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Felix Hammond
Foreign.
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Welcome to Sleep Money Extra. It's a Tuesday with a one off special episode. I am Felix Hammond of Axios and I am going to be talking to Nobel laureate Joe Stiglitz about his new.
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Book, People, Power and Profits.
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This episode is a little bit of an experiment. We're not entirely sure whether we should do this kind of thing more or not. So let me know on slate moneylate.com.
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Whether this is the kind of thing.
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That you would like to hear more of. Basically, the story is that Joe has a new book out and it's a manifesto basically for what the new Democratic 2020 presidential candidate should have in terms of economic policy. He has a whole bunch of policies in there which are kind of interesting. He wants a universal jobs guarantee. He wants to break up a bunch of big businesses. And he had a launch event at Barnes and Noble on the Upper west.
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Side, very close to his home.
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And I was the interlocutor. I interviewed him on stage and it was a kind of interesting conversation. This is not a standard Slate Money interview. We were not in a studio. My microphone didn't always work that well. So there might be a couple of points where I sound a bit weird or even weirder than I normally do. And this was for an audience of people who were Joe Stiglitz fans who lined up for a long time to get him to sign their book. So this wasn't the kind of place where I would get all adversarial. Joe likes to talk. I let him talk. So if you're interested in Joe Stiglitz and if you're interested in politics, and if you're interested in fiscal policy and economic policy, have a listen to this and let me know what you think. Slate, moneyleat.com Let me know who else you think maybe I should have this kind of a conversation with. And here is Slate Money Extra.
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I've read this book. It's extremely good. You should buy it, get it signed. This book is basically a. It's a manifesto. And so if you want, what are we calling it? A progressive capitalist manifesto. And you want to know what that means? This is the book you should read. But I want to start by asking Joe, what does progressive capitalism mean? Is that just a sort of euphemism for socialism?
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Joe Stiglitz
No. I don't know where to begin answering the question, but let me maybe begin by. There's been a lot of attempt. There's been an attempt by Trump to focus a debate about between AOC and Bernie Sanders, who claimed to be democratic socialist and say that's the same as Maduro in Venezuela and all those things that we had in the past. And the fact is that socialism as it was in the past was about the ownership of government, of the basic means of production. It would mean government owning coal mines, steel mills. No one is talking about that. You know, that's an idea that.
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Felix Hammond
Including even AOC or Bernie.
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Joe Stiglitz
AOC or Bernie. Nobody is talking about that. What they're talking about is trying to reshape the market economy to serve ordinary citizens. And the fact is that for the last 40 years the market economy has not been working for most citizens. You know, we've had GDP going up, but the bottom 90%, we're not talking about the bottom 5%, we're talking about the bottom 90%, has had almost stagnant income for more than three decades. Just to give you a couple of numbers, real wages, wages adjusted for inflation at the bottom are the same today in the United States as they were 60 years ago. Can you imagine? You know, when I talk about this in China, they say 60 years ago our per capita income was $150 and now it's 5,000. You know, while you have left the income at the bottom at the same level for 60 years, the income of a full time male worker, the full time guys are the lucky ones, is the same as it was more than 40 years ago. And that's part of the discontent that you see. Life expectancy in the United States is declined for three years in a row. So these are just symptoms that even though GDP may be going up, large fractions of our population are not working. So the idea of progressive capitalism is to say let's use the energy of the market and it does have certain virtues, but let's make sure that we temper it and redirect it to serving the well being of our society. And there was an article I wrote in the New York Times this weekend and they put the headline, they choose the headline and say progressive capitalism is not an oxymoron. And they're referring to some people say capitalism can't work. And part of the point of my book is yeah, we can make a market economy working with government. It's not a free, you know, it's not a market fundamentalism. There is a role for government, a big role for government, but we can make that mixture work. Other countries have succeeded in doing it in various parks and we can too.
