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Please begin with an informative title:

I'm a huge Joseph Stiglitz fan, when it comes to his positions on the economy, both here in the U.S. and internationally.  Today and once again, as you'll see from detail regarding this breaking story-link (see: "America's socialism for the rich: Corporate welfarism"), below, I was reminded why I'm such a big believer in his truly Progressive solutions with regard to providing what are, IMHO, the best answers for getting our country's and the world's economies back on track. I'd even go as far as to say that there's probably nobody else on the planet who more closely reflects my views on the economy than this guy. As someone posting a diary on a Progressive Democratic blog, I think many here--who may be unaware of the extensive detail of Stiglitz's philosophies and expertise--might concur.  But, first a bit of background, per Wikipedia:


You must enter an Intro for your Diary Entry between 300 and 1150 characters long (that's approximately 50-175 words without any html or formatting markup).

...In addition to making numerous influential contributions to microeconomics, Stiglitz has played a number of policy roles. He served in the Clinton Administration as the chair of the President's Council of Economic Advisors (1995 – 1997). At the World Bank, he served as Senior Vice President and Chief Economist (1997 – 2000), in the time when unprecedented protest against international economic organizations started, most prominently with the Seattle WTO meeting of 1999. He was fired by the World Bank for expressing dissent with its policies.[3] He was a lead author for the Intergovernmental Panel on Climate Change.

He is a member of Collegium International, an organazation of leaders with political, scientific, and ethical expertise whose goal is to provide new approaches in overcoming the obstacles in the way of a peaceful, socially just and an economically sustainable world.

Stiglitz has advised American President Barack Obama, but has also been sharply critical of the Obama Administration's financial-industry rescue plan.[4] Stiglitz said that whoever designed the Obama administration's bank rescue plan is “either in the pocket of the banks or they’re incompetent.” [5]

Contributions to economics

Stiglitz's most famous research was on screening, a technique used by one economic agent to extract otherwise private information from another. It was for this contribution to the theory of information asymmetry that he shared the Nobel Memorial Prize in Economics[1] in 2001 "for laying the foundations for the theory of markets with asymmetric information" with George A. Akerlof and A. Michael Spence.

Traditional neoclassical economics literature assumes that markets are always efficient except for some limited and well defined market failures. More recent studies by Stiglitz and others reverse that presumption: It is only under exceptional circumstances that markets are efficient. Stiglitz has shown (together with Bruce Greenwald) that "whenever markets are incomplete and /or information is imperfect (which are true in virtually all economies), even competitive market allocation is not constrained Pareto efficient". In other words, there almost always exists schemes of government intervention which can induce Pareto superior outcomes, thus making everyone better off.[6] Although these conclusions and the pervasiveness of market failures do not necessarily warrant the state intervening broadly in the economy, it makes clear that the "optimal" range of government recommendable interventions is definitely much larger than the traditional "market failure" school recognizes[7] For Stiglitz there is no such thing as an "invisible hand".

Additionally, Stiglitz was recently named Chair of the "Commission of Experts," appointed by the President of the UN General Assembly, on reforms of the international monetary and financial system.

A few days prior to Austan Goolsbie's formal confirmation for his post as a member of President Obama's Council on Economic Advisors,  and shortly after he read a diary of mine which quoted him, right here on DKos, I received a two-sentence email from him suggesting I checkout this Newsweek article:  "Chasing Stiglitz." If you read the article, you'll see that other economic/finance advisors close to the President, such as Director of the Office of Management and Budget Peter Orszag and vice presidential Economics Advisor Jared Bernstein are also big Stiglitz' fans.

Then again, apparently (and unbelievably) , so was none other than economist Milton Friedman, "the founding father of the free-market era."

