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Tuesday 11/15/1994

A discussion on the General Agreement on Trade with Sir James Goldsmith and Laura D’Andrea Tyson.

• Charlie Rose’s dismissive attitude towards Mr Goldsmith seems to reflect the establishment view.
• Laura D’Andrea Tyson concedes his point about outsourcing, but says the horse is out of the barn and it won’t get worse.  She argues the Uruguay round will help American firms export more, while Goldsmith says instead that firms will setup factories in the lowest-cost developing world and ship to the developed world.

Joseph Eugene Stiglitz (/ˈstɪɡlɪts/; born February 9, 1943) is an American economist, public policy analyst, and a professor at Columbia University. He is a recipient of the Nobel Memorial Prize in Economic Sciences (2001) and the John Bates Clark Medal (1979).^[2][3] He is a former senior vice president and chief economist of the World Bank and is a former member and chairman of the (US president’s) Council of Economic Advisers.^[4][5]

some ways I one has to recognize that

42:32

China may have been lucky they began the

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development strategy just at the moment

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when the West was very open to importing

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manufacturing goods it was a moment

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where because there were a large profit

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opportunities in the West that sustained

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the opening with wrong without regard to

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the effects and workers over the over

43:04

the effects and the overall economy so

43:09

in a way China’s success is testimony to

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the failures of democratic politics in

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the United States in Western Europe

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because the rules the game were designed

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worked to advantage American

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corporations Western European

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corporations with no attention paid to

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the consequences to the workers as the

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United States d industrialized now some

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countries in Europe did pay attention

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and they did have active labor market

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policies that shifted workers from the

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old sectors that were dying into the new

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sectors and Scandinavia has been very

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good in these active labor market

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policies which I think are really

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important in the United States we didn’t

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do that even though economic theory said

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opening up of trade between an

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banks country like the United States and

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China West events would result in lower

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real incomes for unskilled workers

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there’s a missing Stover theorem and it

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was unambiguously clear even though we

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were getting cheaper goods real incomes

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of unskilled workers would go down and

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it’s only if you had a mystical belief

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in trickle-down economics would you

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think otherwise but our politicians did

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have a mystical belief in trickle-down

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economics and they asserted this over

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and over again and so even when you know

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in the Democratic Party we tried to get

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Trade Adjustment Assistance we try to

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have some active labor market policies

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when we couldn’t because of concerns

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about austerity and not enough budget

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concerns they wouldn’t work we went

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ahead anyway there is a growing sense

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the United States though that actually

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the agenda on the right was to increase

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unemployment and suffering you say why

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would they anybody you know why do

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people want suffering well it was part

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of a concerted agenda if you look at to

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weaken the bargaining power of workers

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and drive down the wages which increases

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profits so if you look at this from a

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conservative point of view the reforms

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and our labor laws and reforms in the

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way antitrust policy was enforced that

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reform is a not the right word but

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changes in those laws changes in

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corporate governance and implicit

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understandings the legal frameworks and

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in the investment agreements in the

46:10

trade agreements the investment

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agreements they gave more secure

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property rights if American firms

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invested abroad than if they vested at

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home which meant that they were

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encouraged to invest abroad which also

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meant that if the firm if workers came

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to affirming

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we want higher wages and the firms know

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if you we give you if you continue to

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demand higher wages we’re going to leave

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that was more credible so I think it was

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a deliberate strategy to drive down the

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wages of workers and it worked in terms

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of the economics that I described before

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it did drive down the wages but it has

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now led to these this political backlash

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with which we are dealing so there is a

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relationship between China’s success and

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some of the problems that we’re facing

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it wasn’t inevitable we could have

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managed it better we should have managed

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it better but we didn’t but just as a

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footnote the point I’m making is that

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that was a particularly

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Africa won’t be able to follow the

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manufacturing export-led growth model

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that led to the success of East Asian

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countries including China in fact now

47:36

globally manufacturing employment is in

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decline in any country that believes

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that manufacturing should be at the

47:46

center of their economic policy is

47:48

misguided it can be part of it it can’t

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be at the center well let me just

