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.Without sufficient spending, the economy will end upin a recession unless Keynesian macroeconomic policies are used.310 JOSEPH STIGLITZ (1943 )Information problems also plague the global economy.Accordingto Stiglitz (2000b), in the early 1980s Ronald Reagan and MargaretThatcher appointed free market ideologues to head up the WorldBank and IMF.These political appointees got rid of the exisitingfirst-rate economists working at these institutions, and made believ-ing in free market economics a condition for employment.As aresult, the World Bank would lend money to poor nations for roadsand dams only if they made certain changes to their economy; andthe IMF became concerned mainly with issues such as reducingprotectionism and removing restrictions on capital flows in and outof a country.These restrictions worsened the economic problems facingmany countries.Stiglitz (2002) was especially incensed that the IMFdealt with the Asian currency crises of the late 1990s by pushing forhigher interest rates.This, he argued, increased loan defaults andcorporate bankruptcies, and reduced confidence in these troubledcountries.Similarly, by pushing for free markets, the World Bank and IMFmade problems worse in some of the poorest areas of the world.Sti-glitz (2002, p.54) gives a good real-world example of such errors.For many years women in a poor Moroccan village received week-old chicks from the government and raised them both for foodand for the market.Virtually every analyst agreed that the programhelped raise the living standard of these villagers.But the World Bankand the IMF told the Moroccan government that it should not be inthe business of distributing baby chicks, and it pressured them to stopthis practice.As a result, the chicken raising industry disappeared inMorocco, to the detriment of the poor people living there.The problem, according to Stiglitz, was that the IMF and WorldBank thought the private sector would immediately fill the gap leftby the government.In a world of perfect information, private firmswould lend chicks to families that were good risks, and the processwould continue as before.But in a world plagued with uncertaintyand informational gaps, new firms do not start up just as the gov-ernment leaves a market.The result can easily be an economic disaster.Imperfect information also created problems for the former social-ist economies of Eastern Europe as they sought to make the transitionto a market economy.Stiglitz (1994) blamed the IMF for worseningthe economic problems faced by the former Communist nations ofEastern Europe, especially Russia, by pushing for quick privatizationof government-owned firms.Pushing for rapid privatization, Stiglitzargued, the IMF and the US Treasury virtually ensured that former311 JOSEPH STIGLITZ (1943 )Communist bureaucrats would strip assets and send the moneyobtained from selling them to Swiss bank accounts.Privatizationefforts worked badly because these countries had no experience withfree markets, and so senior Communist bureaucrats obtained gov-ernment assets cheaply and via bribes.Moreover, the IMF pushed tooquickly for eliminating trade restrictions.Because many government-owned firms were too inefficient to compete in the global economy,and because new firms did not quickly arise to replace privatizedfirms, the people working for government firms soon found them-selves unemployed.The problem in all these cases is that markets are not perfect.Theydo not move immediately and painlessly to some equilibrium.In thereal world, timing matters; so does the information one has.If peopledo not understand markets and do not have experience with markets,free markets may lead to more problems than economic benefits.The work of Stiglitz provides a defense of Keynesian policy pre-scriptions against monetarism (see Friedman) and new classicaleconomics (see Lucas).This is why Stiglitz is a leading new Key-nesian economist; he provides a new justification for Keynesianpolicies, one based on problems with obtaining information.Wheninformation is imperfect, markets do not give us the best possibleresult and Keynesian economic policies are needed to improve eco-nomic outcomes.More than anyone else, Stiglitz has been responsible for theresurgence of Keynes and Keynesian economics in the late twentiethand early twenty-first centuries.For this reason, Stiglitz has beenone of the most influential economists at the turn of the newmillennium.Works by Stiglitz The Theory of Screening, Education and the Distribution of Income, American Economic Review, 64 (December 1974), pp.283 300 Credit Rationing in Markets with Imperfect Information, American Eco-nomic Review, 71 (June 1981), pp.393 410.Reprinted in New KeynesianEconomics, Vol 2, Coordination Failures and Real Rigidities, ed.N.GregoryMankiw and David Romer, Cambridge, Massachusetts, MIT Press, 1991,pp.247 76, with Andrew Weiss Equilibrium Unemployment as a Worker Discipline Device, AmericanEconomic Review, 74 (June 1984), pp.433 44.Reprinted in New KeynesianEconomics, Vol 2, Coordination Failures and Real Rigidities, ed.N.GregoryMankiw and David Romer, Cambridge, Massachusetts, MIT Press, 1991,pp [ Pobierz całość w formacie PDF ]
