Joseph Stiglitz (Gary, Indiana, 81 years old) is among the great heterodox voices of recent decades. Nobel Prize in Economics in 2001, he is one of the economic figures most present in the public debate, where he defines himself as a progressive economist, but in favor of a capitalism that he believes must be reformed. He chaired the White House Council of Economic Advisors during Democrat Bill Clinton’s first term. He was chief economist and vice president of the World Bank. And he remains at the forefront: with his books, combative with four decades of neoliberalism and its consequences; and with his talks, such as the one sponsored in Madrid by the IESE business school and the Naturgy Foundation. As soon as he finished, he spoke for 40 minutes with EL PAÍS.
Ask. We are in a super electoral year in which, however, little is said about the economy. Cultural and emotional wars dominate everything.
Answer. I think the economy is at the bottom. It has been 40 years of neoliberalism and it has been a very hard period for many people. Above all, due to deindustrialization, a product of both globalization and technological change. Ideology has made it impossible to do enough to protect those who were being left behind. And it has created, especially in the United States, large groups in which desperation dominates and in which a feeling that something has gotten in the way of their life prevails.
Q. Donald Trump and other far-right politicians are taking advantage of it to their advantage.
R. Yes. In the case of Trump, he has not only captured it, but he has also accelerated it and managed to transform it into identity politics. Politics has always been about identities, but now it dominates everything: either you are on team A or you are on team B; and what the other side says is always wrong. Social networks have complicated it even more, because they allow everyone to live in a different world from the rest.
Q. The polarization…
R. Even if you live door to door, you are in a completely different reality. If you are on team A, it is likely that you will not interact with people on team B.
Q. Neoliberalism, they often say, has not delivered what it promised. Paradoxically, on the other hand, the vote for extreme right-wing parties has grown, not exactly inclined to deeply reform the model.
R. It has a lot of emotional reaction. Trump, for example, is not exactly a neoliberal, but a nationalist who has established a coalition between those who feel disaffected and an important group of businessmen. It’s strange, because many of these business leaders used to be pro-globalization. But they see it as an opportunity to lower taxes even further and relax regulations. He is an opportunist who has taken advantage of the opportunity to create an alliance between those who feel disaffected and the billionaires.
Q. A rather unnatural coalition.
R. There are too many business leaders solely focused on their material well-being and who don’t mind making a deal with the devil. Their priority is to lower taxes, even if that ends up destroying democracy. They say: “Don’t worry, we will control him. Yes, he makes a lot of noise, but we will make sure that he behaves reasonably.” And, in exchange, they get tax benefits or fewer environmental regulations.
Q. What about the voters?
R. There are several elements of persuasion. The first is identity, the idea that he [Trump], with that bad boy attitude, is “for us,” whatever that means. There is also a point of revenge and that they really believe that [su regreso] It will be positive for the economy. Although inflation is already falling, they think otherwise. It’s what the surveys say; Many people believe that their personal situation is not bad, but their perception of the economy in general is.
Q. Why does this phenomenon occur? It is not unique to the US, we are also seeing it in Europe.
R. Because narrative dominates over reality. And that thing of thinking that mine do it better: that the president has poor management of the economy and that I must be the exception.
Q. How much will economic policy change if Trump wins the election?
R. I think it depends, to a large extent, on what happens with Congress. If there is a Democratic majority, the change will not be radical. If, on the other hand, there is a Republican majority, there can be large cuts in taxes and in budget items such as those allocated to science, for example. There we could see dramatic changes. In any case, the biggest shift would be in foreign policy: even with a Democratic majority, Trump would have the power to stop supporting Ukraine.
Q. France is on the verge of momentous elections, with the extreme right in the lead. What impact would a victory for Marine Le Pen’s party have on the EU?
R. His rhetoric has been very nationalist, Eurosceptic and not exactly cooperative. But [la también ultraderechista primera ministra italiana Giorgia] Meloni, for example, has realized that Italy needs Europe. Those most at risk in France are immigrants; I wouldn’t want to be among them if Le Pen wins.
Q. Does the rise of the far right in Europe have economic roots? Some point to discontent, low wages and inequality as catalysts.
R. As in the United States, two forces are at work: deindustrialization and neoliberalism. Nor has enough been done to close the gap between urban and rural, and that has created a breeding ground that some have been able to take advantage of. In the United States we have been unlucky to have Trump, who has been very effective. He wants to preserve what he calls the “American way of life,” and the only way he can do that is to destroy democracy.
Q. Trump has not yet returned to power and we are already immersed in something like the prelude to a tariff war with China.
R. For now it is somewhat moderate, with a lot of rhetoric. We should not hyperventilate: it is difficult to imagine a real, total break with China because we are dependent on minerals, on drugs… When you talk to people in these industries, what they say is that it will take between five and ten years to be able to produce them on a scale. [en Occidente]. And, in any case, it would be at a price up to 40% higher. So the most likely scenario is that nothing dramatic happens, because no one really wants it.
Q. Do you agree with taxing electric cars, chips or solar panels?
R. I was recently speaking with an investor who is developing a solar farm in the US and he was complaining that, as a result of tariffs, the cost was much higher. If we want to move as quickly as possible in the energy transition, we must accept subsidized products that come from China.
Q. One of the arguments put forward is the protection of local industry.
R. I think we must develop our own industries, including solar panels, to not depend so much on China. But we must close the circle of a rapid green transition and, at the same time, be more resilient. And we must differentiate between the short term, in which we must accept these subsidized products, and the long term, in which we have to develop our own industry, with more innovation or also with subsidies. Meanwhile, if they want to give us money to be greener, we should accept it and thank them [risas].
Q. I quote: “You Europeans are not aware of the paranoia that we in the United States have with China.” Because?
R. The idea of communist China remains deeply rooted. For 30 or 40 years there was hope that trade would reverse this, but not anymore. So that bogeyman has returned with force, seeing that there were no options to reconvert Xi [Jinping]. As an American citizen, I am concerned about growing Chinese influence in Africa or Latin America, and that we are not influencing there with our democratic values. But not in economic terms: there I am only concerned that we are able to strengthen the resilience of our economy. And that doesn’t necessarily have to do with China.
Q. For years industrial policy has been almost anathema, even disappearing from public debate. In recent times, however, it has returned to the fore.
R. It’s good news: I’ve been advocating for it for 40 years.
Q. He often says that the American dream has been more myth than reality.
R. The data is very clear: Americans’ life prospects depend today, more than ever, on their parents’ education and income. And, for the first time, citizens are beginning to realize this. For many there is no hope.
Q. Are we in time to save capitalism from itself?
R. We are. But if Trump wins the election and the Republicans prevail in Congress, it will be much more difficult. The battle is not lost until it is lost, but if he keeps what he promised it will be difficult to win.
Q. How do you rate Joe Biden’s economic management?
R. He has done a lot and it is not fully appreciated. There is, for example, the Inflation Reduction Law. And child poverty has decreased. Has he done everything I wanted? No. I would have liked to see a tax on the profits fallen from the sky of the oil companies. And I have serious reservations with the re-election of [Jerome] Powell [al frente de la Reserva Federal]: does not understand economic dynamics, has raised interest rates too much and has not understood climate risk.
Q. He believes, then, that the Fed has made a mistake.
R. It made sense to normalize interest rates, but not take them to 5%. They should be much lower. The diagnosis of the central banks has been wrong: they believe that the cause of inflation has been a demand greater than supply. And it is not like that. High rates have not helped solve the shortage of chips to make cars or the high price of oil due to the war in Ukraine. In fact, they have made things worse. Powell is not an economist and does not understand the causes of inflation.
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