Joseph Stiglitz, the Columbia professor, Nobel Prize winner, and former chief economist at the World Bank, is best known for his critical attitude toward globalization and “free-market fundamentalism.” After he visited the Occupy Wall Street protest (video below) this week, he spoke to The National Memo about what can be done to satisfy the frustrations of those who see a mostly unchanged financial system since the crisis of 2008 — and his sense of the new protest movement generally.
“Protests are a way of articulating unhappiness, dissatisfaction, that something is wrong with the system,” he said Tuesday. “Unfortunately, they arise when political proceses themselves have dealt with a problem inadequately. For instance, we saw that very clearly in 1999 in the globalization protests, where there was a strong sense that the democratic political processes were not working and the interests of the environment and those concerned about the poor in developing countries were dominated by special interests, including interests of financial markets and pharmaceutical companies and so forth. And I think what we’re seeing now is that same kind of frustration.”
He said the Dodd-Frank financial reform legislation signed into law last year was “in many ways a step in the right direction” but that it “didn’t go far enough,” especially when it comes to preventing a situation where certain banks are “too big to fail.”
One idea that has been gaining traction across the world — even in some conservative governments — is a tax on the largest financial transactions. Stiglitz is a big supporter.
“There’s been a realization that the time has come for a financial transaction tax. Many people on both sides of the political spectrum from left to right, Merkel in Germany, France, Spain. Broad support is now coming out. The general principle in economics is it’s better to tax bad things than good things. Transaction taxes are directed at really excessive financial [behavior]. It’s one of those taxes that can really enhance economic efficiency, and it’s a tax on the sector that has been one of the clear culprits in our economic woes.”
He expressed hope that the Occupy Wall Street protests would shake things up in Washington.
“We haven’t seen the economy restored to health, and in that context it’s very natural that there’s a high level of frustration, and a desire by ordinary citizens to vent their frustration, and hopefully, that that will motivate a change in behavior on the part of the political process.”
Here’s the video of the economist’s appearance with journalist Jeff Madrick at the protest over the weekend: