After claiming that a Congress govt would have thrown out China from Indian land in 15 minutes and continuing with his lies on the farm bills, Congress leader Rahul Gandhi on Wednesday quoted Nobel laureate Joseph Stiglitz saying that he agrees with the views of the economist. Rahul Gandhi said that he agrees with the critical comments of Stiglitz towards India, adding that his life’s purpose is to bring people of all faiths together in this land. Joseph Stiglitz is an American economist who won the Nobel Memorial Prize in economics in the year 2001, and currently a professor in Columbia University in the US.
Rahul Gandhi quoted a report by The Telegraph where the economist made some very critical comments on India. He described ‘India as a poster child of what not to do’, and bracketed India with the United States and Brazil as “utter failure” in dealing with the Coronavirus pandemic.
Joseph Stiglitz made the comments in a webinar hosted by FICCI. He said that governments need to focus on both helping the poor and containing the disease. “The first priority is to help the vulnerable but also contain the disease. Spending the money in a way that prevents contagion and also helps people gives double dividends. Let me say very clearly, you can not control the economic aftermath if you cannot control the pandemic,” he said. Stiglitz advised the Indian govt to raise tax on the rich and spend the amount on the poor.
Stiglitz said that PM Modi is practicing “politics of division”, and the govt must get rid of it to bring economic prosperity. He said, “I will start by trying to create an inclusive society. Politics of division is an antithesis of what needs to be done. Modi has tried to divide your country, Moslems against Hindus, and that is going to undermine your society and economy no matter what else happens. This fundamental division will weaken India forever.”
Undoubtedly, such harsh criticism of Modi govt was welcomed by Rahul Gandhi.
Although Stiglitz is an influential economist, he was chairman of President Bill Clinton’s Council of Economic Advisers, is former chief economist at the World Bank, he is not alien to controversies. Several other economists have disagreed with him on various issues, and criticised him for his views. His fellow economist at Columbia University Jagdish Bhagwati had said about him, “there are many things wrong with Stiglitz as a policy economist. One is that he doesn’t learn from his mistakes.” Another economist from the same university who chose not to be named had said, “Joe’s career tragically demonstrates that if one combines legitimate credentials as a clever and creative theorist with extreme left-wing bias and a colossal ignorance of history, one can accomplish a great deal of harm in the world.” Moreover, Some of the stands taken by Stiglitz have proved to be disastrous.
Praise of Venezuelan govt
The most famous among them his praise for the policies of Venezuelan President Hugo Chávez. He had said that Chávez government was working towards bringing higher economic growth, and to ensure that the results of the growth is shared more widely. He had praised the health and education policies of the leftist Venezuelan govt in 2007, and had said that the economic growth of the nation was “very impressive”.
Just like what Joseph Stiglitz is suggesting now, the Venezuelan govt had spent a lot on the social sector, which led to the eventual collapse of its economy. The govt spent so much on the social sector that it didn’t have money left to fight the economic depression. For almost a decade now, the Venezuelan economy has been marked by hyperinflation, shortage of food causing mass starvation and diseases, increased crime and mortality rates, all of which have resulted in massive emigration of the population from the country.
The communist government praised Joseph Stiglitz has become one of the most autocratic govts in current times. Hugo Chávez, and his successor Nicolás Maduro has been heading the govt by brutally suppressing the opposition, and had tried to hide the economic collapse initially. When the opposition parties won majority in National Assembly in 2016, Maduro created a National Constituent Assembly, which only has supporters of the government as members and has the power to supersede the national assembly.
U-turn on policies
Joseph Stiglitz is also known for taking U-turn on various issues. Earlier, he had opposed raising the minimum wage, saying that it will lead to job loss as more wage will mean more price which will reduce sales of the product. In his 1993 book Economics, he had correctly written that if the minimum wage is more than the market equilibrium wage, the demand for workers will come down. But when he was part of the Clinton administration, he had supported the hike in the minimum wage. When reminded about his earlier position, he had replied that the negative impact will be negligible.
In the fourth edition of his textbook published in 2006, Stiglitz supported higher minimum wage saying that it will lead to increased motivation of workers. He endorsed government forcing firms to pay higher minimum wages through legislation.
Predicted that impact of mortgage crisis will be effectively zero
One year after winning the Nobel prize, Stiglitz had declared that the risk of Govt. sponsored mortgage firms Fannie Mae and Freddie Mac defaulting on their debt was “effectively zero”. It was declared in a paper co-authored by Jonathan Orzag, Peter Orszag and Joseph Stiglitz. They have said that they had put the companies through “millions of potential future scenarios,” and then judgef the likelihood of default. Even though the assumptions in the test were said to be severe, they found that the probability of a default was “so small that it is difficult to detect.”
In 2008, both the companies collapsed as they faced large losses. Between 2008 and 2012, both the companies lost a total of $265 billion in the subprime crisis. Being govt sponsored companies, their losses were compensated by taxpayer’s money. The companies received $190 billion as bailout from the government. This shows, the authors of the 2002 paper failed to correctly gauge the financial situation of the two companies, and failed to anticipate the future situation in the housing market.
Baseless attacks on others and lies
Joseph Stiglitz, who was fired from World Bank for publicly criticising the policies of the bank, is also known for indulging in character assassination of others. He has been bitter critic of the IMF, and he had publicly insulted IMF staff as “third-rate economists from first-rate universities”. He had also made an unsubstantiated accusation that a potential job offer from Citibank had compromised IMF MD Stanley Fischer’s integrity.
Stiglitz was also accused of lying by IMF chief economist Kenneth Rogoff. After relentless attack on IMF by Stiglitz, Rogoff had written an open letter to him. In the letter, he accused Stiglitz of inventing a meeting between Larry Summers and Jean-Michel Severino that never took place. He wrote, “On page 112, you have Larry Summers (then Deputy U.S. Treasury Secretary) giving a “verbal” tongue lashing to former World Bank Vice-President Jean-Michel Severino. But, Joe, these two have never met. How many conversations do you report that never happened?”
The criticism of India by Stiglitz has attacked sharp criticism. FICCI president Sr Sangita Reddy has said that the economic indicators show a smart recovery for India. “We will soon bounce back. Naysayers like Joseph Stiglitz don’t understand the Indian economy or resilience”, the joint MD of Apollo Hospitals said.