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.Without sufficient spending, the economy will end upin a recession unless Keynesian macroeconomic policies are used.310 JOSEPH STIGLITZ (1943 )Information problems also plague the global economy.Accordingto Stiglitz (2000b), in the early 1980s Ronald Reagan and MargaretThatcher appointed free market ideologues to head up the WorldBank and IMF.These political appointees got rid of the exisitingfirst-rate economists working at these institutions, and made believ-ing in free market economics a condition for employment.As aresult, the World Bank would lend money to poor nations for roadsand dams only if they made certain changes to their economy; andthe IMF became concerned mainly with issues such as reducingprotectionism and removing restrictions on capital flows in and outof a country.These restrictions worsened the economic problems facingmany countries.Stiglitz (2002) was especially incensed that the IMFdealt with the Asian currency crises of the late 1990s by pushing forhigher interest rates.This, he argued, increased loan defaults andcorporate bankruptcies, and reduced confidence in these troubledcountries.Similarly, by pushing for free markets, the World Bank and IMFmade problems worse in some of the poorest areas of the world.Sti-glitz (2002, p.54) gives a good real-world example of such errors.For many years women in a poor Moroccan village received week-old chicks from the government and raised them both for foodand for the market.Virtually every analyst agreed that the programhelped raise the living standard of these villagers.But the World Bankand the IMF told the Moroccan government that it should not be inthe business of distributing baby chicks, and it pressured them to stopthis practice.As a result, the chicken raising industry disappeared inMorocco, to the detriment of the poor people living there.The problem, according to Stiglitz, was that the IMF and WorldBank thought the private sector would immediately fill the gap leftby the government.In a world of perfect information, private firmswould lend chicks to families that were good risks, and the processwould continue as before.But in a world plagued with uncertaintyand informational gaps, new firms do not start up just as the gov-ernment leaves a market.The result can easily be an economic disaster.Imperfect information also created problems for the former social-ist economies of Eastern Europe as they sought to make the transitionto a market economy.Stiglitz (1994) blamed the IMF for worseningthe economic problems faced by the former Communist nations ofEastern Europe, especially Russia, by pushing for quick privatizationof government-owned firms.Pushing for rapid privatization, Stiglitzargued, the IMF and the US Treasury virtually ensured that former311 JOSEPH STIGLITZ (1943 )Communist bureaucrats would strip assets and send the moneyobtained from selling them to Swiss bank accounts.Privatizationefforts worked badly because these countries had no experience withfree markets, and so senior Communist bureaucrats obtained gov-ernment assets cheaply and via bribes.Moreover, the IMF pushed tooquickly for eliminating trade restrictions.Because many government-owned firms were too inefficient to compete in the global economy,and because new firms did not quickly arise to replace privatizedfirms, the people working for government firms soon found them-selves unemployed.The problem in all these cases is that markets are not perfect.Theydo not move immediately and painlessly to some equilibrium.In thereal world, timing matters; so does the information one has.If peopledo not understand markets and do not have experience with markets,free markets may lead to more problems than economic benefits.The work of Stiglitz provides a defense of Keynesian policy pre-scriptions against monetarism (see Friedman) and new classicaleconomics (see Lucas).This is why Stiglitz is a leading new Key-nesian economist; he provides a new justification for Keynesianpolicies, one based on problems with obtaining information.Wheninformation is imperfect, markets do not give us the best possibleresult and Keynesian economic policies are needed to improve eco-nomic outcomes.More than anyone else, Stiglitz has been responsible for theresurgence of Keynes and Keynesian economics in the late twentiethand early twenty-first centuries.For this reason, Stiglitz has beenone of the most influential economists at the turn of the newmillennium.Works by Stiglitz The Theory of Screening, Education and the Distribution of Income, American Economic Review, 64 (December 1974), pp.283 300 Credit Rationing in Markets with Imperfect Information, American Eco-nomic Review, 71 (June 1981), pp.393 410.Reprinted in New KeynesianEconomics, Vol 2, Coordination Failures and Real Rigidities, ed.N.GregoryMankiw and David Romer, Cambridge, Massachusetts, MIT Press, 1991,pp.247 76, with Andrew Weiss Equilibrium Unemployment as a Worker Discipline Device, AmericanEconomic Review, 74 (June 1984), pp.433 44.Reprinted in New KeynesianEconomics, Vol 2, Coordination Failures and Real Rigidities, ed.N.GregoryMankiw and David Romer, Cambridge, Massachusetts, MIT Press, 1991,pp [ Pobierz całość w formacie PDF ]