Joseph Stiglitz National Press Club Address Transcript

Professor Stiglitz is the recipient of the 2018 Sydney Peace Prize and addressed the National Press Club on 14 November

Progressive Reform in a Populist Era.

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SABRA LANE: Good afternoon, everyone, and welcome to the National Press Club of Australia and today’s Westpac Address. My name is Sabra Lane, I’m the President of the club. I’m also the presenter at the ABC radio program AM. We have a very special guest here today — Joseph Stiglitz, an American economist and a professor at Colombia University. He’s also a Nobel Prize winner. He’s in Australia to collect the 2018 Sydney Peace Prize. If you’re following the conversation today online, you can please use the hashtag NPC and our Twitter user handle is @PressClubAust.

Everyone, please welcome Professor Stiglitz.

[APPLAUSE]

JOSEPH STIGLITZ: Well, it’s a real pleasure to be here in Canberra again. The title of the talk is The Progressive Reform in a Populist Era. In some ways, having a progressive reform today should be easier than in earlier times. There has been a fundamental change in the way economists think about equality. It used to be that we thought that you could only get more equality by sacrificing economic growth. There was a book written by Arthur Okun, who was the chairman of the Council of Economic Advisors under President Johnson, which was called the Big Trade-off, and it said if you want more equality you have to give up growth. Well that view is no longer accepted, and when I say it’s no longer accepted, not only by, you might say, progressives or lefties, but even by the IMF. And those of you must know, the IMF is not a left-wing institution.

[Laughter]

They have put at the centre of their economic agenda: dealing with inequality, because they realised that economies with more equality perform better. They have higher growth, more stability. And so, once you recognise that, you recognise that having a progressive agenda with greater equality leads to higher economic growth and that higher economic growth then generates more tax revenue and that more tax revenue gives you a source of funding for more progressive reforms that can make a more inclusive society. So, these advanced in our understanding of economics really mean, today, there is no excuse for not having a progressive agenda. I know some people may take a different view on these things.

[Laughter]

One of the key complaints that one hears in the United States and many other advanced countries is that the kind of middle-class life that people had come to expect in the 1950s, 1960s, is no longer attainable. And again, we have a little bit of a quandary: we are much, much richer today than we were in the 1950s and ’60s. How can it be that we are so much richer and yet we feel more insecure? When I say, we, very large fractions of the population feel more insecure. They feel that the basic prerequisites of a middle-class life are no longer attainable. What makes this puzzle even greater is — to give you one example — education. At the end of World War II, America was, as I say, a much poorer country than it was today. But at that point, at the end of World War II, we said that everybody who had fought in the war, which was every young man and many women, could get as much education as they were qualified for at the best, most expensive universities for as long as they were qualified.

And yet, a few years ago, President Obama proposed two years of education at our community colleges, which are the least expensive, and the opposition said: we can’t afford it. There’s an obvious answer to this: we could obviously afford it, but it was a matter of choice. We didn’t want to enable all those young people to get the education that would allow them to live up to their potential. We have the resources; we haven’t been using those resources well. That is part of the drama that we’re going through, which is they’re increasing inequality. If you look at the data for the United States and for many other countries, US is the most extreme. It give a, really a stark picture. If you draw a chart of what’s happened to the average income of the bottom 90 per cent — we’re not talking about people in poverty — the bottom 90 per cent: it’s hardly budged. With a microscope you can see a little bit of an increase. But if you look at the average income of the top 1 per cent, it’s soared.

So an increasing fraction of the growth of our economy has been captured by a very small number. In fact, to give you- I don’t want to boast about how bad things are in the United States …

[Laughter]

…but it’s hard not to mention it. But there’s an important warning here, that too many other countries are aspiring to be like America. And [indistinct] some people here in Australia. If you follow our policies, you will wind up there. There’s nothing magic about the air in America that leads to these bad outcomes; it’s our policies that have led to these bad outcomes. So, to give you one example, real wages — wages adjusted for inflation — at the bottom are the same as they were 60 years ago. Can you imagine that? No pay raise in 60 years? If you looked at the Trump rallies, you saw a lot of angry white males. And our labour force, our labour market; our labour market has not been good to white males. The median income — half above, half below — of the males in the United States are full-time and the full-time guys are the lucky ones. Twenty per cent of male workers don’t have a full-time job. So, the median income of a full-time male worker adjusted for inflation is the same as it was 42 years ago. So, that gives you a little bit of a picture why there’s a lot of anger around the United States, and the problem is that there are always going to be demagogues, like Trump, willing to take advantage of that anger; not to solve the problems, but to destroy our politics and to gain more for themselves. And I’ll come back to that in a minute.

