power, is its “soft power,” its moral authority. And this, too, was weakened: as the US violated basic human rights like habeas corpus and the right not to be tortured, its longstanding commitment to international law was called into question.

In Afghanistan and Iraq, the US and its allies knew that long-term victory required winning hearts and minds. But mistakes in the early years of those wars complicated that already-difficult battle. The wars’ collateral damage has been massive: by some accounts, more than a million Iraqis have died, directly or indirectly, because of the war. According to some studies, at least 137,000 civilians have died violently in Afghanistan and Iraq in the last ten years; among Iraqis alone, there are 1.8 million refugees and 1.7 million internally displaced people.

Not all of the consequences were disastrous. The deficits to which America’s debt-funded wars contributed so mightily are now forcing the US to face the reality of budget constraints. America’s military spending still nearly equals that of the rest of the world combined, two decades after the end of the Cold War. Some of the increased expenditures went to the costly wars in Iraq and Afghanistan and the broader Global War on Terrorism, but much of it was wasted on weapons that don’t work against enemies that don’t exist. Now, at last, those resources are likely to be redeployed, and the US will likely get more security by paying less.

Al Qaeda, while not conquered, no longer appears to be the threat that loomed so large in the wake of the 9/11 attacks. But the price paid in getting to this point, in the US and elsewhere, has been enormous – and mostly avoidable. The legacy will be with us for a long time. It pays to think before acting.

Joseph E. Stiglitz, a Nobel laureate in economics, is University Professor at Columbia University. A pioneer in the fields of taxation, development, trade, and technical change, he chaired President Bill Clinton’s Council of Economic Advisers, and was Senior Vice President and Chief Economist of the World Bank. He is the author of The Price of Inequality: How Today’s Divided Society Endangers our Future.

Joseph E.Stiglitz：國家資源豐厚是禍是福？/ From Resource Curse to Blessing

在一些非洲國家（包括加納、烏干達、坦桑尼亞和莫三比克），新自然資源的發現引發了一個重要問題：這些飛來橫財是富還是禍？會帶來繁榮和希望，還是與眾多先例一樣，成為政治和經濟的詛咒？

一般而言，資源富裕國經濟發展要比資源貧乏國表現更差。資源富裕國增長更慢，貧富不均的情況更嚴重，與你所設想的正好相反。畢竟，對自然資源課以高額徵稅不會讓它們消失，這意味着以自然資源為主要收入來源的國家可以用它們來為教育、醫療、發展和再分配融資。

資源充裕國的詛咒

經濟學和政治學有一個較大的分支致力於解釋這一「資源的詛咒」，公民社會團體（如歲入觀察和採掘業透明度計劃）的成立便是為了與此鬥爭。

眾所周知，資源的詛咒包括三大經濟成分：

‧資源富裕國的貨幣總是強勢的，因此阻礙了其他的出口。

‧由於資源開採通常不會創造很多就業，因此失業率會上升。

‧資源價格的波動導致增長極不穩定，國際銀行在商品價格高企時湧入，在商品價格低迷時湧出（這反映出一條亘古不變的原理，就是銀行家總是把錢借給根本不需要錢的人）惡化了這一狀況。

此外，資源富裕國通常不會追求可持續增長戰略。它們不會認識到，如果它們不將資源財富用於地上的生產性投資項目，事實上它們會愈變愈窮。政治上的無能加劇了這一問題，因為爭奪資源尋租的衝突滋生了腐敗和不民主的政府。

對 於這些問題，每一個都有眾所周知的解藥：低滙率、穩定基金、對資源收入（包括該國人民）的小心投資、禁止借貸，以及透明化（以便讓公民至少了解錢從何來， 向何處去）。但逐漸形成的共識是，這些措施雖然必要，卻並不充分。新致富國需要採取多個步驟才能增加「資源祝福」的可能性。

首先，這些國家 必須在確保公民獲得資源的完全價值方面做得更多。在自然資源公司（通常是外國企業）和本國人民之間往往存在不可避免的利益衝突。前者希望將支出最小化，而 後者希望將之最大化。巧妙設計的拍賣，提高競爭的透明度，才能帶來比黑箱作業更多的收入。開發項目合約也應該在陽光下進行，並且應該確保萬一資源價格上 漲，飛來橫財不會完全流入公司的腰包。

提高透明度及徵稅

不幸的是，許多國家已經簽署了不平等的開採合約，資源價值被外國公司攫走了。但有一個簡單的解決辦法：重新談判；如果重新談判不可行的話，可以徵收意外利潤稅。

放眼全球，各國已開始如此行動了。當然，自然資源公司也會有所準備，強調合約精神不可侵犯，還會以徹資來威脅。但結果通常正好相反，公平談判可以成為更好的長期合作關係的基礎。

非洲國家博茨瓦納對此類契約的重新談判，為其過去40年令人矚目的增長奠定了基礎。此外，不但玻利維亞和委內瑞拉等發展中國家財務了重新談判的做法，以色列和澳洲等發達國家也在這麼做。連美國也推出了意外利潤稅。

同樣重要的是，從自然資源中賺得的錢必須用於促進發展。就殖民勢力將非洲視為榨取資源的物件。一些新的資源買家也抱有相同態度。

基礎設施（公路、鐵路和港口）的建設帶有唯一的目的：讓資源以最低的價格運離該國，在開採國處理資源根本不予考慮，更不用說開發基於資源的本地工業了。

為長期發展奠基礎

真正的發展要求利用所有可以利用的關係：培訓本地工人、發展中小企業，以供應資源開採業和油氣公司的投入、就地處理資源，以及將自然資源嵌入該國經濟結構 中。當然，如今這些國家在這諸多方面並不具有比較優勢，有人會說國家應該堅持自己的優勢。從這個角度講，這些國家的比較優勢是讓其他國家開採它們的資源。 這是錯誤的。起作用的是動態比較優勢或長期比較優勢，這是可以培育的。

