One of Time Magazine’s 100 most important people who ever lived, and the third most cited economic authority in the world. An ex-president of the World Bank, which fired him for subverting its message. The recipient of the 2001 Nobel Economics Prize, for a ground-breaking theory that says Adam Smith was wrong. And a shared Peace Prize in 2007 for research into climate change. Twelve best sellers so far, and a permanent thorn in the political side. So how come you’ve never heard of this man?
Maybe because most of Joseph Stiglitz’s life has been spent in academia, grappling with macro questions that seem remote from the common man. But more probably because his uncomfortable views about major institutions are still divisive, and his enemies in Washington are many and powerful. Foreigners seem to prefer him.
Intellectual giant, policy renegade
How many universities has Stiglitz worked at? Yale, Harvard, Cambridge, Columbia, Stanford, MIT, Manchester, Princeton and France’s Ecole Polytechnique are just for starters.
But it was the public framework which first brought the 49 year to prominence, starting with his spell at President Bill Clinton's Council of Economic Advisors (1993–1997), and continuing with a three-year spell as chief economist and senior vice-president for development policy at the World Bank. So what did he do to get himself fired in 2000?
Criticising the Bank, its sister organisation the International Monetary Fund, and the US Treasury, for a start. And siding with the growing band of protesters against international economic organisations in general. A great way to make friends in high places.
But then, those were challenging times. Stiglitz had been in charge of reviewing the transition of the Eastern bloc, ten years after the conversion to capitalism in 1990, and he’d become disillusioned with the IMF’s ‘ridiculous’ shock therapy’ tactics. He said other countries that had rejected austerity had done much better. And he’s also been railing recently against the euro zone’s austerity measures. ‘Suicidal’ is one of the gentler words he’s employed.
No perfect market
But it was Stiglitz’s dispute with Adam Smith that established his fame. The traditional assumption, until that time, had been that all economic markets were naturally ‘perfect’ (i.e. balanced). Stiglitz disagreed.
His experience at the World Bank had killed his faith in Adam Smith’s ‘invisible hand’ (which essentially said that human nature strove for progress within the competitive capitalist model). Instead, he said, what we got was an ‘asymmetric’ reality in which the so-called perfect model was actually incredibly rare. What worked for me would probably hurt you.
That, of course, would be putting it rather strongly. (Stiglitz’s version simply said that “individuals and firms, in the pursuit of their self-interest, are not necessarily, or in general, led as if by an invisible hand, to economic efficiency.”) But, being a Keynesian, it was only a short hop to declaring that the responsibility for countering the asymmetric view should rest with government. In a small-government age, that rankled.
And since then?
The renegade is still very much in business. In 2008 he wrote a book accusing George Bush of concealing the cost of the Iraq war. In 2010 it was Barack Obama’s financial rescue that attracted his ire. And in 2012 another book warned of terminal inequality in America.
Also in 2012, Foreign Policy magazine named him one of the world’s foremost thinkers. ]The same year, he became president of the International Economic Association. In 2012 he was awarded the Legion d’Honneur by the French government. And yes, he’s still telling Barack Obama that he’s got it all wrong. Nothing new there, then.