So, there is one problem that I think is difficult, and that is the problem posed by deindustrialisation, particularly these males I described before. A lot of them are not doing very well. Their jobs have been destroyed. Forty years ago, when this process of deindustrialisation began, we should have thought about how we can move them from the jobs that were disappearing to new jobs. The market never makes these kinds of transitions well on their own and there’s a well-defined theory explaining why the market can’t handle it. There was a need for government intervention to try to ease that transition, but the ideology at the time was that: don’t worry, globalisation, financialisation, advances in technology would not only increase GDP — which it did — but everybody would benefit. It’s an idea called trickle down economics. But we now know trickle down economics has not worked. In fact, there was no theory behind trickledown economics — it was an ideological position. And the evidence now is overwhelming. The problem is that because so many of the elites — and, you know, not only in the United States but across the advanced countries — advocated, said that globalisation, financialisation, advances in technology would benefit everybody, the credibility of the elites has been destroyed and that has had serious consequences. That is what is leading to the success of demagogues like Trump, who say: look, what they promised hasn’t been delivered — trust me.

What I can tell you is what he is going to do will actually going to make them worse off, and I’ll give you some examples as I go along.

So, the point is that we have now the resources for a progressive agenda, we have the knowledge of how to create a shared prosperity; we can make a middle-class life attainable for all. We will have a challenge dealing with the de-industrialised, the people we should have dealt with 40 years ago and we now created a problem that is very difficult — that’s clear. And so the question I want to spend the remaining few minutes of my talk is where is today’s progressive agenda? And it’s obviously a very big topic, but I’m going to try to highlight four things.

I’m going to begin, though, with trying to understand why it is that we have such inequality, and there are many forces that have contributed to it. But one thing is that over the last 40 years, we’ve rewritten the rules of the market economy. Markets don’t exist in a vacuum, they have to be structured. They’re structured by rules and regulations; by a whole set of legal frameworks from antitrust, to labour law, to tax laws, to expenditure policy, monetary policies. We can think of that whole gamut of- a framework we often take for granted and extraordinary complex as the rules of the economy. And over the last 40 years, since Reagan and Thatcher, those rules have been rewritten. And they have been rewritten in ways that have actually led to slower economic growth and more inequality, and so what paltry economic growth has occurred, the benefits have all gone to the top.

Examples are: we have not been enforcing antitrust competition law and so we have centres of market power in industry after industry, and market power means that they can raise the price relative to cost, raising the price is the same as lowering real wages and it’s a major source of inequality in our societies. We changed labour relations law to make it more difficult for unionisation, to make it more difficult for industry-wide collective bargaining. And when you change the laws, if you don’t have any collective voice for workers, obviously workers are not going to do as well. They have not been doing very well. It’s been predictable and it was predicted and it’s now happened.

We structure globalisation in ways to weaken further the bargaining power of workers. We opened up our markets to developing countries, we gave better property rights protection for investments in many of these countries through our investment agreements. And so we put our workers in competition with low-wage workers in these countries and they put downward pressure on wages.

There are a whole set of, say, every aspect of our economic framework illustrates how we have rewritten the laws, and in the United States it’s been the worst case, but every country has examples. For instance, if you borrow in the United States to get ahead, to borrow to go to school, you can’t discharge that debt, even in bankruptcy. And if your parents co-sign it, they can’t discharge that debt, even in bankruptcy. You can buy a yacht and discharge the debt, but not if you’re trying to get ahead for school. In a normal civilised society and you have bankruptcy; the first claimant is workers because workers can’t get back the labour that they’ve already given to the employer. But in the United States, we changed the law so that the first claimant when a company goes bankrupt are the derivatives — those risky products that led to a $180 billion bailout of AIG. And in doing that, we encouraged these risky financial products.

So these are just examples of how we structured our economic system, but we’ve also restructured our political system to make it more difficult for workers to have voice. Now you in Australia have done some things that I admire a great deal and you should realise how important these things are. The fact that you have a mandatory requirement of going to the polling place, the fact that you vote on Sunday; we vote on a weekday. And in places like Indiana where they make sure that the polling places close at 6 o’clock, so that they can’t go out and vote after work. And then they have few voting places. One of the great victories in this election in 2018 was that the voting rights of 1.5 million Americans were restored. As many of you may know, we have a program of mass incarceration of African Americans. We have 5 per cent of the world’s population, 25 per cent of the world’s prisoners; something maybe that Australia would understand about prisons. But these are disproportionately African Americans. And after they’ve served their time, they are denied the right to vote for the rest of their life. It’s a state-by-state thing, and in the vote in Florida, 1.5 million, one state, in one state, 1.5 million Americans got the right to vote once again. So, it’s not only the economic rules, but the political rules, but it’s a vicious circle because if you have working people denied the right to vote, you get laws and you have a political system where money matters and the way that it does in the United States, you have a vicious cycle. Economic inequality leads to political inequality, leads to more and more economic inequality. So that’s the first thing — rewriting the rules to achieve a fairer society.

