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The fact that the global economy is broken may be widely accepted, but what precisely needs to be fixed has become the subject of enormous controversy. In 2008, the president of the United Nations General Assembly convened an international panel, chaired by Nobel Prize-winning economist Joseph Stiglitz and including 20 leading experts on the international monetary system, to address this crucial issue. This report controversially establishes a bold agenda for policy change, both broad in scope and profound in its ambitions.
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Most Helpful Customer Reviews
8 of 10 people found the following review helpful
Format:Paperback|Amazon Verified Purchase
Those who know J. Stiglitz's work (compulsory reading) see his mighty stamp on this hard-hitting and all important report for the future of mankind.
Facts and figures
The 2007 crisis showed blatantly the interdependence of all (inter)national economies.
In the US, 1 out of 6 people has no full-time job; worldwide 200 million people were driven into poverty by becoming unemployed. The havoc on pensions was also tremendous.
The crisis exposed deep flaws in the evangel of neoliberal free market fundamentalism. Markets are not stable, not self-regulating and not efficient (information asymmetries between seller and buyer).
Aim
For the authors, ethical and moral values should be decisive factors in economic decision making. In a world with huge unmet needs, a plague of massive unemployment is unacceptable.
The Report proposes to install, not only, a new global economic order based on stability and faster growth, but also, more democratic governances (those who suffer have no say, those responsible are not held accountable).
Macro-economic solutions
To tackle the huge problems of poverty, malnutrition, environmental pollution, climate change and social insecurity, the world economy needs more stability and growth of global aggregate demand: less volatile exchange rates and asset prices, a social insurance system, more income equality, no protectionism and no `too big to fail' institutions. The latter should function with less leverage and give easier access to their resources.
Regulation solutions
Financial deregulation was one of the main causes of the global crisis. The financial sector became an end, not a means of economic activity. But, it was not capable to manage risk, to allocate capital efficiently and to mobilize savings at the lowest possible cost.
In order to protect the consumer and avoid disastrous externalities (unemployment, poverty), the Report proposes the creation of a `New Central Bank' (instead of the do-wrongly's) and a `Financial Regulatory Authority". Together, those new institutions should impose transparency (no creative accounting), limit the size of financial institutions, regulate credit rating agencies, create a deposit insurance system, allow public alongside private banking and prohibit the use of tax havens.
International Institutions - solution
With its counter-productive policies, which undermined social protection, the IMF made crises worse than they were. Its policies should, on the contrary, support employment worldwide. In that case, its lending capacity could be enhanced. But in any case, its governance should be more democratic.
The first task of the WTO should be the implementation of anti-protectionist measures.
The Report proposes two new institutions, the `Global Economic Coordination Council' and an "International Panel of Experts' in order to coordinate economic policies worldwide.
Long-term reforms
A new global architecture is needed to manage the global good.
The global reserve system should be improved by the creation of a supranational international new currency (e.g., the SDRs of the IMF).
An `International Debt Restructuring Council' should be installed for the management of sovereign debt defaults.
The risk between lenders and borrowers could eventually be managed with GDP- and commodity-linked bonds.
Also, novel financial mechanisms, like `solidarity levies', should be imposed in order to diminish living standard inequalities.
This report is a must read for all those interested in the future of mankind.
One minor remark: the report has no index.
It is evident, that all the world's problems cannot be solved by economic measures.
There are also pure ethical or moral problems, like the world's demographic explosion.
Facts and figures
The 2007 crisis showed blatantly the interdependence of all (inter)national economies.
In the US, 1 out of 6 people has no full-time job; worldwide 200 million people were driven into poverty by becoming unemployed. The havoc on pensions was also tremendous.
The crisis exposed deep flaws in the evangel of neoliberal free market fundamentalism. Markets are not stable, not self-regulating and not efficient (information asymmetries between seller and buyer).
Aim
For the authors, ethical and moral values should be decisive factors in economic decision making. In a world with huge unmet needs, a plague of massive unemployment is unacceptable.
The Report proposes to install, not only, a new global economic order based on stability and faster growth, but also, more democratic governances (those who suffer have no say, those responsible are not held accountable).
Macro-economic solutions
To tackle the huge problems of poverty, malnutrition, environmental pollution, climate change and social insecurity, the world economy needs more stability and growth of global aggregate demand: less volatile exchange rates and asset prices, a social insurance system, more income equality, no protectionism and no `too big to fail' institutions. The latter should function with less leverage and give easier access to their resources.
Regulation solutions
Financial deregulation was one of the main causes of the global crisis. The financial sector became an end, not a means of economic activity. But, it was not capable to manage risk, to allocate capital efficiently and to mobilize savings at the lowest possible cost.