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Felix Hammond
A much bigger role. I mean, that's one of the main themes running through the book, is that you want more government intervention in virtually all parts of the economy. And you say that we can't just sort of tweak where we're at right now. We need to have like a wholesale reworking of the economy and the way we look at it and the way that we involve government. And you quote, I want to quote one thing we say the kinds and extent of cooperation that our 21st century economy requires are new and unprecedented. And, and that cooperation again is going to have to come down in a sort of top down way from the government. And then you say that this is going to be a consensus for a renewed Democratic Party, or at least that's the hope. So tell me, so tell me how much of a change that is from the Democratic Party of Obama or Clinton. How radical is this manifesto?
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Joe Stiglitz
Well, it's radical to where we've been in the sense that there's been a kind of caution that I saw when I was in the Clinton administration and I think it was true of Obama. You know, at the Beginning of the 2008 crisis, Rahm Emanuel said we shouldn't let a crisis go to waste. And there's a general consensus we did let a crisis go to waste. And you ask why? I think Obama's heart was in the right place, but he was too conservative. He actually told me at one point when I told him he should be doing certain things, he said, I'm just too conservative to do that. So it really is a sense that he was very wedded to notions of gradualism and I would say tweaking the system a little bit better education here, a little bit more financial market regulation there. Those were all good things to do, but now we realize they weren't enough. So let me just give you a couple of things that have happened that in the economy where he didn't do enough, there's been an enormous increase in the concentration of market power. And all of us sort of feel it, you know, when we try to deal with the Internet provider or the phone company or the airplane, you know, you don't have much choice. And you know that when you sign a contract, including for a nursing home or for whatever you sign a contract, you typically have to give away your right to use. The courts. You may not know this, but typically the contract says that if there's a dispute, it will be settled by arbitration. And that arbitration, the arbitrators will be effectively appointed by the business. And the Supreme Court keeps supporting the fact that you say, I didn't know that when I signed it. And they say that's too Bad. You signed away your rights to adjudication by public courts. One of the important parts of our democracy is that kind of public adjudication of disputes. So one of the big changes I talk about is curbing the excesses of market power. And I tried to describe the way we can do that. One of the things that's happened over the last 40, 45 years is the bargaining power of workers has been constantly eroded. And globalization has played a role in that. And there's some interesting things in our trade agreements that have exacerbated this problem where we actually give more rights to foreign firms than we do to domestic firms in investment agreements. So if we change a law regulation, and that decreases the market value, you know, the profits of a company, a foreign company can sue and say, you've taken away our property rights, an American company can't. So we've given, we've encouraged firms to move abroad almost, because when American firm moves abroad, it gets that stronger property right abroad that it doesn't have at home. And that, of course, weakens the bargaining power of workers because the threat of moving is more credible. So, you know, these are little things, little tweaks that most people don't know about. And they are little tweaks that have changed our basic legal framework.
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Felix Hammond
And so, and this is what you refer. I mean, you have a book somewhere, I think they're called Globalization and its Discontents, which is largely about this kind of issue. Although now you're also warning about de globalization. We seem to be in this kind of paradox here where globalization is bad and de globalization is bad. I'm not quite sure how you square.
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Joe Stiglitz
That one, but the point that I try to make is that when we globalized, it put a lot of stress in our economy and it led to deindustrialization. And unlike the Scandinavian countries, we didn't help the people who are facing de industrialization. We didn't have the job assistance that we should have had, not only for workers who were losing their jobs from globalization, but also from technical change. And so we didn't have what are called active labor market policies, industrial policies that enabled the people facing these challenges to respond. Well, the consequence of that is we have the kind of massive problems in parts of our country where life expectancy is really going down dramatically. Deglobalization done without active labor market policies, without industrial policies, location based policies is going to have the same effect because de globalization is going to mean that we will lose our competitiveness in many areas of manufacturing. He says the argument for doing it is protectionism. But it is very interesting. The auto companies are against what Trump is doing. And let me tell you, they're not doing it because they're concerned about their workers. First and foremost, they're concerned about their ability to sell cars. And they know if they can't get parts from Mexico or from China, our cars will lose their competitiveness. So the fact is, de globalization is going to cause the same kind of strains today that globalization did 20 years ago.