The second one is opportunity. To give opportunity to so many Americans that don’t have opportunity; 20 per cent of Americans are growing up in poverty. Growing up in poverty means that they won’t have access to good nutrition, good health, good health care and most importantly, good education. New York City has recognised how important it is to have preschool education for everybody. But we are about the only place in the country that has done that. Our citizens very strongly support the idea that everybody, you know, we know that by the time you’re five years old, the life chances have already changed dramatically.

So America prides itself of being the land of opportunity, the American dream. And yet, the life prospects of young American are more dependant on the income and the education of his parents than in almost any other advanced country. So, the idea of the American dream is a myth. The lack of access to health care means that throughout their lives, Americans worry about what happens if you get sick. We are the only advanced country that does not recognise access to healthcare as a basic human right.

I mentioned before the Tax Bill, so let me mention something about it. The December 2017 Tax Bill represents, in a way symbolises everything that’s wrong in American politics. Here in the country, among the advanced countries with the highest level of inequality, highest level of inequality, we passed a tax bill that lowered the taxes on billionaires and corporations, and when it’s fully implemented, will increase the taxes on a majority of the middle class, on a majority of those in the second, third and fourth quintiles. So it was a tax bill designed to increase inequality, in a country where life expectancy is in decline and is among the lowest in the advanced countries. You know, it’s not because we don’t have good science in the United States, good medical schools. We do. We have the best in the world. But we don’t give access to healthcare to millions of Americans. And so, our life expectancy for the last several years has been declining from a level that was already lower than in other countries. You should appreciate the quality of your healthcare system and do what you can to preserve it. It can be destroyed very easily. This was the Tax Bill, something between 15 and 30 million more Americans will lose their health insurance.

Meanwhile, while it makes a claim- while the Republicans made a claim for fiscal responsibility, the debt that they incurred by this Tax Bill was enormous. In fact, in three weeks, the US deficit to GDP ratio increased from slightly less than 3 per cent to almost 6 per cent. Everybody talks about well, hasn’t Trump brought growth to the United States? If you increase that deficit of that magnitude, you are going to get a sugar high. There’s no doubt about it. What is remarkable is how anaemic that sugar high is and it won’t last. Almost everybody now expects a downturn in the latter part of 2019 and beginning of 2020. The reason is- the evidence is — where did most of the money go? It didn’t go to increasing investment it went to share buy backs and dividends. It did not have the stimulate effect. We didn’t have the benefit that you did in your discussion of corporate tax cuts. You had had a robust discussion; you had some excellent research by people like Andrew Charlton, who pointed out that a corporate tax cut would not stimulate investment. And that research was right. And so, you avoided the pit fall that the United States has made.

Well, the third thing that I want to talk about as part of the progressive agenda is realising the importance of collective action. We are individuals, it’s important to encourage an individual initiative. But also, we are a collective and many of the most important things that we do together. When you have a hurricane, who comes to the rescue? It’s the Government. Nobody says — let everybody fend for themselves. No-one says that. And that requires a strong nation. In fact, what we need is to do something about the underlying causes of why is it that the United States has been afflicted by these hurricanes and these wildfires that are killing people? The loss of property alone last year in our two hurricanes was about 2 per cent of GDP. And these are enormous numbers. It’s climate change. Absolutely, no doubt about it. It’s climate change. And yet, we can’t get the collective action that we need to deal with climate change.

We need public investment. We talk about being an innovation economy. What is the foundation of all the innovation that occurs? It’s basic research. And where does that basic research go on? It’s our universities. Who supports it? It has to be the Government. You cannot have, no private sector is going to support basic research. There’s a whole theory of public goods that explains why that is the case, but it is the case. And so if you’re going to have innovation economy, you have to have public support for research and technology — basic research. I could go on, but the point I want to make is that we, as a society, need a strong, collective action.

But strong collective action requires resources and that requires taxation. I once asked the Finance Minister of Sweden — why is Sweden such a success? And I don’t know if you know, not only does it have a high growth rate, but if you look at any of the metrics in terms of individual wellbeing, standards of living, they are at the top. And he said — it’s because we have high taxes. Now, you can say — what do you mean high taxes? Isn’t high taxes a bad thing? And the answer was very clearly — as a society, you have to pay for public investments, for research, for education and that costs. And if you don’t make those investments, you won’t grow. Your children won’t have the opportunity to live up to their potential. So, the bottom line of all of this is that taxes are a necessary part of our working together as a society.

One of the things that corporations have excelled in, used their intelligence in, is to avoid paying taxes. Apple, one of the leading technology companies in the United States has used that same ingenuity to avoid paying taxes. And if you follow what happened in Ireland that they were paying something like 0.2 per cent of the revenue in taxes. Google, I think, outdid them. It was smarter. So it paid even less. So, they take pride- they talk about corporate responsibility, but the first element of corporate responsibility is paying your taxes. And I’m involved in an international effort. Other people here are also involved in that effort to stop this kind of tax evasion. It has to be done at a global level. And it can be done. We have a framework to show how this can be done.