In order to protect the consumer and avoid disastrous externalities (unemployment, poverty), the Report proposes the creation of a `New Central Bank' (instead of the do-wrongly's) and a `Financial Regulatory Authority". Together, those new institutions should impose transparency (no creative accounting), limit the size of financial institutions, regulate credit rating agencies, create a deposit insurance system, allow public alongside private banking and prohibit the use of tax havens.
International Institutions - solution
With its counter-productive policies, which undermined social protection, the IMF made crises worse than they were. Its policies should, on the contrary, support employment worldwide. In that case, its lending capacity could be enhanced. But in any case, its governance should be more democratic.
The first task of the WTO should be the implementation of anti-protectionist measures.
The Report proposes two new institutions, the `Global Economic Coordination Council' and an "International Panel of Experts' in order to coordinate economic policies worldwide.
Long-term reforms
A new global architecture is needed to manage the global good.
The global reserve system should be improved by the creation of a supranational international new currency (e.g., the SDRs of the IMF).
An `International Debt Restructuring Council' should be installed for the management of sovereign debt defaults.
The risk between lenders and borrowers could eventually be managed with GDP- and commodity-linked bonds.
Also, novel financial mechanisms, like `solidarity levies', should be imposed in order to diminish living standard inequalities.
This report is a must read for all those interested in the future of mankind.
One minor remark: the report has no index.
It is evident, that all the world's problems cannot be solved by economic measures.
There are also pure ethical or moral problems, like the world's demographic explosion.
6 of 11 people found the following review helpful
Format:Paperback
I love to read Stiglitz: he is informative, committed, even passionate about his theme, he thinks forward and much of his criticism of the prevailing system is accurate and to the point.
Nevertheless, he is too committed. His main thesis is that the system is biased and has fundamental flaws that would always determine its ultimate failure. He flays alive his opponents ascertaining to them a complete lack of understanding of the fundamentals of modern economics, imputing to them a complete belief in the market and its self correcting forces, whereas, he postulates, such things do not exist and the role of the State as a regulator has been bypassed, that being the cause of our present problems.
That is the thesis he develops in «Freefall», his book about the root causes of the crisis. Although Mr. Stiglitz acknowledges in the preface that the growth in the west was based on a mountain of debt and that there is something fundamentally wrong when one part of the world consumes without producing and the other produces without consuming, he does not withdraw the consequences of this.
As a matter of fact, his enmity towards the «system», what he calls the Washington Consensus, or his «receipt for disaster», blinds him to the fact of the fundamental shift in economic paradigm that occurred in the last two decades when several regions of the world fuelled by huge rates of savings, like Japan in the sixties and seventies, started to accede to enough technology to develop a good enough industry to export «en force», profiting from very low human resource costs and almost no social entitlements. In the meanwhile, the western hemisphere entered an economy of services of high added value but disconnected from the needs and education of its populations. Also, more and more entitlements put more and more pressure in Governments to cope with rising demands of social coverage.
That was the «receipt for disaster» of which Mr. Stiglitz says nothing of consequence.
As a matter of fact, there might be a lot of things quite wrong with the prevailing system, but the fundamental one about the present crisis, something that will endure in the future and is only getting worse, is that this is the «crisis of debt» both private, caused by an unsustainable model of growth based on ever growing debt due to the lack of savings, and public, caused by ever rising demands on Government to cover every aspect of people's life.
Anyone looking at the last ten years will see a glaring fact: that for long the trend of growth in the West is much lower then in emerging economies, breaking a previous long trend of higher growth in developed countries; and, that also breaking with the previous secular trend, the West became a importer of capital, instead of exporting it.
That is globalization in reverse and we are now coping with its long reaching consequences.
Nevertheless, he is too committed. His main thesis is that the system is biased and has fundamental flaws that would always determine its ultimate failure. He flays alive his opponents ascertaining to them a complete lack of understanding of the fundamentals of modern economics, imputing to them a complete belief in the market and its self correcting forces, whereas, he postulates, such things do not exist and the role of the State as a regulator has been bypassed, that being the cause of our present problems.
That is the thesis he develops in «Freefall», his book about the root causes of the crisis. Although Mr. Stiglitz acknowledges in the preface that the growth in the west was based on a mountain of debt and that there is something fundamentally wrong when one part of the world consumes without producing and the other produces without consuming, he does not withdraw the consequences of this.