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conclude by SEP some let me just

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conclude by a set of remarks about that

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in a way that pertain to all countries

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but we’re we’re china realized this in a

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way more forcefully than many others

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have and that is that reform is a

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never-ending process that societies are

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always changing technology’s changing

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and therefore the policies that are

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going to make a society successful have

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to change in a corresponding way

48:41

for China China’s entering a new stage

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of development it’s facing critical

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problems of inequality health

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environment livable cities markets won’t

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solve those problems in fact many of

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those problems have been created by the

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fact that they had markets that were too

49:00

unfettered to under-regulated

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they’re going to have to regulate them

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better there are further questions posed

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by changing globalization the

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recognition of the risks of excessive

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financialization the West

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I believe hasn’t succeeded in adequately

49:20

taming financial markets as you know

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this is this week is the 10th

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anniversary Lehman Brothers and and a

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lot of people are talking about have we

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done enough I think it’s absolutely

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clear no and what’s particularly

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disturbing is the Trump administration

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is trying to undo the inadequate things

49:44

that we’ve already done again I was at a

49:48

dinner right before the inauguration of

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Trump where one of his chief economic

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advisors was there

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I don’t normally associate with his

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people might make it clearer but it was

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an embassy dinner so I and I didn’t know

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he was going to be there anyway

50:10

and he was talking about how he was

50:16

going to deregulate the financial sector

50:19

within weeks after taking office and the

50:26

first thing that struck me is he clearly

50:28

had no idea of our democratic processes

50:31

yeah he really thought you know Trump is

50:34

the dictator he gets to write rewrite

50:36

all the rules no no none of these

50:38

processes that we put in place as

50:40

democratic checks against authoritarian

50:43

leaders no knowledge of that was just so

50:46

clear but the second point I was going

50:50

to ask what somebody who asked it before

50:51

I did quizzically

50:55

didn’t we have a crisis in 2008 and the

51:02

implicit answer was that was ancient

51:04

history and we have to move on but it’s

51:09

not ancient history and I think the

51:12

risks are very much with us one of the

51:17

concerns that I increasingly seeing in

51:20

China is that as China grows the

51:26

influence of vested interest will grow

51:28

and you can feel it already

51:32

another just a little anecdote every

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year when I go to China I often talked

51:42

to the finance minister and I’ve been

51:43

pushing them to move away from their

51:46

debt finance growth model to more tax

51:50

financed in particular I’m telling them

51:53

they need a carbon tax and it would

51:56

raise a lot of revenue it would help

51:59

clean up their air pollution exceed me

52:02

an obvious idea and the finance minister

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every year says great idea and he says

52:10

we have some political problems which he

52:14

means the auto industry the coal

52:16

industry this you know steel industry

52:18

and so forth we’re gonna work on it next

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year we go through the same conversation

52:27

as China has grown and it has taken on

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many of the features of a modern vested

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interest economy we’re getting change is

52:41

becoming more difficult and that of

52:43

course is is very worrisome but the

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principles that guided China in the

52:53

first 40 years are likely to continue to

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be relevant and that by that I mean the

52:57

pragmatism crossing the river by feeling

53:00

this still stone they’re going to be new

53:02

problems not fully foreseen would that

53:04

appear it will have to address these

53:08

problems

53:09

using insights from theory and past

53:11

experience and the second critical point

53:14

is openness there is much to be learned

53:18

from experiences of others and from the

53:20

ink sykes of non-ideological economic

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analysis and again we’re in a particular

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moment where I hate to keep coming back

53:34

to the United States but we’re a little

53:35

bit obsessed with with our problems one

53:41

can’t help but reflect on the closed

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mindedness of our current administration

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of not looking around you know if you

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think you’re number one and you think

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that you’re the there’s nothing to learn

53:57

from anybody else that is part of the

54:02

beginning of the end so we hope that

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this is just a temporary interlude but

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as we reflect on what makes I know

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successful in the ways it is I think

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there are a lot of lessons for all of us

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to think about how we can make our own

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economy successful for all of us thank

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you

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