Well, the fourth element I want to talk about is — making a middle class life once again attainable. As I said in the beginning, we can afford it. There have been innovations, we know how to do it better. We know how to provide healthcare to everybody. Australia has shown how you could make higher education available to everybody. Your income contingent loans, that Bruce Chapman played a big role in trying to establish is a model for the whole world. And yet, some people are trying to attack that system here in Australia. So, we can make education, housing, you know, America’s private mortgage system is broken. The private mortgage system led to the crisis of 2008. And yet, a decade after the crisis we’re celebrating the 10th anniversary of the crisis, the American private mortgage market is still not functioning. The government is underwriting the vast majority of all mortgages. The private sector says — we can’t take the risk. We can take the fees, yes and we can do that very well. We can write bad mortgages, but we don’t want to take the social, we don’t want to take the responsibility for the loans that we originate. We want the government to take the risk. That’s obviously unacceptable. But we have better risk management procedures, scoring methods; we know how to give good mortgages. So, in each of these areas, homes, retirement, health, education — we know how to make a middle class lifestyle once again accessible. There are ideas called the public option, there are a whole variety of ideas. The point is that we can afford it.

So let me just conclude and say that the progressive reform I think is really attainable today. In fact, I think it is necessary. If we don’t do these kinds of reforms, what we’re going to get is more demagogues like Trump, and they do represent a real threat to our civilisation.

The basis of the growth of the wealth of nations is two things. One is the advances in science — how we learn about technology and how we- you ask: we are so much better off today than we were 250 years ago and what is the reason for that? The first is the advances in the science, and the second one is the advances in social organisation. The rule of law, democracy with its systems with checks and balances. But all this requires systems of truth-telling, of ascertaining, discovering what the truth is, verifying the truth. But the demagogues, like Orban in Hungary and Trump in the United States, are systematically trying to destroy all of our truth-telling institutions — the media, the judiciary, our universities. One of the most invidious aspects of the 2017 Tax Bill was a tax imposed on Harvard and Princeton and other leading universities. Other countries are trying to encourage research and encourage universities — we are taxing them to try to discourage them.

The upshot of this is not only will our economic prosperity be put into jeopardy, but so will our democracy. You cannot have a democracy without a strong media, without these strong institutions and there is a systemic attempt to undermine these institutions. So to me, necessary — not sure if sufficient but certainly necessary — to battle these demagogues is to restore some version of sustainable shared prosperity. Thank you.

[Applause]

SABRA LANE: Thank you, Professor. There are so many meaty topics in your speech. In the- I want to touch on your point in regards to climate change. In the absence of parliaments being able to enact policies to reduce carbon emissions, what can businesses do to tackle it? If effectively- we had a major business in Australia today, a major energy company, Woodside, say it’s time for a carbon price and the Government straightaway said: no; they won’t entertain that. What should they be doing about trying to bring about change? Should they unilaterally try and do something? [Indistinct]

JOSEPH STIGLITZ: Let me say — yes, they should. This is a very live topic in the United States because US withdrew or announced it’s withdrawing from the Paris Agreement, and the response in the business community was actually very heartening on this issue. The response of the business communities overwhelmingly was: we’re going ahead. Not the coal industry, but the overwhelming part of the business sector said: we’re going ahead. Especially the multinationals. They know that they want to be part of a global economy. They are- will be under pressure in Europe and they can’t have two ways of producing, so they are going ahead.

There are a couple of other initiatives that are going on both at the level of the judiciary and the level of civil society. One of them is Mark Carney, who is the head of the central bank- the Bank of England and head of the Financial Stability Board, has said that the financial sector has to take into account carbon risk. If a company has large holdings of coal, it should be obvious that there is a very high probability that there will be a price of carbon globally, the price of coal will go down, and you are at risk of going bankrupt. So, the requirement is being put that you have to report your carbon risk and that’s becoming a very big initiative throughout the world — about reporting carbon risk. And a bank, as it lends, has to think about the carbon risk of those to whom it’s lending.

A related idea is the fiduciary responsibilities — pension funds. It used to be the view was that pension funds should just look at the short-term returns, but pension funds are long-term investors. And there will be a carbon price before … you know, whether it’s five years or 10 years or 15 years, there will be a carbon price, and so the view is that it is a violation of your fiduciary responsibility not to look at the carbon risk in your portfolio.

SABRA LANE: Our first question from the floor is from Dana McCauley.

QUESTION: Thanks, Professor, for your speech. I wanted to ask you about something that touches on inequality and wage growth. Penalty rates are a big issue in Australia and traditionally workers on Sundays get paid as much as double an ordinary day. Now, this is being phased out after the Fair Work Commission decided to cut Sunday rates and the Government supports this, saying that such an approach is outdated. Do you think that penalty rates have a place in a modern award system?

