Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: Well, our next guest follows the US economy, really the
Speaker 2: global economy has for decades. Weigh in on the trends
Speaker 2: that describe us and divide us financially, economically, and so
Speaker 2: much more. Let's get to the interview this hour with
Speaker 2: us as Nobel Laureate economist and Columbia professor Joseph Stieglitz.
Speaker 2: He was an economic advisor to presidents, including chair of
Speaker 2: the Council of Economic Advisors that was during the Clinton administration.
Speaker 2: Former Chief economist at the World Bank, He's written numerous
Speaker 2: books and research papers. His latest book, The Road to Freedom,
Speaker 2: Economics and the Good Society. He joins us here in
Speaker 2: New York City. Professor Stieglitz, So great to be talking
Speaker 2: with you once again. It's been a while, but great
Speaker 2: to have you here, and we want to talk about
Speaker 2: the book. But we would be remiss not to ask
Speaker 2: you your take on today's economic environment and the stickiness
Speaker 2: of inflation. What is the smart conversation that you think
Speaker 2: we should all be having here at Bloomberg when it
Speaker 2: comes to today's US economic environs.
Speaker 3: From the point of view of economics.
Speaker 1: Having two and a half or even three percent inflation
Speaker 1: is not a big deal.
Speaker 3: You know, the two.
Speaker 1: Percent target was pulled out of thin air. It was
Speaker 1: not based on economic science. What we want to be
Speaker 1: sure of is that we don't have runaway inflation. And
Speaker 1: inflation has clearly been tamed, it's been brought down. It's stable.
Speaker 1: It fluctuates from month to month, but it is not
Speaker 1: a major problem. We should be focusing on other things,
Speaker 1: continuing economic growth, making sure that all Americans share in
Speaker 1: that growth. Those are the kinds of things that we
Speaker 1: ought to be thinking more about.
Speaker 4: So, Professor Stieglitz, should the Fed abandon the two percent
Speaker 4: inflation goal? Should they have a different inflation goal, a
Speaker 4: different metric that they should be held accountable to.
Speaker 3: Yes, I think they should.
Speaker 1: I think they should be talking about being within a
Speaker 1: range to maybe three, three and a half four percent.
Speaker 1: You know, there's actually some economic science that says, especially
Speaker 1: in a time of major structural change such as we're
Speaker 1: going through, having a little higher inflation actually is helpful
Speaker 1: in realocating resources in the presence of downward nominal rigidities
Speaker 1: of wages, because what guides the movement of resources from
Speaker 1: one place to another is relative wages, and if some
Speaker 1: wages are sticky downward, you want other wages to go
Speaker 1: up enough to move labor, and that means you're going
Speaker 1: to have to have more inflation. So actually a little
Speaker 1: higher inflation is actually good for the economy.
Speaker 2: Do you think the FEDS management of the economy has
Speaker 2: been a good one in terms of policy?
Speaker 3: Quite? Frankly, no, put it bluntly.
Speaker 1: Let's go back to when inflation broke out after the
Speaker 1: pandemic and the Russian invasion of Ukraine. The question was
Speaker 1: what was the cause, the primary cause of the inflation.
Speaker 3: It was unambiguous.
Speaker 1: It was the pandemic and war related interruptions in supply
Speaker 1: chains and rising prices caused by shortages of oil and food.
Speaker 1: It was demand shifts. People wanted to live in different places,
Speaker 1: and that meant housing prices went up where there was
Speaker 1: a scarcity, but didn't go down as much where there
Speaker 1: was where people didn't want to live, like in.
Speaker 3: Parts of New York.
Speaker 1: Raising interest rates actually impedes the ability.
Speaker 3: To the economy to respond to that kind of.
Speaker 1: Structural To that that kind of challenge, we needed to
Speaker 1: build more houses in the places where there was a scarcity,
Speaker 1: and having higher interest rates actually works, makes it more difficult.
Speaker 1: They also have a modeled economy that's based on competition.