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Felix Hammond
And so your solution is to do exactly what we should have done during the globalization era. Bring in the labor policies, industrial policies. I remember these terms from the 1970s. Everything old is new again. And break up a lot of big corporations. You want to break up Facebook? If I'm reading this right, you want to force comcast to sell NBCUniversals, Force AT&T to sell Warnermen.
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But you also say something interesting.
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You say that even if we do break up Facebook, even if we do force it to spin off Instagram, spin off WhatsApp, that might not be enough. And there may be no alternative to declaring Facebook a public utility with all the tight public oversight that entails. And I'm fascinated about this. Would that be like an international thing?
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Joe Stiglitz
Most of the social media actually works within a country, and so there are issues about going across borders. But what I was trying to highlight in that particular set of paragraphs in the book was the fact that the problems today of monopolization of market power are in many ways worse than the problems were at the turn of the 20th century, when we extended oil and we had the monopolies in sugar and many other industries because we knew what to deal with. Standard Oil, we broke it up into 10 companies, and they were forced to compete against each other. We created a competitive marketplace with social media. The problem is that the whole structure of it comes from the networks, the interactions. And so the risk is that they still will be very, very large and dominant and have market power. And it's not just ordinary market power. They have the power to invade privacy. One of the big concerns is with AI and big data, big data creates what you might call a natural monopoly. The more data you have, the more economic power you have and the more ability to do things like price discrimination. You can identify how much each person is willing to pay and charge different people different prices. And the interesting thing about that is it actually undermines the efficiency of the economy. I don't know how many of you remember this from your undergraduate college courses, but one of the arguments for the Efficiency of the market economy is that everybody pays the same price. And by paying the same price, you equate the marginal value and the marginal cost for everybody. And that's a basic condition for efficiency.
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Felix Hammond
We do that for airline seats.
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Joe Stiglitz
Well, it's the same issue of discrimination. But what was one industry could be amplified everywhere in our economy.
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Felix Hammond
Let me ask you a bit about some of the big policy proposals that we're hearing from the Democrats these days. I want to know what you think about them. The one that just came out yesterday was Elizabeth Warren. She said that student loans should be forgiven if you're making less than $100,000 a year, that tuition at college should be free. What do you think of that one?
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Joe Stiglitz
Well, what she's identifying as Bernie Sanders had identified in the last campaign, that America has a problem that is almost unique among the advanced countries, and that is we do not provide a way of access to university education without the accumulation of massive amounts of debt. And this has grown to the point where it's one and a half trillion dollars. It is a major source of debt in our economy and it's having macroeconomic consequences because people with 25,000, 50,000, if you go to graduate school, 100, $200,000 of debt can't afford to start a family or to buy a house. And so it's actually having macroeconomic effects. So you have to ask, with respect to this question and many of the others that you're probably going to ask me about, I have a long list. The question is, how do all these other countries figure out how to solve this problem? They're not as rich as the United States and yet they figured out ways of doing it. And another way of putting this question is at the end of World War II, when we had a debt GDP ratio of more than 130%, much higher than it was today. What we said was that anybody who fought in the war, which was every male, virtually every male and a lot of women, you could get the most expensive education that you are qualified for for as long as you find it desirable. And you can get, you know, you could get a college education, you can go to graduate school at Harvard, at Columbia, you know, all these high ticket price places, and we'll pay for it, the government will pay for it. If we could afford it then, when our income per capita was actually a fraction of what it is today, why can't we afford it today? You know, that's really the question. And the answer is we can afford it. It's a question of Priorities, what do we want to do with our resources and how do we allocate it? And I think it's foolish to do it, you know, make some of the choices that we're making. So now to come to the specific issues, there's two parts to the question. One is, what do we do with the huge amount of debt that's been accumulated, the $1.5 trillion of the past? Now, my preferred way of dealing with it is along the lines similar to what Australia has done, is to say we'll make it an income contingent loan. We'll convert all these loans and you'll pay back depending on how much you owe, 1, 2, 3, or 4% of your income per year. And that will depend on your income. If your income is below $40,000, you don't pay back anything. And if it's over a million, you pay 4%. And you pay that until you repay the loan or for 25 years. And after 25 years, we'll say we're going to have debt forgiveness. You know, you've made your contribution, you've done what you can. We don't want to burden anybody. And that seems to me a fair way of ensuring that everybody is doing what they can to pay back their loans. It's not giving anybody off a free ride, but it's saying we can't allow the past to be the kind of burden that it's become.
