Friday, 15 April 2011

Stiglitz on the Irish crisis

Tom McDonnell: Joe Stiglitz's preface to a new collection of essays on Exiting from the Crisis makes for interesting reading. The publication (to which PE's Rory O'Farrell also contributed) is available for download here.

Professor Stiglitz mentions Ireland in the preface, noting that:

“Ireland has faced a crisis largely because it followed the standard free market orthodoxy: unfettered markets led to a bloated financial sector which put at risk the entire economy; while politicians boasted of the growth (the benefits of which were not uniformly shared) they took little note of the risks to which they were exposing the economy. The core lesson of Ireland’s experience – and that of the US – is that one cannot rely on unfettered markets or self-regulation.”


Paul Hunt said...

So presumably we need fettered markets and effective external regulation - or should we seek to eliminate markets and internalise regulation in the process?

Prof Stiglitz is also good here:

Tom McDonnell said...

Thanks for the link. An excellent article.

I especially like this:
"Much of today’s inequality is due to manipulation of the financial system, enabled by changes in the rules that have been bought and paid for by the financial industry itself—one of its best investments ever."

Surely the appropriate 'fettering' and regulation of a market is the only way to ensure the survival of a truly competitive market in the long-run?

Of course a lot hinges on the word 'appropriate'.

Paul Hunt said...

I agree about 'appropiate', but let an open debate focus on that. However, for the global banking and financial sector, this needs global action. Following the petition by 1,000 economists in 53 countries requesting the G20 finance ministers to implement a financial transactions tax (FTT), Ha-joon Chang has a good follow-up here: