Q & A with Joseph Stiglitz

Joseph Stiglitz, Nobel Laureate in Economics and Professor at Columbia University, addressed a small group of reporters at the World Urban Forum 7. The following notes summarize Dr. Stiglitz's answers to a series of questions on inequality, education, youth unemployment, China's role in development, and his advice for Colombia and Latin America.

What can be done to improve the quality of education?

Encouraging the improvement in performance of existing teaching is key, according to Dr. Stiglitz. Most teachers are professionals, it's important to show them respect, and to help them become better teachers. He noted that in the U.S. and elsewhere, much of the discussion about education has revolved around berating and criticizing teachers, not helping them.

What message would you give to Latin American governments?

Dr. Stiglitz is very optimistic regarding Latin America. This continent has historically had the highest levels of inequality, but over the last 20 years, many governments have realized this is an issue, and put in place policies reducing inequality. Many of these policies are already working, which Dr. Stiglitz noted is striking because in much of the world, inequality is increasing.

Should banks and businesses care about inequality?

Dr. Stiglitz strongly believes that they should care about inequality. First of all, they are one of the sources of the creation of inequality. But even worse, he notes, is what they've done to the poorest, including abusive credit card practices and predatory lending. They've moved money from the bottom of the pyramid to the top. Dr. Stiglitz pointed out that banks are also well positioned to play an important role in access to credit, which is a big issue in limiting mobility. He noted that things have not gotten better since the 2008 financial crisis, inequality has actually gotten much worse: in the U.S., 95 percent of the increase in income from 2009 to 2012 went to the top 1 percent, which means that for 99 percent, there has been virtually no recovery.

How does China's rise affect the geo-political balance in relation to development?

China will soon have the largest economy in the world, so Dr. Stiglitz affirmed that it will soon play a more important role in managing the global economy. He believes that currently, some international institutions are experiencing failures in governance: the U.S. and Europe are reluctant to rebalance voting rights to allow China and other emerging markets their fair share. Dr. Stiglitz added that China has a strong solidarity with developing countries and emerging markets because they were one of them not long ago. Dr. Stiglitz hopes that the upcoming BRICS summit in Brazil will result in the creation of a new BRICS bank, an important South-South initiative. Today, BRICS countries' economies are larger than the World Bank countries' economies were when the World Bank was created. He is confident that China will definitely play an important role in this process.

What can be done to create better, sustainable employment, while support pensions?

Dr. Stiglitz considers youth unemployment is a serious problem: the average youth unemployment rate in Europe is 25 percent (in Spain, it's over 50 percent, and in Greece it's over 60 percent). He argued that the issue should be approached from two sides: first, increase young people’s skills so that their supply meets the market's demand. The process of education itself must be rethought, according to Dr. Stiglitz: the labor market is changing rapidly, so the education system must be focused on life-long learning. Secondly, Dr. Stiglitz argued that governments need to implement active industrial policies that encourage the creation of new enterprises and new jobs, particularly jobs that will reflect the labor supply present in the market.

What advice do you have for Colombia?

Dr. Stiglitz made four important points: (1) "Beware of the resource curse," he cautioned: Colombia, like many other Latin American countries, has an extractive economy that has recently benefitted from high resource prices. Dr. Stiglitz argued that it would be beneficial to restructure the Colombian economy, focusing more on domestic demand and less on exporting. (2) Colombia has one of the highest levels of inequality in Latin America, which Dr. Stiglitz considers an imperative to addressed. (3) There needs to be a national urban strategy: Colombian cities have done well, but he believes they would do better with more assistance from the central government. (4) Colombia has signed a free trade agreement with the U.S., but according to Dr. Stiglitz, free trade agreements are not free - they're managed, and they usually benefit the U.S. He concluded by explaining that Colombia needs to work to re-level the playing field.

How long does reducing inequality take? What can we do to speed up the process?

Dr. Stiglitz believes that reducing inequality itself takes a long time, but some of the worst manifestations of inequality can be dealt with quite quickly, with investments in education, healthcare, transportation, etc. He argues that both inequality and its consequences should be addressed at the same time, for improvements in quality of life today and in the future.

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