In 2018, I found myself in a challenging situation where I had to discuss economic matters with Joseph Stiglitz, a Nobel laureate in a public setting. We were at the World Economic Forum in Davos, Switzerland, in a packed hall, debating corporate tax. None of the conditions were in my favour as Stiglitz, who is well-known for his tenure as the World Bank’s chief economist and his numerous works, is far from being a reserved figure.
Given these circumstances, I was relieved to manage a respectable performance. My in-depth knowledge and experience in high-pressure public discussions was my saving grace. Stiglitz’s fame stems from the breadth of his scholarly work and the depth of his thoughts, acknowledged through a Nobel Prize for his research on the effect of data on market activities.
Stiglitz’s most prominent book, Globalisation and Its Discontents, which was released in 2002, criticized global fiscal management. He took issue with quick budget reductions, mandated privatizations, and the ease of monetary transfers across national borders, especially for growing economies. These strategies were part of what is widely known as the Washington Consensus, of which Stiglitz was a strong opponent.
Stiglitz championed for a more empathetic type of globalisation, arguing that the key to making globalisation work effectively was a shift in governance. He further expanded on this proposition in his subsequent books, Making Globalization Work (2007) and People, Power and Profits (2020).
In his recent publication, The Road to Freedom, he continues his scathing critique of neoliberalism while proposing alternative economic strategies. There is a philosophical underpinning to this book as Stiglitz appropriates the idea of freedom, typically a stronghold of free-market advocates, to argue for a proactive rather than passive state.
Stiglitz suggests that the expansion of individual liberty frequently restricts the freedom of others, emphasising the necessity of collective activity, predominantly through government, for achieving equilibrium in liberties. He highlights the importance of this freedom distribution against competing demands, contending that it’s too valuable to be left to market forces alone. His work is a strong advocacy for a reinvigorated social democracy that can maximise the liberties of the majority of citizens.
The preliminary sections examine the concept of liberty – arguing that an individual’s freedom can lead to another’s ‘unfreedom’. Contracts or agreements between individuals or between citizens and the state are instrumental in managing this trade-off.
Stiglitz suggests that handling externalities—situations where one party’s actions impose costs on others—establishes the bedrock of civilisation in a captivating excerpt. He points out the essential distinction between social contracts, which are grounded on trust, and regular contracts, which follow clear guidelines and procedures and where trust isn’t as critical. The erosion of this social contract has significant implications, albeit gradual.
This book’s central focus is the management of freedom’s inherent trade-offs, using externalities as a clear illustration. Numerous perspectives on the exercise of our freedom are evaluated. The traditional view, which presupposes fixed preferences and a rational approach to choice, is subject to critical scrutiny.
This viewpoint is juxtaposed with a more pragmatic frame of attitudes, which accounts for imperfect information and faulty logic, acknowledging capacity for change. Institutional influences that shape and dictate individual choices are also acknowledged.
Fans of Stiglitz’s works will undoubtedly appreciate the final chapters – a series of recommendations for creating an improved society where freedom thrives.
Tables detailing policy content, despite clashing with the book’s otherwise eloquent style, are characteristic of this economist. He goes beyond identifying problems, offering potential solutions.
Within the confines of this text, a continuous emphasis is placed on coercion as an essential state instrument, portraying a disproportionately cynical perspective of the government. Furthermore, the book’s fixation on the concept of “unfreedom” detracts from the appreciation of the power choices and self-determination have.
The consequent assertion that “Reasoning, a fundamental principle of the Enlightenment era, and discussions deriving from that reasoning can better enable us to grasp the intricate nuances of the issues in question and assist in finding consensus in pursuit of shared interests” serves as a testament to the author’s stature as a significant public thinker.
Though I have found myself at odds with Stiglitz concerning corporate tax policies, we are fortunate to have him. This text is a reaffirmation of that fact.
Stiglitz does not stand alone in his call for reforms to key regulatory bodies that influence our global economic and trade policies. Shortly after Globalisation and its Discontents was published, George Monbiot put forth a more radical proposition in his work, The Age of Consent, A Manifesto for a New World Order.
More drastic reforms were advocated by the author, arguing that “Our mission is not to undermine globalisation but to seize it and utilise it as a platform for the world’s first global democratic revolution”.