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Felix Hammond
Another one which people say is far too expensive, which actually you say it's far too expensive, is Andrew Yang of Universal Basic Income. You say that given the stinginess of America's fiscal policy, you can't really make a universal basic income work. Are you resigned to a stingy fiscal policy?
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Joe Stiglitz
My real objection to Universal Basic Income, which is for those who don't know, is a flat grant to everybody just for the right of citizenship. And, you know, if we had a lot of money, I could support it. But my real objection is that for most people, work gives them dignity. And what we should be doing is saying everybody who wants and able to work wants to work and is able to work. We should say our economy should provide a job and appropriate to their skills. And what worries me is the universal basic income is intended to shift our focus away from the obligation to give work opportunities for everybody. It's very popular in Silicon Valley because they see AI and robotization as creating unemployment and they don't want to face the reality of how we as a society are going to give jobs for everybody. I don't think it's that difficult. You know, it's going to be decades and decades. We're going to still need people to take care of our young people for education. We're going to still need people to take care for older people, our increasing number of older people, and we're going to need people to take care of our sick. So just those three create a lot of jobs. Now, part of the problem is a lot of those jobs are not paying decent wages. And why aren't they paying decent wages? Because of the history of gender discrimination in America, that those are jobs that have been historically been disproportionately occupied by women. We took advantage of discrimination to keep the wages lower. We're going to have to pay more for that. But if we paid more, those jobs would have more respect and we would have more equality in our society.
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Felix Hammond
So we have this idea of jobs guarantee, which is also in your book, which I feel would be even more expensive. I mean, that seems expensive.
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Joe Stiglitz
No, no, no. If our market economy works in the way that the advocates say it should be providing jobs for everyone, and, you know, that's the way a market, you know, demand is supposed to, equal supply, including demand for labor equal to supply, we shouldn't be having the massive amounts of unemployment of young African Americans that we have today. Now, unfortunately, I don't think our economy actually works the way that many of the advocates say it is. There is still pervasive racial and gender discrimination. And in those areas, we're going to have to take a little bit more active role, but it's not going to cost us a massive amount. And actually, I think it's going to make our economy more productive.
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Felix Hammond
So since we're talking about the big expensive things, let me run down reparations. What do you think about them?
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Joe Stiglitz
That's a harder issue. Let me say the notion that at the end of the Civil War, we compensated the owners of slaves but not the slaves is an anathema. I mean, we have to recognize that that is just amazing. And it's not just true. In the United States, it was true. In Britain, it was true. In France, it was true. It was the norm at the time. But looking back on it, we should be really angry and upset. On the other hand, our objective should be to integrate everybody into our society on equal terms. And to do that, I think we are going to need to spend more money on those who we've discriminated against in the past. So my own view is we should be using, you can think of it as the funds that we would have otherwise spent as part of our obligation from our past sins. If you want to think of it that way, we ought to be spending more to create a more equal society.