JOSEPH STIGLITZ: Yes, I do, very much so. One of the things- the economy is supposed to be helping increase people’s living standards and part of living standards is enjoying leisure, and having a life where you don’t get the same time off that everybody else does is really interfering with your wellbeing. And if you have to work on a Sunday, you should get compensated. If you work more than- you’d have to work more than 40 hours a week or whatever the standard is, you should be compensated extra. So the- and the background of this, it goes back to what I mentioned in my talk, the bargaining power of workers has been eviscerated. And if workers had a bargaining power, they would say: I don’t want to work on Sunday, but they can’t say that. So that’s why there’s a really important role for a government to set hours and overtime standards.

SABRA LANE: Next question is from Tim Colebatch.

QUESTION: Hi, Professor Stiglitz. Tim Colebatch from Inside Story. About 20 years ago, I interviewed you one day in Washington when you were in the middle of a war against the IMF.

JOSEPH STIGLITZ: [Laughs]

QUESTION: You were the chief economist of the World Bank at the time and I remember I had a- you had a press- there was a press guy sitting in there with me to make sure that you didn’t say anything critical of the IMF, which you are now free to do. But you were taking on what was called the Washington Consensus, that sort of small government, low-tax, minimal welfare model that the IMF and the World Bank had been spreading — with the support of the US Treasury, of course. And 20 years later, I think you can say that that Washington Consensus no longer exists, not at least at the IMF and the World Bank, but it does seem to exist still as a residual in the Treasury departments of English-speaking countries and also on the conservative side of politics in English-speaking countries. You’ve outlined your progressive vision today. I’m wondering: how much of that is a consensus in the US today? How much of that would be accepted, firstly, by the House Democrats, who are now going to be important players in political decision-making in the US? And, secondly, by economists across the frontier? For example, Columbia and Chicago have common ground on the importance of inequality and tackling it.

JOSEPH STIGLITZ: Yeah. So, I think there is a consensus that something wasn’t right about what was called neoliberalism — that markets would take care of all these problems, these set of ideas that are still very ingrained in many treasuries. The evidence of what’s happened over the last 25 years should have been dispositive on that. It really does show that those ideas didn’t make sense. In some ways, they were never intellectually coherent. So, that economic theory was very clear that globalisation — you know, opening up trade between advanced and less-developed countries — would lower real wages of unskilled workers. There was absolutely no doubt about it, and yet a lot of people who were cheerleading globalisation closed their eyes and didn’t want to believe it. Some of them said: well, maybe we will have a problem and we need some trade adjustment assistance, and that was basically the view of the Democratic Party at the time. But when the Republicans said: we don’t want to pay for trade adjustment assistance, and they couldn’t get it through Congress in a significant form, they said: oh, we still believe in trickle down economics, even without trade assistance. They supported it. So, that view, I think, is no longer held by any serious economist.

Now, where there is a major difference — and it is a major shift in the centre of economic thought — that is the underlying model of the Washington Consensus was that markets were fundamentally competitive. You could describe the economy by a model of perfect competition. It wasn’t quite perfect, but don’t worry, it was sufficiently close to perfect competition that the predictions of that model would hold. My own work, the work for which I got a Nobel Prize, showed that that was- had no intellectual foundation. So my own work for- so for instance, if there was just a little bit of imperfect information, the outcome will look dramatically different from what it did if there was perfect information.

So those of you who know some economics, one of the most important, influential ideas was Adam Smith’s Invisible Hand, that the pursuit of self-interest would lead as if by an invisible hand to the wellbeing of society. My research that the reason the invisible hand so often seemed invisible was that it wasn’t there.

[Laughter]

And that the markets are- imperfections of competition, imperfections of information, are just pervasive in our society. And the outcomes of the equilibrium, then, are markedly different from what you get in a world with perfect competition. And I would say today that that is now the prevalent view. There are some people in Chicago who continue to deny it. There are some people in Chicago who don’t believe that we had a recession in 2008.

[Laughter]

So, you’re never going to get unanimity. There are a few people who don’t believe in climate change too. About a majority of the Republican Party, unfortunately. But in terms of people who’ve actually thought about the issues, it is very clear that there are these problems, and so where the Democratic Party is — I think it’s very close to the progressive agenda that they’ve outlined. When they run for office, they’re not going to have the- be able to talk about everything that I’ve summarised here. They’ll pick out a few things, but this will be, I think, part of the intellectual framework that will be guiding them next year.

SABRA LANE: Simon Grose.

QUESTION: Simon Grose from Canberra IQ. My question is about the blockchain cryptocurrency phenomenon. In particular, do you see any implications for equality? And in general and looking forward, where do you see it landing? Is it a bubble that’s going to burst or is it potentially going to become integrated into the global and commercial financial systems?

