Dump Neoliberalizm, Nobel Laureate Stiglitz Tells U.S., EU

Like previous disruptions to the global economy, Russia’s war in Ukraine has proved the fallacy of relying on markets alone to mitigate risks and strengthen countries’ resilience.

Photo Insert: Neoliberalism has failed another test and must finally be replaced by a new economic vision based on new values, according to Nobel laureate Joseph E. Stiglitz.

Neoliberalism has failed another test and must finally be replaced by a new economic vision based on new values, Nobel laureate Joseph E. Stiglitz wrote for Project Syndicate.

The fallout from the invasion has shown the unforeseeable disruptions constantly confronting the global economy. No one could have predicted the September 11, 2001, terrorist attacks, and few anticipated the 2008 financial crisis, the COVID-19 pandemic, or Donald Trump’s election, which resulted in the United States turning toward protectionism and nationalism, Stiglitz added.

Even those who did anticipate these crises could not have said with any precision when they would occur.

Stiglitz is a University Professor at Columbia University and was a former chief economist of the World Bank (1997-2000), chair of the US President’s Council of Economic Advisers, and co-chair of the High-Level Commission on Carbon Prices.

“Underlying the current lack of resilience is the fundamental failure of neoliberalism and the policy framework it underpins. Markets on their own are short-sighted, and the financialization of the economy has made them even more so. They do not fully account for key risks – especially those that seem distant – even when the consequences can be enormous. Moreover, market participants know that when risks are systemic – as was the case in all the crises listed above – policymakers cannot idly stand by and watch,” he argued.

Precisely because markets do not account fully for such risks, there will be too little investment in resilience, and the costs to society end up being even higher. The commonly proposed solution is to “price” risk, by forcing firms to bear more of the consequences of their actions.

The same logic also dictates that we price negative externalities like greenhouse-gas emissions. Without a price on carbon, there will be too much pollution, too much fossil-fuel use, and too little green investment and innovation, Stiglitz concluded.

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