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Felix Hammond
So in a way, if I've got this right, as part of your jobs guarantee, that will, given the higher levels of unemployment among the African American population, that will effectively mean a bunch of government money going into that population, which wouldn't be direct reparations, but would serve a similar purpose. But that is that kind of jobs guarantee is part of the Green New Deal, as you know, along with a lot of decarbonization. How much of the Green New Deal are you on board with?
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Joe Stiglitz
The central message of the Green New Deal is that we are facing a crisis. And absolutely, I agree with that. You know, I was on the IPCC panel that reviewed climate change back in 1995, and the one mistake we made was the rapidity with which the problems would be developing. You know, we saw them coming, but they've come more rapidly. And so we are facing a crisis. And the Green New Deal says there's an urgency and a scale that we haven't faced up to now. Part of what they're also saying is that we have the capacity to respond to this. You know, if we think about this as a New Deal, a wartime mobilization. But to do it, we really need to make sure we use all of society's resources. So what did we do in World War II? We brought women into the labor force, women who had not previously been part of the labor force because we needed to mobilize all of our resources. Now, most Americans probably don't realize that America's female labor force participation today is really mediocre among the advanced countries. Other countries are doing much better than the United States. And why is that? Well, it's partly because we have the worst family leave policy. We don't provide childcare. There are lots of other things that other countries have figured out that they can afford. And we're richer than they are, so we could afford it. And the dividend you get by having more people in the labor force is large. I mean, just to give you one example of this one occasion, I was talking to the Prime Minister of Norway, oil rich country. And she said, we took that oil money and we invested it in our people and particularly in our woman. And now we get more money from our woman than we get from our oil. So it may have been a metaphor, but she really believed it. And I think that concept is part of the Green New Deal. We have to marshal all of our resources, our underutilized resources, get rid of some of the inefficiencies that result from corporate power and redirect them to what is a national, a global emergency, the problem of climate change.
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Felix Hammond
Okay, let's have some questions here. Let's make them beautifully short.
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Audience Member 1
Joe, you talk a lot about inequality in the society and making our society more equal, but you never mentioned worker co ops as far as I know, and the importance of worker co ops to make the society genuinely more equal and democratic.
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Joe Stiglitz
So actually I do talk about co ops in the book. And one of the things I point out is the need for a richer, what I call ecology of institutions that we focus on for profit corporations where there is no representation of workers. In Europe, particularly in Germany, they have what is called stakeholder capitalism where the objective of the firm is not just to maximize shareholder value, but the value of all the stakeholders, which includes workers and the community. And then I have a section where I talk about the important role of co ops. And one of the things that I particularly emphasize in that discussion is that the way our market economy works shapes who we are as people. That because we have a market economy that is very short sighted, that is very materialistic, profit oriented, it has led us as a society to be dominated by people who are short sighted and very materialistic. And unfortunately, one of the things that I emphasize two ways of getting wealthy, one is by enhancing the size of the national pie. And the other way is by grabbing a bigger slice of the pie, rent seeking. And that because we haven't distinguished between those two, that we've almost pretended that it doesn't matter how you get your wealth as long as you're wealthy. And unfortunately what that has done is giving a lot of latitude to moral turpitude saying, you know, what matters is just getting wealthy. And you see that in Trump University, you know, trying to take advantage of others. And you see that in a lot of the for profit universities that are, you know, designed to take advantage of people who are less informed about what an education is about. And they're just focused on taking money from some of the poorest Americans. So it is interesting that the one part of our financial system that worked well in the run up to the crisis was our co ops, which are credit unions. The credit unions basically are cooperatives. They did not engage and the kind of exploitation that our for profit, all of our for profit banks engaged in. And after the crisis they maintained their lending to small businesses. So both before and after the crisis they were exemplary. So Part of the idea that I talk about is co ops not only behave better economically, but they also change the nature of who we are. They do encourage more cooperative behavior and that that will change the nature of our society.