As a matter of fact, his enmity towards the «system», what he calls the Washington Consensus, or his «receipt for disaster», blinds him to the fact of the fundamental shift in economic paradigm that occurred in the last two decades when several regions of the world fuelled by huge rates of savings, like Japan in the sixties and seventies, started to accede to enough technology to develop a good enough industry to export «en force», profiting from very low human resource costs and almost no social entitlements. In the meanwhile, the western hemisphere entered an economy of services of high added value but disconnected from the needs and education of its populations. Also, more and more entitlements put more and more pressure in Governments to cope with rising demands of social coverage.
That was the «receipt for disaster» of which Mr. Stiglitz says nothing of consequence.
As a matter of fact, there might be a lot of things quite wrong with the prevailing system, but the fundamental one about the present crisis, something that will endure in the future and is only getting worse, is that this is the «crisis of debt» both private, caused by an unsustainable model of growth based on ever growing debt due to the lack of savings, and public, caused by ever rising demands on Government to cover every aspect of people's life.
Anyone looking at the last ten years will see a glaring fact: that for long the trend of growth in the West is much lower then in emerging economies, breaking a previous long trend of higher growth in developed countries; and, that also breaking with the previous secular trend, the West became a importer of capital, instead of exporting it.
That is globalization in reverse and we are now coping with its long reaching consequences.
Most Helpful Customer Reviews on Amazon.com (beta)
Amazon.com:
3 reviews
27 of 27 people found the following review helpful
Death of the Wicked Witch?
5 July 2010
Format:Paperback
This short but jam-packed report from an international panel of experts, brought together by the UN and headed by the Nobel Prize-winning economist Joseph Stiglitz, presents a trenchant and compelling analysis of the causes of our recent and on-going global economic crisis. In so doing, it hammers home several more nails in the coffin of the economic ideology that has prevailed for the last 35 years, encapsulated by such terms as market fundamentalism, neo-liberalism (in Europe), neo-conservatism (in the U.S.), or the Washington consensus. This ideology has proclaimed that free market capitalism, with little or no government interference (since markets are "self-correcting"), is the only way to guarantee human prosperity.
The recent meltdown of financial institutions that spread like wildfire from a few major economies to wreak havoc on the entire world should be enough to convince everyone that total disregard for government regulation of economic activity does not work, and government involvement is a necessary staple of a stable economy. (This is a lesson historians have mastered since the Great Depression.) The Stiglitz Report shows in accessible detail how this disaster could have been prevented by a robust system of regulation that must now be truly international in scope. He and his commission propose specific reforms of current practices and institutions, as well as outlining possible new international entities. Their guiding principle would be greater democratization: giving significant voice to all countries, especially the poorest, in bringing into existence a world economic system that promoted growth, stability, environmental sustainability, and greater equality for all.
The reading can be a bit tough in places for the lay person. But it is worth persevering to know what worthwhile ideas are out there. Much that is here runs counter to the still strong currents in favor of the status quo, controlled by a few national and corporate elites. We must remain vigilant lest the death of free market ideology is broadcast prematurely. One can hope that our policy makers around the world, at least, have encountered and pondered these important proposals.
The recent meltdown of financial institutions that spread like wildfire from a few major economies to wreak havoc on the entire world should be enough to convince everyone that total disregard for government regulation of economic activity does not work, and government involvement is a necessary staple of a stable economy. (This is a lesson historians have mastered since the Great Depression.) The Stiglitz Report shows in accessible detail how this disaster could have been prevented by a robust system of regulation that must now be truly international in scope. He and his commission propose specific reforms of current practices and institutions, as well as outlining possible new international entities. Their guiding principle would be greater democratization: giving significant voice to all countries, especially the poorest, in bringing into existence a world economic system that promoted growth, stability, environmental sustainability, and greater equality for all.
The reading can be a bit tough in places for the lay person. But it is worth persevering to know what worthwhile ideas are out there. Much that is here runs counter to the still strong currents in favor of the status quo, controlled by a few national and corporate elites. We must remain vigilant lest the death of free market ideology is broadcast prematurely. One can hope that our policy makers around the world, at least, have encountered and pondered these important proposals.
19 of 21 people found the following review helpful
A national real-estate crisis became a worldwide economic and social catastrophe
10 July 2010
Format:Paperback
Those who know J. Stiglitz's work (compulsory reading) see his mighty stamp on this hard-hitting and all important report for the future of mankind.
Facts and figures
The 2007 crisis showed blatantly the interdependence of all (inter)national economies.
In the US, 1 out of 6 people has no full-time job; worldwide 200 million people were driven into poverty by becoming unemployed. The havoc on pensions was also tremendous.
The crisis exposed deep flaws in the evangel of neoliberal free market fundamentalism. Markets are not stable, not self-regulating and not efficient (information asymmetries between seller and buyer).
