Stiglitz is the darling economist of the Democrats & Left as it stands. He and they have been consistent enough in their points of view to become a decent and reasonable target for whatever coordinated opposition there might be.
It has been a while since I've been tuned into the daily operations of the markets. About six or eight months ago, not long after Bloomberg started charging for their podcasts, I dropped out. I had also decided to return to Miller's Alley, tired of finding myself disenchanted with things over which I have only partial understanding and even neglible control. I did play the market for a quarter, and I got about 8%. But my focus has changed to more prosaic concerns. While I still await Taleb's next book, I've unsubscribed from Roubini's daily updates. Essentially the last event for me was the hearings on Goldman Sachs. Since then, not so much.
So it's good to know that the mention of Stiglitz still gives me heartburn. I interpret him to be a government supply-sider. If the government spends it, it will multiply, is probably Stiglitz in a nutshell. I welcome a more sophisticated and nuanced interpretation.
At my level of engagement with American business, which is basically an understanding of how F1000 companies budget, plan and manage their moola from an accounting systems point of view - and also how many companies manage professional talent, I have a touch of jaundice. What I tend to believe to be the case is that a certain class of business managers are essentially irreplaceable and immune. As such there are plenty myths propogated in the political sphere about a raft of virtues that they essentially don't have. Similarly there are an equal number of myths propogated about their corruption, which is similarly overstated. Edison's aphorism is appropriate. It's 99% perspiration.
Similarly in matters of government the Right is often guilty of overstating the virtues of military service and the Left of bureaucrats and agencies at intersection of the social sciences and public policy. I strongly suspect those two are mostly sweaty enterprises into which wisdom and inspiration injections are generally minimal.
So what are the chances that anybody who wins a Nobel Prize in anything can actually be right enough about something large, like the fate of the American economy, and pull together what's necessary to effect change? That is to say, responsibly. I say the chances are slim, but the effort is worth it. And so into the arena of famousity, a number of economic hats and theories are tossed. I happen to like a guy named Zingales, who clearly demonstrated the proper answer to the problem of foreclosure and toxic mortgages as well as the reason why his answer would not be taken up. The great Paul Volcker, who essentially stopped the inflation we say in the early 80s, has been reduced to an eponymous rule which may or may not prove to be just another boulder in a river of dodgy arbitrage. And of course Summers and Geithner, brilliant as they may be have used quantitative easing to give us historically low mortgage interests rates that nobody actually qualifies for because banks make money on the carry trade in Treasuries, not on lending to Americans. Stiglitz and stimulus are peas in a pod, but it's not working. His answer seems to be, stimulate more - you're not doing enough. It's gotta be trillions, evidently.
I seem to recall some mumbling about VAT for the US. And what annoys Progressives most about the Tea Party movement is their minimalist approach to taxation which of course jeopardizes all of their lovely and heartfelt humanitarian impulses made manifest by government spending. So the temptation to look over at Europe and other Western democracies with effective tax rates that sometimes double ours must be irresistable. And cracking the rhetorical whip over the backs of Republicans, given the moral smugness of pacifists and general anti-American grumbling, is a favorite pasttime. Why not have higher taxes?, they say. It must be ignorance and immorality.
From my point of view, it all rather comes down to the virtue or vice of deficit spending. And I am convinced that the multipliers of government stiumulus are simply not there. But even if they were and if Stiglitz were right, how much do we become state capitalists? And what kind of state capitalists would we be?
It was Noam Chomsky who convinced me back in the mid80s before businesses would allow UNIX into their IT shops that America under Reagan had become Military State Capitalist. I agreed with his rhetoric that all of our science and technology expertise was going from Electrical Engineering school into the Military Industrial Complex. And I couldn't argue, because way back in those days I was already using email. But was the public in on email? No way buddy. My buddy Greg put it the best way I thought possible. "If I want to buy my sweetheart a new fur coat, I have to design a new missle." Greg was one of the smartest guys I knew and in 1986 he was dead right. Now there is venture capital and iPads. Then, there was Raytheon, Northrop and Bunker-Ramo.
My guess is that we'd become a Healthcare Industrial Complex under Obama's State Capitalism, but that's just a silly guess. What would Stiglitz really have us stimulate and where would his multipliers multiply? Qui bono?