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Audience Member 2
Yeah, of course you were with the World bank, but you knew damn well when you were there that the US Ran the World Bank. They always appoint the head of it. I'm not against your working there or even that I believe in the UN the whole UN system, but it shouldn't be dominated by the US My question is, you're very good in talking about tonight, basically the US economy or maybe the advanced nations economies, but you're not saying a damn thing about the mass of world people who are in dire poverty.
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Joe Stiglitz
On the issue of the World bank and particular role of the US there are two parts of the question. Let me answer both. It is curious that the US was part of a G20 meeting where there was an agreement that the next president of the World bank and the IMF would be chosen. This is a really radical idea on the basis of merit. So there was an agreement about this radical idea, but then came the time to implement it. And Obama said, no, we didn't really mean that. What we meant is the best person from America and the person he appointed turned out not to be very good. And unfortunately that policy has now continued under Trump. And the other nations have not done what they should have done to say this is a multilateral institution and the president should be chosen on the basis of merit. Now, the other issue I talk about just very briefly is poverty around the world is obviously a very big issue. It's not only poverty at the bottom, but it's also inequality at the top. One of the statistics I mentioned comes from a study that Oxfam does every year, which they release at Davos where all the muckety mucks come together and they do deliberately there because they want to embarrass them. And what they point out is that just, and this is the latest report, 26 people from around the world have as much wealth as the bottom 3.9 billion people, the bottom half of the world. So index testimony to how much concentration of wealth there is at the top, but also how much poverty there is at the bottom. Now, where this fits into American current politics is the following. Trump has said that our trade agreements are unfair to American workers. And basically he's trying to get across the idea that our trade negotiators were snookered by the smart trade negotiators from the developing country. Now, any of you who've watched the trade negotiations over years will find that laughable. And when I talk to trade ministers from South Africa or from other countries, they actually do laugh. They say, lookit, the trade agreements were dictated by the United States largely. And the problem wasn't that the US was snookered by South Africa or by some other developing countries. The problem was what the United States wanted. And the American trade agenda was a corporate trade agenda. So it was advancing the interest of American corporations at the expense of American workers. So that's just one example. And the way those trade agreements were structured, for instance, kept American agricultural subsidies, like subsidies for cotton, the effect of which was billions of dollars, go to a very small number, about 25,000American cotton farmers, just one example, leading to the impoverishation of millions and millions of cotton farmers in Africa and India and other developing countries.
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Felix Hammond
And I'll just jump in here to mention the Stanford University report that just came out yesterday saying that climate change has basically made the poor a lot poorer globally and the rich actually richer. And if you really want to help the poor, you've got to start making some serious action on climate change. But mainly we need some questions from women here because we haven't had any. So any women with questions.
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Audience Member 3
During the run up to the Iraqi war, you pointed out that America trillion dollars of debt because of the injuries to the troops, et cetera, we are now having a military budget that is bigger than seven other countries comb, including Russia and China. So my question to you is, what are we going to do about the military industrial complex and how does it impact your agenda?
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Joe Stiglitz
Well, as a result of that book, which was called the $3 trillion war, and I used $3 trillion because the real number was more like 5 or 6 trillion, but that sounded too large. So I wanted to be on the conservative side of that. One of the things I pointed out was that we were spending massive amounts of money on weap that didn't work against enemies that didn't exist. And the basic fact is the Cold War is over. Nobody has trumped that. But the Cold War is over. We have threats. Terrorism is a serious threat. But the kinds of expenditures that you need against that are very different from the kinds of expenditures that you need during the Cold War. And so what we should have done is restructure our expenditures, rethink what are the real current threats. And I believe that we had done that, we could have had more security at a fraction of the expenditures that we have. I need to mention that the numbers that when I wrote that book. We said they were conservative. And as the actual numbers came in, it proved really they were very conservative. Just to give you one number, and it's what you mentioned. We had estimated somewhat less than 40% of the people coming back from Iraq and Afghanistan would be disabled, many of them with multiple disabilities. The number has been much higher than that and the costs have been much higher. And so just the disability costs have. The expectation today is that they are just. The disability costs are well over a trillion dollars from that war. And that shows you what a big mistake that was.