Aim
For the authors, ethical and moral values should be decisive factors in economic decision making. In a world with huge unmet needs, a plague of massive unemployment is unacceptable.
The Report proposes to install, not only, a new global economic order based on stability and faster growth, but also, more democratic governances (those who suffer have no say, those responsible are not held accountable).
Macro-economic solutions
To tackle the huge problems of poverty, malnutrition, environmental pollution, climate change and social insecurity, the world economy needs more stability and growth of global aggregate demand: less volatile exchange rates and asset prices, a social insurance system, more income equality, no protectionism and no `too big to fail' institutions. The latter should function with less leverage and give easier access to their resources.
Regulation solutions
Financial deregulation was one of the main causes of the global crisis. The financial sector became an end, not a means of economic activity. But, it was not capable to manage risk, to allocate capital efficiently and to mobilize savings at the lowest possible cost.
In order to protect the consumer and avoid disastrous externalities (unemployment, poverty), the Report proposes the creation of a `New Central Bank' (instead of the do-wrongly's) and a `Financial Regulatory Authority". Together, those new institutions should impose transparency (no creative accounting), limit the size of financial institutions, regulate credit rating agencies, create a deposit insurance system, allow public alongside private banking and prohibit the use of tax havens.
International Institutions - solution
With its counter-productive policies, which undermined social protection, the IMF made crises worse than they were. Its policies should, on the contrary, support employment worldwide. In that case, its lending capacity could be enhanced. But in any case, its governance should be more democratic.
The first task of the WTO should be the implementation of anti-protectionist measures.
The Report proposes two new institutions, the `Global Economic Coordination Council' and an "International Panel of Experts' in order to coordinate economic policies worldwide.
Long-term reforms
A new global architecture is needed to manage the global good.
The global reserve system should be improved by the creation of a supranational international new currency (e.g., the SDRs of the IMF).
An `International Debt Restructuring Council' should be installed for the management of sovereign debt defaults.
The risk between lenders and borrowers could eventually be managed with GDP- and commodity-linked bonds.
Also, novel financial mechanisms, like `solidarity levies', should be imposed in order to diminish living standard inequalities.
This report is a must read for all those interested in the future of mankind.
One minor remark: the report has no index.
It is evident, that all the world's problems cannot be solved by economic measures.
There are also pure ethical or moral problems, like the world's demographic explosion.
Facts and figures
The 2007 crisis showed blatantly the interdependence of all (inter)national economies.
In the US, 1 out of 6 people has no full-time job; worldwide 200 million people were driven into poverty by becoming unemployed. The havoc on pensions was also tremendous.
The crisis exposed deep flaws in the evangel of neoliberal free market fundamentalism. Markets are not stable, not self-regulating and not efficient (information asymmetries between seller and buyer).
Aim
For the authors, ethical and moral values should be decisive factors in economic decision making. In a world with huge unmet needs, a plague of massive unemployment is unacceptable.
The Report proposes to install, not only, a new global economic order based on stability and faster growth, but also, more democratic governances (those who suffer have no say, those responsible are not held accountable).
Macro-economic solutions
To tackle the huge problems of poverty, malnutrition, environmental pollution, climate change and social insecurity, the world economy needs more stability and growth of global aggregate demand: less volatile exchange rates and asset prices, a social insurance system, more income equality, no protectionism and no `too big to fail' institutions. The latter should function with less leverage and give easier access to their resources.
Regulation solutions
Financial deregulation was one of the main causes of the global crisis. The financial sector became an end, not a means of economic activity. But, it was not capable to manage risk, to allocate capital efficiently and to mobilize savings at the lowest possible cost.
In order to protect the consumer and avoid disastrous externalities (unemployment, poverty), the Report proposes the creation of a `New Central Bank' (instead of the do-wrongly's) and a `Financial Regulatory Authority". Together, those new institutions should impose transparency (no creative accounting), limit the size of financial institutions, regulate credit rating agencies, create a deposit insurance system, allow public alongside private banking and prohibit the use of tax havens.
International Institutions - solution
With its counter-productive policies, which undermined social protection, the IMF made crises worse than they were. Its policies should, on the contrary, support employment worldwide. In that case, its lending capacity could be enhanced. But in any case, its governance should be more democratic.
The first task of the WTO should be the implementation of anti-protectionist measures.
The Report proposes two new institutions, the `Global Economic Coordination Council' and an "International Panel of Experts' in order to coordinate economic policies worldwide.
Long-term reforms
A new global architecture is needed to manage the global good.