Speaker 1: That might have been true some time ago, but we
Speaker 1: have an economy with a lot of market power at
Speaker 1: firms are trading off. If they raise their prices, they
Speaker 1: get more profits today, they lose profits in the future,
Speaker 1: and in that trade off is when you raise the
Speaker 1: interest rate, they value those future losses less and they
Speaker 1: were induced to raise their prices more.
Speaker 3: So margins go up.
Speaker 1: And a marked aspect of the inflation that we've just
Speaker 1: been through is that markets have increased enormously.
Speaker 4: Hey, Professor Stieglitz, I just wanted to speaking of the FED, Carol,
Speaker 4: I know you would a well.
Speaker 2: One one thing before we have a bigger, broader question,
Speaker 2: and it's certainly been a bigger jump in on Well,
Speaker 2: what do you think then we should be cutting rates already,
Speaker 2: that we're behind the curve right now?
Speaker 1: Yes, I think I think the risks are asymmetric. I
Speaker 1: think with Europe already slowing down in recession, we don't
Speaker 1: know where.
Speaker 3: China is going to be going.
Speaker 1: I think proudents would have us going back to a
Speaker 1: more normal infrast rate. The higher interest rates are really
Speaker 1: not going to be taming inflation.
Speaker 3: That that model was wrong.
Speaker 1: In another way, they dramatically had said that we're going
Speaker 1: to need five percent of inflation for five percent unemployment
Speaker 1: for some time in order to get inflation down.
Speaker 3: They were absolutely wrong. We got inflation down.
Speaker 1: Where in a period where we kept unemployment relatively low.
Speaker 3: So their analysis of the economy was just off.
Speaker 1: And meanwhile, they have put at risk our banking system
Speaker 1: and we had a problem in sell Compalty Bank partly
Speaker 1: because of the enormous changes in terms structure which their
Speaker 1: policies led to. And we're facing a deck crisis in
Speaker 1: the developing countries and emerging markets. So there's enormous one
Speaker 1: sided risk.
Speaker 3: I believe in the policies that they've been pursuing well.
Speaker 4: On the FED, Professor Stieglitz, I got to ask you
Speaker 4: about this Wall Street Journal report that broke last night
Speaker 4: that said how former Trump administration officials are coming up
Speaker 4: with plans to take on the independence of the Federal
Speaker 4: Reserve essentially at one end of the spectrum, even allowing
Speaker 4: if President Trump gets re elected him to weigh in
Speaker 4: on FED policy when it comes to interest rates. Talk
Speaker 4: a little bit about your reaction to if this were
Speaker 4: to come to fruition, how important the independence of the
Speaker 4: FED is, and if that would really put at risk
Speaker 4: the model of the independence of the US financial system.
Speaker 1: Well, I think Trump is himself a major argument why
Speaker 1: you want to have de pendings.
Speaker 3: Of the FED.
Speaker 1: You don't want somebody who doesn't understand monetary policy, who would,
Speaker 1: uh put at risk the long run stability of the
Speaker 1: economy for the short term electoral advantage of having a
Speaker 1: hot economy right before an election. That's precisely why there
Speaker 1: is an argument for independence. So you know, I believe
Speaker 1: in the accountability of the FED. Uh, it is a
Speaker 1: public institution. Uh.
Speaker 3: We had previous chairmen of the FED. We're very cognizant
Speaker 3: of that.
Speaker 1: I remember Paul Voker saying Congress created us and Congress
Speaker 1: can uncreate us. So there is a kind of accountability
Speaker 1: that responsible heads of the FED understand. But we certainly
Speaker 1: don't want Donald Trump to be running monetary policy. All right.
Speaker 2: We do want to into your book because you've been
Speaker 2: thinking a lot about the meaning of freedom, and I
Speaker 2: think we throw the word abown a lot.
Speaker 3: I think.
Speaker 2: The folks who created the United States are founding fathers
Speaker 2: thought about freedom a lot and the difference though between
Speaker 2: what that really means, and maybe it comes down to,
Speaker 2: as you think about it, the values that we all
Speaker 2: have in society tell us about how we need to
Speaker 2: kind of maybe redefine freedom and what it means in
Speaker 2: terms of citizens more broadly and generally, as well as
Speaker 2: economically in terms of their success.