In pursuance of this, he suggested the establishment of a new international bank and a dramatically restructured United Nations General Assembly.
This marked the start of a string of publications advocating for radical political responses, specifically to our climate crisis. The most recent of these, The Invisible Doctrine: The Secret History of Neoliberalism, was co-authored with filmmaker Peter Hutchison.
Their perception of capitalism is explicitly expressed as it being “A financial system rooted in colonial plunder”. From this perspective, the government and dominant private entities utilise laws “supported by the possibility of force” to transform shared resources into private possessions and the outcomes of labour into marketable goods.
This perception disregards the role of entrepreneurial ventures, doesn’t validate the nobility of earning wages in exchange for services rendered or the reduction in worldwide poverty over the past years.
This sombre interpretation of capitalism results in a rather pessimistic view of political activities as the authors assert that “Governments, of all political orientations, gradually relinquished governance, leaving key socio-economic matters to an abstract entity referred to as ‘the market’”.
This rapid progress of capitalism, along with the restructuring of the state, is commonly known as neoliberalism.
This piece dissects the conceptions and philosophies that have revolutionised the conversation about the partition of responsibilities between government and the market. Influential figures in this narrative include Ludwig von Mises and Friedrich Hayek.
Their contention proposed that state-led collective action would inexorably lead to consolidating planning and authoritarian rule. Their ideologies were disseminated through the generous funding by significant American enterprises via bodies like The Heritage Foundation and the Cato Institute.
The piece falters, however, in acknowledging the dynamic nature of market economies. It overlooks the fact that the authority of governments hasn’t shrunk, but rather expanded.
Monbiot and Hutchinson argue convincingly that this view grew so dominant it became unseen, accepted as normality. They rightly claim that the state’s dwindling and the weakening of its safety nets can escalate to a point where it can lay the groundwork for the surge of political extremism.
Unrestrained free markets might ultimately deplete the institutions and traditions endorsed by conservatives, including the notion of place and identity in minor towns and cities.
The piece overlooks the evolution of market economies. The functions of governments have expanded rather than atrophied. Today’s governments spend more and tax more in most cases.
The range of statutes and regulations in most democracies has expanded rather than shrunk. The proactive use of tariffs by big industrial countries is not a humble capitulation to almighty trade flows.
The incentives of President Biden or the European Union’s budget support a thriving, not a declining state. The Covid pandemic prompted a reassessment of state size expectations. There is scarce evidence of an impending pullback.
The primary challenge of our time centres around the feasibility of our current social structure in the face of political challenges from authoritarian and populist forces, and immense disruptions like climate change and AI.
All rebukes should be carefully assessed. Regrettably, the eloquent prose of “The Invisible Doctrine” aren’t paralleled by an acknowledgement of the plethora of economic models influencing our globe.
The prospect of unimpeded markets and a diminishing state dramatically transformed economic policy, but much has evolved since then. An enhanced argument would acknowledge this.
Although both pieces deliver vital assessments of current economic systems, they vary in their solution’s detail and reliability. It does not require full endorsement of both scholars to acknowledge their influence. Significant insights have been provided by both Stiglitz and Monbiot on the primary concerns that our era faces, and they maintain this practice with their current works.
Paschal Donohoe holds the titles of Minister for Public Expenditure and President of the Eurogroup.
A few more books worthy of consideration include ‘Why Liberalism Works’ written by Deirdre Nansen McCloskey and published by Yale University Press in 2019. This work elegantly and boldly advocates for the individual’s discernment cautioning against the collective’s power and wisdom. It also warns to be wary of constraints, commands, and simplistic routes to equality.
‘What We Owe Each Other’ by Minouche Shafik, published by The Bodley Head in 2021, provides an extensive analysis of how social contracts function in various economies and societies. She presents a schedule for a fresh and revived contract to manoeuvre the profound shifts in technology, demographics, and climate.
Finally, ‘The Origins of Totalitarianism’ by Hannah Arendt, published by Penguin in 1951, may not be an effortless read, but it is an invaluable piece. This paramount work aids in comprehending why societies shift from democracy to the attraction of an authoritative figure. It serves a warning against isolation, as advised by Arendt.