JOSEPH STIGLITZ: Well, you may know I’ve come out very strongly against cryptocurrencies. I think we have actually a pretty good currency called the dollar, and it serves all the functions of a good medium of exchange: low transaction costs, stability, good store of value, all that. I think you should be working towards an electronic monetary system. So that’s the good thing about the cryptocurrency, but it should be not crypto. What’s wrong with the cryptocurrency is that it’s crypto. We have been working- when I say we, the world has been working to create an open and transparent financial system. A very important part of it is anti-money laundering. We have a problem having a president who is a money launderer in chief, but…

[Laughter]

…that’s what our banking regulators are trying to do, is to stop money laundering. Now, in a world where you’re trying to stop money laundering, why would you open up a channel through which all the money launderers could go? So, I think the only reason the governments of the world would have not shut down cryptocurrency is because it’s not important. When it becomes important, it will be shut down, and that’s why I think it’s a bubble.

SABRA LANE: Are you a cash or a card man?

JOSEPH STIGLITZ: What?

SABRA LANE: Are you a cash or a card man? Do you actually still carry cash?

JOSEPH STIGLITZ: Not very much. And, as I say, in the United States, one of the things that a lot of people don’t appreciate, your central bank took some very important initiatives to weaken the market power, monopoly power of the credit card companies — American Express, Visa, and MasterCard. And you are the example to which we are aspiring. We have some very big court cases now on precisely that issue. So, what is stopping the US going to a electronic payment mechanism is this market power. But you’re in a position actually — because you’ve broken the market power — to actually move all the way towards an electronic payments mechanism.

SABRA LANE: Next question — Julie Hare.

QUESTION: Professor Stiglitz — Julie Hare from Wonkhe. Recently, you told the Royal Society that they needed to be an investment in higher education and all levels of education on a level akin to the US spending after World War II to help manage the rise in artificial intelligence. I understand you told the Royal Society that AI could lead to an era of fascism and could bring a further rise in inequality by making jobs obsolete. You’ve also said that you tell your students the best decision in your life is to choose their parents wisely.

[Laughter]

I’m just wondering how these two concepts of destiny and artificial intelligence collide?

JOSEPH STIGLITZ: So, let me say — there’s been a lot of interest about what are the consequences of artificial intelligence. And one of the- the main point I tried to make in that talk was that these advances in technology can take two forms. They can replace humans or they can augment the power. You know, we have- doctors have new instruments that make that possible for them to be better doctors. So, they can augment what we do or they can replace us. And the market doesn’t necessarily make the right decision of the direction of research. We should be doing more research to save the planet rather than to replace unskilled labour and create more unemployment of unskilled labour. But, that’s not what the market forces are doing, so we need to shape our innovation system. What I worried about was that if we continue to have the kind of labour-replacing innovation that AI could be — and the important part about AI is not only now are machines stronger than what we are, not only can they process information better, but they can actually learn faster than we can. And that is a threat to the jobs of a very significant fraction of the labour force.

So, if we don’t respond in the appropriate way, all the inequality that I described today could get a lot worse. But the fundamental idea was what I talked about here — the pie is bigger; the national pie is bigger. So, everybody could be made better off and the question is how to make sure we make sure that everybody is better off. And better education is going to be one of the important instruments in doing that, but it’s not going to be sufficient. We’re going to have to do some other things as well.

SABRA LANE: Our next question — Jon Millard.

QUESTION: Thank you, Sabra. Jon Millard, freelance. Thank you very much, Professor Stiglitz, for your address. In it, you mentioned that trickle down economics hasn’t worked, and that can be said by many people for neoliberalism generally. In fact, for the chief economist with the Australia Institute here in Australia who published an essay on it recently. Your country and ours share conservative governments who seem to be in favour of this sort of economics; do you see a correlation between political persuasions of governments and this attitude towards neoliberalism or do you think it’s independent of politics?

JOSEPH STIGLITZ: Yeah, so, let me talk more- I know about my government more than I know about your government, but our government does not have any coherent economic philosophy.

[Laughter]

So — I mean, to mention Trump and thought in the same sentence is jarring. So, the mixture of protectionism on the one hand — and un-thought-through protectionism. There are lots of things wrong with our trade agreements and I have been criticising our trade agreements, but his kind of protectionism is- you know, I have been concerned about getting the right rules. You need a rule of law — I mentioned that in the beginning. It’s one of the things that separates us from what we had 250 years ago. We need a rule of law, you need a rule of law internationally. But you need a right rule of law. And I’ve always been saying we need a right rule of law, but we ought to change it because it’s unfair to developing countries in emerging markets.

Now, Trump has said: these trade agreements, for instance, are unfair to the United States. I ask my students: who is right — me or Trump?

[Laughter]

And guess what? They say that I’m right.

[Laughter]

So- but the point I’m making is that there isn’t a coherent philosophy. If, when we were debating the tax bill, there had been any intellectual depth, they would have asked the question: is it likely that lowering the tax rate and getting rid of or reducing the tax deductibility of interest would lead to increased or reduced investment?

In theory, it’s very clear, it will lead to reduced investment. So, economic theory said: this is a really bad tax law that will actually design to discourage investment. You’re giving more money in the pocket of the corporations, but they’re not going to spend it; which is what they — on investment — and they haven’t.