Speaker 1: Sure, you know, I approached the issue obviously as an economist,
Speaker 1: and as an economist we think of freedom is free
Speaker 1: to do what you can do.
Speaker 3: What are the choices that you can make.
Speaker 1: Somebody who is at the point of starvation doesn't really
Speaker 1: have any freedom.
Speaker 3: He has to do what he can to survive.
Speaker 1: And expanding the set of choices that an individual is
Speaker 1: available is a.
Speaker 3: Way of saying that he has more freedom.
Speaker 1: And here there are a couple of ideas I put
Speaker 1: forward in my book.
Speaker 3: The first is.
Speaker 1: That in our integrated urban twenty percentury economy, one person
Speaker 1: does the expansion of his freedom may lead to less
Speaker 1: freedom of others. Isaiah Berlin, the great Oxford philosopher, put
Speaker 1: it this way. He said, freedom for the wolfs has
Speaker 1: often meant death for the sheep, and in the context
Speaker 1: of the US, for instance, freedom to carry in AK
Speaker 1: forty seven means that people will die, and it means
Speaker 1: that our school children are not free from fear.
Speaker 3: They have to.
Speaker 1: Learn how to what to do if a gunman comes
Speaker 1: into the classroom and teachers have to go to school
Speaker 1: worried about whether they'll be attacked. Freedom not to wear
Speaker 1: a mask is exposed, taking away the freedom of others
Speaker 1: to live. So we have to balance these freedoms. There
Speaker 1: are trade offs. Many cases, those trade offs are easy.
Speaker 1: Freedom to pollute takes away the freedom to have somebody
Speaker 1: with asthma to even live, let alone the freedom of.
Speaker 3: All of us to live on our planet.
Speaker 1: So there, I think we have to constrain the freedom
Speaker 1: of the polluters and the freedom of exploiters.
Speaker 2: So we're talking with Joseph Stieglitz, Nobel Laurate economist, Professor
Speaker 2: of economics at Columbia University, and we're talking about his
Speaker 2: new book, The Road to Freedom, Economics and the Good Society.
Speaker 2: All Right, So if we think Professor Stieglitz the idea
Speaker 2: of freedom, so it's maybe more inclusive or it's a
Speaker 2: broader definition, how do we do that within society? With corporations,
Speaker 2: the need to be profitable for those we are in
Speaker 2: earning season. We look at companies and their reports, and
Speaker 2: that's how we kind of measure them grade them. What
Speaker 2: does government need to do? How can we maybe be
Speaker 2: better if you will for more?
Speaker 1: Well, first, let me emphasize that in the world I've
Speaker 1: just described, there's an important role for regulations. Corporations often
Speaker 1: don't like that, but we have to remember the purpose
Speaker 1: of our economy is to improve the lives and live
Speaker 1: goods of our citizens.
Speaker 3: It's not the other way around.
Speaker 1: That the economy is supposed to serve society, not the
Speaker 1: other way around.
Speaker 3: There's another aspect.
Speaker 1: Regulations can't actually expand the freedom of all of us.
Speaker 1: Think about stop likes. If we don't have stop likes,
Speaker 1: we have good luck. None of us have the freedom
Speaker 1: to move. Stop likes ors are a little bit of
Speaker 1: a coercion, mean that I have to take turns, but
Speaker 1: by taking turns, we all have more freedom. And that
Speaker 1: basic idea extends much more broadly. People don't like to
Speaker 1: pay taxes. That's they often feel kind of coercion. But
Speaker 1: when those tax revenues are used productively, like they were
Speaker 1: to invest in the Internet and invest in the m
Speaker 1: r any platform that led to the vaccine against COVID nineteen,
Speaker 1: that expands our freedom to do. And so we have
Speaker 1: to look at this and I would say, in a
Speaker 1: little bit more holistic way, Well.
