A quarterly magazine of urban affairs, published by the Manhattan Institute, edited by Brian C. Anderson.
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The Two Joseph Stiglitzes
One is a serious economist. The other isnt.
22 July 2009
There are two Joseph Stiglitzes, a fact insufficiently acknowledged by Newsweek in its glowing portrait of the man this week. One is a respected economist and rigorous teacher at Columbia University Business School. This Stiglitz has the esteem of his peers. For the research on asymmetric information and market transparency he conducted in the 1980s, he shared the 2001 Nobel Prize with George Akerlof.
But then comes the other Joseph Stiglitz: a fiery public intellectual with a Leftist political agenda, a media-savvy icon who revels in publicity. Stiglitz Number Two has become leader of a vast anti-capitalist, anti-globalization, anti-free-trade crusade. The split between the two Stiglitzes occurred in 2002, when Stiglitz Number One published Globalization and Its Discontents, a rather technical book that criticized the IMFs generosity toward the new Russia. However, the books title, not its content, made it a worldwide bestseller. Stiglitz Number Two was born. For the enemies of economic liberalization, the IMF is the devil incarnate. As a former IMF economist, a Nobel laureate, and now a renegade, Stiglitz became the hero the activists were looking forand he has relished the role.
Stiglitz does not hesitate to borrow from and update the Marxist agenda. Where Marx saw a system in crisis from capitalism, Stiglitz blames globalization. As Marx was in his day, Stiglitz has become a prophet of doom: the economic system will inevitably fail. There is no easier job in politics than being a prophet of doom: you just wait for the next downturn and claim that you predicted it. Doomsaying is not a scientific position, however, only a political posture. Since economics follows cycles, the only useful information would be to determine a rationale behind these cycles and be able to predict the exact dates of booms and busts. Neither Stiglitz nor any other economist can predict these cycles.
Right now, Stiglitz Number Two may look like a prophet, but when the economy recovers, his star will fade. Again like Marx, he trumpets disasters to come without proposing actual alternativeswhich is not surprising, since his strident criticism of globalization is not backed up by a substantive agenda. The Stiglitz who makes genuine proposalsStiglitz Number Onesticks to basic capitalism in his academic work, only suggesting that we use caution and make adjustments. No economist would argue with such an approach.
To his Columbia students, Stiglitz acknowledges that there can be no growth without sound monetary policy, a reasonably managed public budget, and domestic and international economic competition. This Stiglitz knows very well that the last 25 years of global development, until the current slump, were based on sound economic footing. He also knows that there can be no escape from poverty without reliable governments and the rule of law. But Stiglitz Number Two praises, in public, Venezuelas and Bolivias leaders when they destroy the rule of law and confiscate private property. How do both Stiglitzes manage to live in the same body?
Stiglitzs academic peers are increasingly perplexed these days by his split personality, puzzling over how the same professor can behave rationally in the classroom and then become erratic and fiery in front of a crowd. Unfortunately, the most influential of the two Stiglitzes will likely be the fiery anti-globalization persona: a brilliant mind in the service of a bad cause. If free trade really were disrupted by bad economic policies, the current slump would soon become something much, much worse. Most victimized would be the poor countries that Stiglitz Number Two and his followers pretend to defend. Revolutions seldom serve the poor.
Guy Sorman, a City Journal contributing editor, is the author of numerous books, including Economics Does Not Lie.