The global reserve system should be improved by the creation of a supranational international new currency (e.g., the SDRs of the IMF).
An `International Debt Restructuring Council' should be installed for the management of sovereign debt defaults.
The risk between lenders and borrowers could eventually be managed with GDP- and commodity-linked bonds.
Also, novel financial mechanisms, like `solidarity levies', should be imposed in order to diminish living standard inequalities.
This report is a must read for all those interested in the future of mankind.
One minor remark: the report has no index.
It is evident, that all the world's problems cannot be solved by economic measures.
There are also pure ethical or moral problems, like the world's demographic explosion.
9 of 12 people found the following review helpful
Covers significant ground and articulates reasonable approaches
1 Jun 2010
Format:Paperback|Amazon Verified Purchase
Following the crisis we have had to think quite long and hard, some more than others, about what went into that which went wrong. Stiglitz and colleagues approach the aftermath of the crisis with the proper expertise and clarity of thought to really contribute a roadmap to where we need to be heading.
The crisis that we have recently/are going through has many causes, microeconomic level incentive problems coupled with informational asymmetries allowed for the emergence of large scale misallocation of resources. There is a general widening of the distribution of wealth which has repurcussions to consumption patterns in the long run in developed nations. The surplus savings fuelled into the US came about as a result of surplus out of developing nations who felt the need for foreign exchange buffers to tide them over whatever next crisis would emerge. This behaviour resulted from previous crisis in which these countries were forced to undertake pro-cyclical instead of countercyclical policies. The risk aversion that exists because cross border capital flows themselves seem to be pro rather than countercyclical might even imply that there should never be a sovereign nation that has privelidge of being a global currency as they might be forced to run a deficit just to balance the surpluses run abroad that are embedded behaviour. Institutional arrangements both at the micro and macro level are discussed. The domestic institutional arrangement commentary should be heeded, the macro coordination etc will inevitably a lot more difficult.
As noted in this report quite explicitly, global commerce has advanced more quickly than global institutions to help regulate this commerce. There has been a race to the bottom in terms of regulation as the economic doctrine we have followed essentially assumed that markets regulate themselves as prices are signals that force countercyclical action. That is wrong, why its wrong is complicated and will probably never be truly understood, but asset markets and commodity markets have different dynamics and i guess we just need to accept that there are bouts of fear and greed that manifest themselves on the large scale.
Most of what this reports is reasonable. It talks to the heart of many problems and outlines what need to be fixed. It is argued forcefully that markets have their failures and that needs to be addressed period. It is in the times of crises that people can gain the momentum to affect change and we must use what has just happened to help gain the momentum to bring us to a more stable economic regime. There will be many who argue otherwise, usually due to vested interest. This is much more instructive than the recent book Freefall, and I think this is an excellent start that needs to be considered deeply by policy makers globally.
The crisis that we have recently/are going through has many causes, microeconomic level incentive problems coupled with informational asymmetries allowed for the emergence of large scale misallocation of resources. There is a general widening of the distribution of wealth which has repurcussions to consumption patterns in the long run in developed nations. The surplus savings fuelled into the US came about as a result of surplus out of developing nations who felt the need for foreign exchange buffers to tide them over whatever next crisis would emerge. This behaviour resulted from previous crisis in which these countries were forced to undertake pro-cyclical instead of countercyclical policies. The risk aversion that exists because cross border capital flows themselves seem to be pro rather than countercyclical might even imply that there should never be a sovereign nation that has privelidge of being a global currency as they might be forced to run a deficit just to balance the surpluses run abroad that are embedded behaviour. Institutional arrangements both at the micro and macro level are discussed. The domestic institutional arrangement commentary should be heeded, the macro coordination etc will inevitably a lot more difficult.
As noted in this report quite explicitly, global commerce has advanced more quickly than global institutions to help regulate this commerce. There has been a race to the bottom in terms of regulation as the economic doctrine we have followed essentially assumed that markets regulate themselves as prices are signals that force countercyclical action. That is wrong, why its wrong is complicated and will probably never be truly understood, but asset markets and commodity markets have different dynamics and i guess we just need to accept that there are bouts of fear and greed that manifest themselves on the large scale.
Most of what this reports is reasonable. It talks to the heart of many problems and outlines what need to be fixed. It is argued forcefully that markets have their failures and that needs to be addressed period. It is in the times of crises that people can gain the momentum to affect change and we must use what has just happened to help gain the momentum to bring us to a more stable economic regime. There will be many who argue otherwise, usually due to vested interest. This is much more instructive than the recent book Freefall, and I think this is an excellent start that needs to be considered deeply by policy makers globally.
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