So, I think the way to understand the economic policy of this administration is a pure money-power grab. It is the elite seeing a last chance to get — or a chance to get more money for themselves. You know, I was at Davos last January and at these meetings of these [indistinct] heads of all these American corporations who are doing very well. And I said to them: doesn’t it bother you that the President is a misogynist, racist bigot? And if that’s not bad enough, he’s going against the rules of international law that you have been advocating for 40 years? And their answer — I mean, they didn’t answer, but the answer was very clear: no, we like the tax cut, the money in our pocket, and we want deregulation so we can cause another recession.

So, that is really the mindset of what is going on. It’s not based on an attempt to revive neoliberalism.

SABRA LANE: Katharine Murphy.

QUESTION: Hi, Professor Stiglitz. Katharine Murphy from Guardian Australia. I’m going to take you back to my former colleague Tim Colebatch’s point about consensus, but I want to ask it in a slightly different way. Now, you’ve said in your address that collective action is the foundation, basically — strong collective action is the foundation for advancing a progressive agenda; which is demonstrably true. Something else that is also demonstrably true, though, is that it requires a degree of consensus in order to advance said program.

Now, one of the things I find enormously frustrating about being a participant in the public debate at this point in history is that so much of it is carried out in enclaves where people of like-minded views agree furiously with one another and do not talk across tribes. And that phenomenon is being intensified by political figures like Donald Trump who have a currency in culture war, division, and a complete derision about facts and evidence. So, how do we then create a new consensus around the principles that you’re talking about that is a durable one, that converts people to this cause rather than locked in cycles of conflict about the same ideas over and over?

Now, I suspect you’ll say to me: verification, which you invoked at the end of your conversation; and that’s an altar I worship at too. But I think we’re a shrinking cohort. So what’s the answer?

JOSEPH STIGLITZ: Well, you just asked the hardest question…

[Laughter]

…and I think at this juncture, we aren’t going to be able to get consensus throughout our society. What we need to be able to do, though — we made a mistake 40 years ago, we didn’t deal with some of the problems that were festering and now we have this very divided society. But it’s only 30 per cent that is — or 25 per cent — that is hard-core. I think that — maybe that’s an optimistic view, but I think that’s right. I think we can get a consensus over the other 70 per cent. And by that, I mean not a consensus on everything that I’ve laid out. But, if you ask Americans: do they think that the minimum wage should be increased, three-fourths say yes. If you ask them: should we have more regulation of banks, three-fourths say yes. If you ask them: should everybody have access to healthcare, three-fourths- more than three-fourths say yes. If you ask them: should we do something about gun control — we’ve have had a mass murder almost every day for the past year — three-fourths say yes.

So, there are a wide consensus on a lot of the core elements of policy. If you asked them: should money have so much influence on our politics — I think they would say yes. So, I think that — you know, there wouldn’t be universal agreement on a lot of the elements of what I’ve talked about, but I think there is a core — if you go back to do they feel frustrated about the power of the telephone companies and the internet companies and the insurance companies and the airlines, they would say: yeah, we have a problem of market power in the United States.

So, I am actually optimistic that it will be possible to construct a core set of arguments and ideas around which there is a broad consensus. But the echo-chambers that have been really facilitated the new technologies, Twitter, are a very strong force going in the other direction. I mean, I think the old newspapers — where in print, we had to confront all the views on both sides — were a very important part of our society. And I think we haven’t yet been able to figure out how do we substitute for that common knowledge that you had in sharing a set of newspapers or a media. You know, it used to be everybody walks — Walter Cronkite — and there was a common frame. Now, everybody has their own facts, and even worse with Trump, who elevates the idea that you are entitled to your own facts.

SABRA LANE: Mark Kenny.

QUESTION: Mark Kenny, Professor Stiglitz, from the Sydney Morning Herald and The Age. Can I take you to some of those issues you just talked about, particularly healthcare? We watched, with some aghast I suppose you could say, in Australia during your 2016 election as Trump rode to victory, advocating the end of the Affordable Health Care Act. It seemed to us to be an incredibly modest agenda to have to try and lift -whatever it was — 29 million people out of having no healthcare at all, yet it was derided as sort of runaway socialism in the US. Here in Australia, we have both sides of politics, even the conservative right of the Liberal Party, mouthing the words: we’re the best friends Medicare ever had. So, I’m very interested in what is the difference- I mean, going to Katharine’s question, can America really unite around some of these ideas, when there is such a strong distaste, I suppose, for any sorts of policies that are government-led; that are seen to be interfering in the market; that are equalising the economy? Yes, I’ll leave it at that.

JOSEPH STIGLITZ: Yeah. Actually, that’s a good example of where, I think, there is a movement towards a consensus. You noticed when Trump got elected, he said it was going to be easy to have repeal and replace? In fact, you couldn’t- there was no repeal and replace, and one of the reasons is as Americans face the prospect of not having health insurance — and a key part of Obamacare was this provision about pre-existing conditions that you could buy health insurance even if you had a pre-existing condition — they realised that was too important to give up on. And a vast majority of Americans now want some program that has deals with pre-existing conditions, which is Obamacare. It’s the minimal program that deals with it and no one’s replaced it.