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Felix Hammond
We have time for, I think, a couple more questions. There's gotta be at least one other woman here. Come on, people. Ah, at the back.
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Audience Member 4
My question concerns a corporation's fair share of taxes. How do we ensure that corporations pay their fair share of taxes and that the likes of Amazon doesn't get away with paying $0 in taxes? And my second question is about how do we break up monopolies?
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Felix Hammond
Should Amazon be broken up? That's another one of Elizabeth Warren's proposals.
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Joe Stiglitz
Almost surely, yes. But let me begin with the first part of the question. The fair share. How do we make them? I think there are several parts of that. First, we need to recognize that companies like Apple and Google are not paying their fair share. They have used the same cleverness that they have in making products that we love to avoid taxes and probably invested just as much money to avoid paying taxes. In the case of the Apple in Ireland, it turned out, you know, that they were paying, I think, 0.5 of 1% or less than 0.5 of 1% in taxes. And Google, you know, there was a race between them who could pay the least. So the evidence about their tax avoidance is very strong. And globalization has given them a lot of opportunities. That's one of the things that the Panama Papers and Paradise Papers brought out very, very forcefully. There are a couple of ideas that have been floated about how to deal with it. One of them is a global minimum tax. You say, if you operate in the United States, we will look at your consolidated profits and you will have to pay somewhere in the world at least 15 or 20% of those global profits. And what we have been having, and Amazon was a real example of this, was a race to the bottom. Everybody tried to do special deals in the way that Amazon tried to do with New York, but that's been a global phenomena. And you do as Apple was doing with Ireland and many other companies were doing with Luxembourg. Starbucks wasn't paying any taxes in the uk and they kept expanding. You sort of scratch your head. Usually businesses that don't make any profits don't expand. And what's the trick? Well, obviously what they were doing was charging franchise fee to Ireland of all their profits. And so all their profits were being siphoned off to Ireland, where they got a good tax deal. So if you had a global minimum tax, they couldn't get away with that. If they didn't pay tax in one place, they'd have to pay back in the United States or they'd pay in Europe. So the global minimum tax is an idea that's now getting a lot of resonance. There is a discussion going on now, IMF or the un, of frameworks for a agreement about the taxation of multinational corporation and making sure that they can't shift their income. There was an initiative at the OECD called the base erosion of profits shifting, called beps, which has succeeded in stopping some of the most egregious, but didn't stop making any dent in what Apple and Google and Starbucks were doing. So there's a global consensus that there are ways of dealing with this problem called profit shifting. On the issue of what do you do with the monopolies, first, I want to emphasize it's not just breaking up monopolies, but circumscribing some of the worst behavior and not allowing certain mergers to go through. Let me just give you an example of where the United States differs from, for instance, Europe. In the United States, if you've acquired monopoly power legitimately, then you can do anything you want. So if I'm a drug company and I buy the rights to produce a certain drug, I pay for it. Once I've acquired that legitimately, I can charge any price I want. And this is not just a hypothetical. A number of American companies have done that and increased prices a thousand fold. You know, a drug that costs, you know, pennies, they'll charge $1,000 for it. They have a monopoly in Europe. There is a doctrine called abuse of market power. You know, they look at what goes on in the United States and say, how can you let this happen? And, you know, I think it's unconscionable. The other example, the United States focuses only on what are called vertical mergers, mergers between firms in an industry. But when a cable provider buys an entertainment company, it can use control over the cable or the Internet to distort the market. We had a principle. We were aware that we had what was called net neutrality. So you can't do that. But then under Trump that thing has been abolished. And at the same time, the courts have said, don't worry about this. This is a vertical. There's no danger of monopoly power. What world do they live in? And so those are the kinds of things that economists have recognized as a danger. Our courts have not. We ought to stop it. There are issues of what are the presumptions in quarks. The real danger, going back 40 years, is that the corks have taken the view, that was pushed by University of Chicago economists, that markets are naturally competitive. So don't worry, don't worry about market power because competition can't be suppressed. Again, you wonder what world they live in. Competition is suppressed all the time. And our companies have gotten more and more clever figuring out how to create barriers to entry and how to suppress competition. So as one person at the staff or at the FTC said in a recent hearing I was at, he said, you know, we have to spend all our energies proving that water is wet. And after we prove that, we don't have any resources to prove anything else.