40年前，南韓的比較優勢是種植水稻。如果它堅持這一優勢，那麼永遠不會成為如今那樣的工業巨人。南韓也許是世界上最具效率的水稻生產國，但會一直窮下去。

公司會告訴加納、烏干達、坦桑尼亞和莫三比克快點行動，但它們有充分的理由謹慎行事。資源不會憑空消失，商品價格也在上漲。與此同時，這些國家可以實施所需的制度、政策和法律以確保資源的好處能被所有公民分享。

資源應該是福，而不是禍。它們可以是福，但不會自己變福，也不會輕易地變福。

作者為諾貝爾經濟學獎得主、哥倫比亞大學經濟學教授，近著有The Price of Inequality: How Today's Divided Society Endangers our Future


 

Joseph E. Stiglitz: From Resource Curse to Blessing

KAMPALA – New discoveries of natural resources in several African countries – including Ghana, Uganda, Tanzania, and Mozambique – raise an important question: Will these windfalls be a blessing that brings prosperity and hope, or a political and economic curse, as has been the case in so many countries?

On average, resource-rich countries have done even more poorly than countries without resources. They have grown more slowly, and with greater inequality – just the opposite of what one would expect. After all, taxing natural resources at high rates will not cause them to disappear, which means that countries whose major source of revenue is natural resources can use them to finance education, health care, development, and redistribution.

A large literature in economics and political science has developed to explain this “resource curse,”and civil-society groups (such as Revenue Watch and the Extractive Industries Transparency Initiative) have been established to try to counter it. Three of the curse’s economic ingredients are well known:

• Resource-rich countries tend to have strong currencies, which impede other exports;

• Because resource extraction often entails little job creation, unemployment rises;

• Volatile resource prices cause growth to be unstable, aided by international banks that rush in when commodity prices are high and rush out in the downturns (reflecting the time-honored principle that bankers lend only to those who do not need their money).

Moreover, resource-rich countries often do not pursue sustainable growth strategies. They fail to recognize that if they do not reinvest their resource wealth into productive investments above ground, they are actually becoming poorer. Political dysfunction exacerbates the problem, as conflict over access to resource rents gives rise to corrupt and undemocratic governments.
There are well known antidotes to each of these problems: a low exchange rate, a stabilization fund, careful investment of resource revenues (including in the country’s people), a ban on borrowing, and transparency (so citizens can at least see the money coming in and going out). But there is a growing consensus that these measures, while necessary, are insufficient. Newly enriched countries need to take several more steps in order to increase the likelihood of a “resource blessing.”

First, these countries must do more to ensure that their citizens get the full value of the resources. There is an unavoidable conflict of interest between (usually foreign) natural-resource companies and host countries: the former want to minimize what they pay, while the latter need to maximize it. Well designed, competitive, transparent auctions can generate much more revenue than sweetheart deals. Contracts, too, should be transparent, and should ensure that if prices soar – as they have repeatedly – the windfall gain does not go only to the company.

Unfortunately, many countries have already signed bad contracts that give a disproportionate share of the resources’ value to private foreign companies. But there is a simple answer: renegotiate; if that is impossible, impose a windfall-profit tax.

All over the world, countries have been doing this. Of course, natural-resource companies will push back, emphasize the sanctity of contracts, and threaten to leave. But the outcome is typically otherwise. A fair renegotiation can be the basis of a better long-term relationship.
Botswana's renegotiations of such contracts laid the foundations of its remarkable growth for the last four decades. Moreover, it is not only developing countries, such as Bolivia and Venezuela, that renegotiate; developed countries like Israel and Australia have done so as well. Even the United States has imposed a windfall-profits tax.

Equally important, the money gained through natural resources must be used to promote development. The old colonial powers regarded Africa simply as a place from which to extract resources. Some of the new purchasers have a similar attitude.

Infrastructure (roads, railroads, and ports) has been built with one goal in mind: getting the resources out of the country at as low a price as possible, with no effort to process the resources in the country, let alone to develop local industries based on them.

Real development requires exploring all possible linkages: training local workers, developing small and medium-size enterprises to provide inputs for mining operations and oil and gas companies, domestic processing, and integrating the natural resources into the country’s economic structure. Of course, today, these countries may not have a comparative advantage in many of these activities, and some will argue that countries should stick to their strengths. From this perspective, these countries’ comparative advantage is having other countries exploit their resources.

That is wrong. What matters is dynamic comparative advantage, or comparative advantage in the long run, which can be shaped. Forty years ago, South Korea had a comparative advantage in growing rice. Had it stuck to that strength, it would not be the industrial giant that it is today. It might be the world’s most efficient rice grower, but it would still be poor.

Companies will tell Ghana, Uganda, Tanzania, and Mozambique to act quickly, but there is good reason for them to move more deliberately. The resources will not disappear, and commodity prices have been rising. In the meantime, these countries can put in place the institutions, policies, and laws needed to ensure that the resources benefit all of their citizens.

Resources should be a blessing, not a curse. They can be, but it will not happen on its own. And it will not happen easily.

Joseph E. Stiglitz, a Nobel laureate in economics, has pioneered path breaking theories in the fields of economic information, taxation, development, trade, and technical change. As a policymaker, he served on and later chaired President Bill Clinton’s Council of Economic Advisers, and was Senior Vice President and Chief Economist of the World Bank. He is currently a professor at Columbia University, and has taught at Stanford, Yale, Princeton, and Oxford.He is the author of The Price of Inequality: How Today’s Divided Society Endangers our Future.