Speaker 4: I want to go to your taxes point, because I'm
Speaker 4: curious if you could wave a magic wand fplement some
Speaker 4: sort of tax policy here in the US, what would
Speaker 4: it be. How could you reinvent it? Would you broaden
Speaker 4: the tax space, would you lean more on corporate taxes,
Speaker 4: would you tax wealth more? What, in your opinion would work?
Speaker 3: Well, I begin by.
Speaker 1: Analyzing what are some of the key problems on our
Speaker 1: society basis, And one of them is inequality and one
Speaker 1: of the reasons. And a second problem is the growth
Speaker 1: of market power, which has been enormous in the last
Speaker 1: few decades.
Speaker 3: And those two are obviously linked.
Speaker 1: When you have more market power, the fruits of that
Speaker 1: market power go to those at the top. We also
Speaker 1: have more economists called monopsity power. Firms have market power
Speaker 1: over workers and have driven down their wages significantly below
Speaker 1: a competitive level. So I want to have more anti
Speaker 1: trust policy, more competitive labor market policies, but.
Speaker 3: That can take time.
Speaker 1: Meanwhile, there's a lot of monopoly rents, and so part
Speaker 1: of what I would begin by doing is increasing corporate
Speaker 1: conflicts taxes, which are not a tax on return to capital,
Speaker 1: they are tax on this monopoly profits. I'd also like
Speaker 1: to have environmental taxes firms that are engaged, including the environment,
Speaker 1: on to pay for the damage that they're doing. Remarkably, America,
Speaker 1: those at the top pay a lower percentage of their
Speaker 1: taxes than those down below. Even some of our richest
Speaker 1: people have commented that they think that's right wrong.
Speaker 2: We can I ask you, like on a day when
Speaker 2: we're looking at a company, and forgive me, I'm just
Speaker 2: singling out because it popped. Shares of Alphabet are now
Speaker 2: a two trillion dollar market cap company this week, you
Speaker 2: know next week.
Speaker 3: Last week.
Speaker 2: We've been obsessed with, certainly what we call the Magnificent seven,
Speaker 2: the big megacap technic companies.
Speaker 3: They're very big.
Speaker 2: Amazon, we talked with an author recently, so entrenched certainly
Speaker 2: in our world, and you think about their reach. Are
Speaker 2: these the companies the individuals, whether it's an Amazon, whether
Speaker 2: it's a Meta, whether it's an Alphabet that you think
Speaker 2: you talk about growth of market power? Is it too
Speaker 2: much at this point in your view that something needs
Speaker 2: to be done to rain them in or do the
Speaker 2: benefits outweigh the downside here, Well, they do.
Speaker 1: Give benefits, but they have a lot of downsides. They
Speaker 1: need to be better regulated. Europe has done a better
Speaker 1: job of regulating with them. The digital harms are quite
Speaker 1: obvious and have been by now well documented. But talking
Speaker 1: narrowly now about market I think they we ought to
Speaker 1: do what we can to limit their market power, but
Speaker 1: tax the fruits of that market power, the revenues that
Speaker 1: they get at a much higher rate. You know, if
Speaker 1: you ask the question, would Jeff Bezos or the founders
Speaker 1: of Google or Zuperbird stop working if we tax their
Speaker 1: wealth in a way, say a three percent you know,
Speaker 1: so any answer is obviously they would continue to work.
Speaker 4: Do you think that they would leave the United States?
Speaker 1: Well, we have imposed what we call an exit tax
Speaker 1: that those with a lot of wealth and don't feel
Speaker 1: who don't feel loyalty in the United States.
Speaker 3: Can leave.
Speaker 1: We allowed them to leave, but they have to pay
Speaker 1: tax that represents attacks on the groups of the wealth
Speaker 1: that they've accumulated while they've been in the United States.
Speaker 1: And that tax is significant, and it is a deterrent,
Speaker 1: and if it's not, it may be that we ought to.
Speaker 3: Consider raising that tax.
Speaker 1: But I don't think people like at Zuckerberg Musk are
Speaker 1: going to leave the United States. They realize the benefits
Speaker 1: of American citizenship.
