Joe Stiglitz on the new world economy
By Lynn Parramore
Salon.com
This is the final installment of "The Influencers," a six-part interview series that Lynn Parramore, a media fellow at the Roosevelt Institute, is conducting for Salon. She caught up with Nobel Prize-winning economist Joseph Stiglitz to discuss global imbalances and America’s evolving role on the world’s economic stage.
Lynn Parramore: People have said that before the crash, the U.S. provided the world’s consumer of last resort. How much has the world changed in that respect?
Joseph Stiglitz: Well, before the crisis, the United States was living beyond its means, and much of what it was spending beyond its means was consumption. It is still the case that the United States is living beyond its means, but the good news is that the households are now beginning to save. But on the other hand, the government deficits have actually increased. So the fact is, the U.S. is continuing to spend beyond its means. Now in the long run, this can’t continue, and that is what is sometimes referred to as the problem of global imbalances. It changed a little bit since the crisis, but the fundamental problems that have given rise to it have not been corrected.
China is running a massive export surplus, and this is beginning to emerge as a political issue. What’s your take on this?
Well, China’s problems are distinctive, and in some ways just the opposite of ours. They have a savings rate of 50 percent. China’s not the only country that’s running large surpluses; Germany’s running surpluses that are largely comparable as a percentage of GDP, and Saudi Arabia has surpluses that are also large. The focal point of the debate in the United States has been exchange rates -- concern that the exchange rate between the U.S. dollar and Chinese currency is distorted by government intervention on their part. Adjustments of exchange rate are not likely to fully resolve the problem of global imbalances. In fact, from 2005 to 2008, the time when the crisis occurred, China had basically increased the value of its currency by 20 percent, which is about two-thirds of what most people had thought was the exchange rate adjustment that was needed.
(More here.)
Salon.com
This is the final installment of "The Influencers," a six-part interview series that Lynn Parramore, a media fellow at the Roosevelt Institute, is conducting for Salon. She caught up with Nobel Prize-winning economist Joseph Stiglitz to discuss global imbalances and America’s evolving role on the world’s economic stage.
Lynn Parramore: People have said that before the crash, the U.S. provided the world’s consumer of last resort. How much has the world changed in that respect?
Joseph Stiglitz: Well, before the crisis, the United States was living beyond its means, and much of what it was spending beyond its means was consumption. It is still the case that the United States is living beyond its means, but the good news is that the households are now beginning to save. But on the other hand, the government deficits have actually increased. So the fact is, the U.S. is continuing to spend beyond its means. Now in the long run, this can’t continue, and that is what is sometimes referred to as the problem of global imbalances. It changed a little bit since the crisis, but the fundamental problems that have given rise to it have not been corrected.
China is running a massive export surplus, and this is beginning to emerge as a political issue. What’s your take on this?
Well, China’s problems are distinctive, and in some ways just the opposite of ours. They have a savings rate of 50 percent. China’s not the only country that’s running large surpluses; Germany’s running surpluses that are largely comparable as a percentage of GDP, and Saudi Arabia has surpluses that are also large. The focal point of the debate in the United States has been exchange rates -- concern that the exchange rate between the U.S. dollar and Chinese currency is distorted by government intervention on their part. Adjustments of exchange rate are not likely to fully resolve the problem of global imbalances. In fact, from 2005 to 2008, the time when the crisis occurred, China had basically increased the value of its currency by 20 percent, which is about two-thirds of what most people had thought was the exchange rate adjustment that was needed.
(More here.)
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