The 2018 elections also reflected this broad consensus. One of the provisions in Obamacare was an extension of healthcare to the very poor through Medicaid, which is the program that we have for low-income individuals. And about- I can’t remember, about 26 Republican governors rejected healthcare for the poor for their state even though the federal government was paying almost all of it — was paying 90 per cent of the cost. They were so ideologically driven that they would rather their poor have no health insurance than accept money from the federal government. It’s unbelievable. It was inhumane.

Well, in about four states, in 2018 election — it could be more than four states — they overruled the governor. They had a referendum. They said: we want health insurance. We want public health insurance. We want Medicaid. So, I would say right now- if there had been referendums in other states, I think it would have gone the same way. So, the answer is that actually, on this issue, there is a broad consensus and that’s why one of the pillars of the democratic platform is going to be this because they realise this is what Americans want.

SABRA LANE: Our final question today, professor, is from Misha Schubert.

QUESTION: Misha Schubert as the vice president of the National Press Club but also as a proud alumna of Columbia Journalism School, 2002, it was a terrific year of learning and skilling in the craft. I wanted to say thank you for your wide-ranging address and really thoughtful remarks, and to invite you to maybe expand further on the idea of the value of evidence and expertise. Why do they matter and where are we without them?

JOSEPH STIGLITZ: Yeah. That’s a really very important question because the fundamental issue, both as academics and citizens, is how do we know what we know, and if we don’t know- if we don’t have any knowledge base, even notions of due process, how do we have- we try to have systems of judicial proceedings [indistinct] convict people. But if you don’t have some notion of what is the truth, how do you do that? How do you elect people who are going to serve you if you don’t know what they’re advocating or if they say: I’m going to do this and then they do something else? So, our society, I think, simply can’t function without some basis of agreeing what are the facts. There are always going to be disagreements. There are always going to be disagreements.

The fact is our world is too complex and always changing, so we will never have the evidence that will answer all the questions that we want to know. Just to give you one example. In your debate about the corporate income tax, there was a strong theory that I had developed back in- 45 years ago about why the corporate income tax cut of the kind that you were considering would be bad for investment. But it was only when you had data of the kind that was newly-available — had never been available before — that you were able to do a careful study and show that actually the corporate income tax did not lead to more investments; and that turned out to be very important in making a very important decision: should you cut the corporate income tax? Was it going to lead to more investment or was it going to lead to more dividends? Was it going to lead to higher wages? Who was going to benefit? So, every issue in public policy is an issue where we are making judgments about the consequences of one thing or another. And how are you going to make that judgment without evidence, without- when I say evidence — theory, argumentation?

And I think expertise is important because these are complicated areas, but in our democracy, that expertise has to be communicated to a wide body of citizens and that’s where the press plays a very important role; and having an independent press is very important. There are other countries where you have a government-controlled press. Sweden, Australia, UK have national publicly-funded broadcasting that has managed to be independent, and that’s a real achievement. I mean, I think you should realise what kind of an achievement and how fragile these institutions are; and how important it is to support these kinds of institutions because having that kind of trust in the media is the only way that we as a society can function. And so, what- that always brings- Americans, as you know, are absolutely obsessed with our president because he is destroying our civilisation and…

[Laughter]

…destroying- the attacks on the press are attacks on our civilisation because if we don’t have some check- our courts are an important check but he just makes up facts. He just makes up stories and he’ll say one thing one day. The office in the next day and the press he says: shows on TV or you said this yesterday and you’re saying this today. It doesn’t bother him, but it bothers most of our citizens; and somebody has to be there to hold him accountable and to say: you’re a liar. And without a free and independent press, there would be nobody to do that. I mean, you see what happens in other societies where you don’t have a free and

independent press. So it’s really important what you’re doing.

SABRA LANE: Everyone please join me in thanking Professor Stiglitz.

[Applause]

And to thank you, professor, we’re giving you membership to the National Press Club, a very important institution in Canberra, and also a history of the 50 years of the club. We hope that we’re here for a lot longer than 50 years. Thank you very much…

JOSEPH STIGLITZ: [Talks over] Yeah. Thank you.

SABRA LANE: We really appreciate you coming here today.

[Applause]

* * End * *


Professor Stiglitz is in Australia to receive the Sydney Peace Prize. He will be awarded the Prize at theCity of Sydney Peace Prize Lecture on 15 November, and speak at the National Press Club on 14 November andAthenaeum Theatre on 19 November.

The Australia Institute is an Impact Partner for the 2018 Sydney Peace Prize and Professor Stiglitz visited Canberra to address the National Press Club as a guest of The Australia Institute and Sydney Peace Foundation.