From: Chasing Stiglitz:

Chasing Stiglitz
by Michael Hirsh
Newsweek Magazine
December 4, 2008

...In a spate of books, essays and speeches dating from the early '90s, Stiglitz denounced Rubin's support for repeal of the Glass-Steagall Act, which separated commercial from investment banking for precisely the reasons we are now witnessing on Wall Street: new "full-service" banks would seek to hype companies that their stock-market side underwrote and issue loans to them even if they were not credit-worthy. "The ideas behind Glass-Steagall went back even further [than the 1929 crash] to Teddy Roosevelt and his efforts to break up the big trusts," he wrote presciently in "The Roaring Nineties" (2003). "When enterprises become too big, and interconnections too tight, there is a risk that the quality of economic decisions deteriorates, and the 'too big to fail' problem rears its ugly head." Unfortunately, Stiglitz wrote, his worries "were quickly shunted aside"' by the Clinton Treasury team. Earlier, in his book "Globalization and its Discontents" (2002), Stiglitz became the most prominent voice in Washington to say plainly that free-market absolutism, which began with the Reagan revolution and continued under Clinton (who upon being elected declared the era of "big government" was over), was ill-founded theoretically and disastrous practically. "In 1997 the IMF decided to change its charter to push capital market liberalization," he wrote. "And I said, where is the evidence this is going to be good for developing countries? Why haven't you produced some research showing it was going to be good? They said: we don't need research; we know it's true. They didn't say it in precisely those words, but clearly they took it as religion."

As far back as 1990, Stiglitz argued in a paper (it can be found on The Economist's Voice Web site at www.bppress.com) against securitizing mortgages and selling them because "when banks retained the mortgages which they issued, they had greater incentives to screen loan applicants." He asked, again with startling prescience: "Has securitization been a result of more efficient transactions technologies, or an unfounded reduction in concern about the importance of screening loan applicants?" None other than Milton Friedman, the founding father of the free-market era, told me in an interview before he died that Stiglitz also had been more correct than everyone else about how to transform Russia into a market economy when he argued that institution-building and creating regulatory authorities were an important preliminary step. "In the immediate aftermath of the fall of the Soviet Union, I kept being asked what the Russians should do," Friedman told me in 2002. "I said, 'Privatize, privatize, privatize. I was wrong. Joe was right. What we want is privatization, and the rule of law..."

Today, we have this (there's no other word more suitable than: "profound," IMHO) breaking piece from--of all places--the Jakarta Post, with a h-t to Bloomberg for bringing this to our attention: "America's socialism for the rich: Corporate welfarism."
America's socialism for the rich: Corporate welfarism
Joseph E. Stiglitz   |  Tue, 06/09/2009 10:47 AM

Commentary by Joseph Stiglitz

With all the talk of "green shoots" of economic recovery, America's banks are pushing back on efforts to regulate them. While politicians talk about their commitment to regulatory reform to prevent a recurrence of the crisis, this is one area where the devil really is in the details - and the banks will muster what muscle they have left to ensure that they have ample room to continue as they have in the past.


The Obama administration has, however, introduced a new concept: "too big to be financially restructured". The administration argues that all hell would break loose if we tried to play by the usual rules with these big banks. Markets would panic. So, not only can't we touch the bondholders, we can't even touch the shareholders - even if most of the shares' existing value merely reflects a bet on a government bailout.

I think this judgment is wrong. I think the Obama administration has succumbed to political pressure and scare-mongering by the big banks. As a result, the administration has confused bailing out the bankers and their shareholders with bailing out the banks.


We need to break up the too-big-to-fail banks; there is no evidence that these behemoths deliver societal benefits that are commensurate with the costs they have imposed on others. And, if we don't break them up, then we have to severely limit what they do. They can't be allowed to do what they did in the past - gamble at others' expenses.

This raises another problem with America's too-big-to-fail, too-big-to-be-restructured banks: they are too politically powerful. Their lobbying efforts worked well, first to deregulate, and then to have taxpayers pay for the cleanup. Their hope is that it will work once again to keep them free to do as they please, regardless of the risks for taxpayers and the economy. We cannot afford to let that happen.

I strongly, strongly recommend reading this entire (relatively short) story.
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Originally posted to http://www.dailykos.com/user/bobswern on Wed Jun 10, 2009 at 12:06 PM PDT.

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