Speaker 4: We're speaking right now with Professor Joseph Stieglitz, Nobel Laurate Economists.
Speaker 4: He's a professor of economics at Columbia University. He's got
Speaker 4: a new book out, The Road to Freedom, Economics and
Speaker 4: the Good Society. Professor, as I mentioned, you are up
Speaker 4: at Columbia. You've been there for a long time. We've
Speaker 4: been watching everything that's been happening on the campus there,
Speaker 4: as well as campuses including USC, Yale, MIT. The list
Speaker 4: continues to go on here in the United States, as
Speaker 4: we've seen pro Palestinian protests and encampments take over some
Speaker 4: of these campuses. Freedom in the academic context, how are
Speaker 4: you looking at the protest protests and the context of
Speaker 4: freedom of speech.
Speaker 3: That's a good question.
Speaker 1: I mean, person, let me comment that up where my
Speaker 1: office is, which is the Manhattanville campus.
Speaker 3: Uh, things are.
Speaker 1: Very quiet at the Business school at the Business School,
Speaker 1: but you've been.
Speaker 2: That campus a long time and you've seen different protests
Speaker 2: over the years, and it seemed to be I was
Speaker 2: there when there were protests, and it seems like that's
Speaker 2: what students are should be doing, exploring and pushing back
Speaker 2: when they don't feel like things are right. But what
Speaker 2: is what is the what is it does protests and
Speaker 2: the context of freedom of speech.
Speaker 3: So I agree with you very strongly.
Speaker 1: I'm actually happy the students are engaged in the world,
Speaker 1: you know, That's that's one of the things I probably
Speaker 1: kept them to be interested in the world, and also
Speaker 1: to reason about the world, to come to understand it,
Speaker 1: and to debate how how could should things be changed?
Speaker 3: So that's a good thing.
Speaker 1: And in my own life, protests have played a very
Speaker 1: important role.
Speaker 3: Back in nineteen.
Speaker 1: Sixty three, I was down there in the march in
Speaker 1: Washington with Martin Luther King, and you know that speech
Speaker 1: he gave about I have a dream has been a
Speaker 1: lifelong inspiration to me. So even civil disobedience in certain
Speaker 1: circumstances can be an important mechanism for social change. We
Speaker 1: have a special responsibility, of course, to make sure on
Speaker 1: our campus that all views get heard, that we can
Speaker 1: have civil debates, and so on the one hand, academic
Speaker 1: freedom is really important, and I'm really took offense to
Speaker 1: Speaker Johnson coming up to our campus and calling for
Speaker 1: the resignation of our presidents.
Speaker 3: I hadn't seen anything.
Speaker 1: Like that, maybe since the HUAC hearings the House on
Speaker 1: American Activities Committee back with McCarthy in the fifties.
Speaker 3: I mean, that kind of.
Speaker 1: Direct interference in academia is just unheard of. And we
Speaker 1: know some of the Republicans have been trying to undermine
Speaker 1: universities because universities teach children how to our young our youngsters,
Speaker 1: our young men and women how to think, and a
Speaker 1: lot of people don't like that idea that they should
Speaker 1: be thinking for themselves. But at the same time, we
Speaker 1: have to create on campus a community where all voices
Speaker 1: are heard, and I think we're actually working very much
Speaker 1: towards that.
Speaker 3: There were only a few people.
Speaker 1: Raising problems, and I think having outside a takers like
Speaker 1: the speaker is not hopeful.
Speaker 2: We're going to leave it on that note. We always
Speaker 2: appreciate hearing you talk about hearing from voices. We always
Speaker 2: appreciate hearing from you. Professor Stieglitz, Thank you so much,
Speaker 2: Nobel lorid Economist Columbia professor Joseph Stieglitz.
Speaker 3: Here in New York City.
Speaker 2: Check out his book his latest book, The Road to Freedom,
Speaker 2: Economics and the Good Society. Really appreciate us spending some
Speaker 2: time with you.