Joseph Stiglitz isn't your typical Nobel Prize-winning economist. In books like Globalization and Its Discontents, he's expressed misgivings about the global economy -- misgivings that predicted much of the global downturn. And when he came to Pittsburgh for the G-20, instead of meeting with foreign dignitaries, he gave a speech at the Hill District's Monumental Baptist Church. This is an excerpt of remarks made to reporters Sept. 23:
The G-20 is a major improvement over the G-8 [an earlier, smaller group of countries]. There is no way that you could address the problems of the world like climate change without major players like China and India. ... But there are 192 countries, and that means 170 of them are not represented here. Seventy-five percent of global GDP is represented, but a very large fraction of global population is not represented.
... Some people are declaring victory: "The recession is behind us." The fact is that the unemployment rate is still high, likely to go up. And for these individuals, the recession is not over. ... To get our unemployment rate back down where it should be ...we're going to have to grow faster than 3.2 percent. Anybody looking at a forecast for 2010, 2011 -- let alone 2009 -- that's not in the cards. ... And then to go back to the other [question]: Have you really fixed the underlying problems? There's a sense that we haven't, and that things have gotten worse.
One issue that has become almost emblematic of that kind of tension is the debate over the bonuses [for executives at firms that accepted public bailouts]. If public money that was supposed to lead to more lending is going into dividends and bonuses, how is that serving the social functions for which that money is being devoted? ... [And] if we have too-big-to-fail banks, those institutions have incentive to gamble. Because if they win, they walk off with the profits, and if they lose, the taxpayer bears the loss.
We've seen that over and over again. The myriad of bailouts with country names -- like Mexico or Latin America or East Asia -- are really bank bailouts [since without bailout, the countries would default on loans the banks made]. So you get public money going into the private sector, you get a bloated sector. So it's important for the politicians to hear the views of people in a broader swath of society.