- [42:11]
Felix Hammond
I mean, it's interesting you mentioned the cable providers in particular, because the Trump administration, weirdly, and I think to quite a few people's surprise, took AT&T to court and said, you're not allowed to buy Time Warner. We don't want to let you do this. And they lost. This. Isn't the government just kind of like laissez faire, letting this thing happen? This is the court system. What kind of legislation is necessary to. To prevent these kind of measures?
- [42:35]
Joe Stiglitz
Well, I think simple legislation saying there should not be a presumption that markets are competitive. You look around, the presumption is there's lots of barriers to entry. We have to change the presumptions to the courts. We have to say, vertical mergers are a problem. We have to say, give you one more example that's very relevant to some recent instances. Facebook is very aware of how our antitrust law works. And so it buys companies when they're. And it's not the only one. When they're very young, it looks at who is a future potential threat to their market dominance and buys them today. And the standard procedure says, oh, Instagram is just a little company. How can you object to Facebook buying Instagram? You look at how much they paid for it and you see why you should have objected. They weren't buying it because of the technology. I mean, their engineers could have recreated that technology. They were buying it to suppress competition. Everybody knew that except our antitrust authorities. So the basic Idea is you have to have a forward looking antitrust law, you know, asking not where competition is today, but let's not suppress potential competition in the future.
- [44:04]
Felix Hammond
All right, let's have one more. I think there's a question right behind us right here.
- [44:08]
Audience Member 5
Under national health insurance or Medicare for all, do we all get to go to the very best doctors and hospitals like for knee surgery we can inundate hospital for special surgery who doesn't even take Medicare patient or many Medicare patients? Patients. Now so as an economist, how do you deal with that issue?
- [44:25]
Joe Stiglitz
Well, first let me put this in perspective. The basic point of departure is to realize that our health care system is extraordinarily inefficient, that we pay roughly 18% of GDP of a high GDP per capita. Canada, France spend about 11% of GDP. We get worse outcomes than France or Canada. Why? Well, there's a lot of inefficiency, some of it related to market power. Market power of insurance companies, health insurance company market power of the pharmaceutical industries. There are other reasons, but market power of hospital conglomerates. So there are lots of pockets, more than pockets of market power that are extracting rents that all of us pay. Now I think we should begin with the premise that access to health should be a basic human right. It's part of the declaration of human rights. Every other advanced country has recognized this. It was interesting. President Sarkozy of France was in the United States at the time the Obamacare was being discussed. And he gave a talk at Columbia and he was asked a question about Obamacare. You know, what was his view of it? And he began by saying, you know, I don't want to interfere in domestic American politics. But he couldn't help himself. And then he said, but I just don't understand you Americans because we all think that access to health care should be a basic human right. And some way you should figure that out. Now the particular proposal that I talk about in the book, and it's part of a number of proposals I have which is called the public option. It's not just my proposal and it was originally a part of Obamacare. And what it said is that the government should provide the option for people to buy, you might say extended Medicare going down, but not a compulsion. You know, you keep the right to buy private insurance, but if the private insurance is not providing an adequate product and if it's not providing, you know, health insurance, in many parts of the country, it's down to one or zero health insurance companies, at least people have a choice. Medicare and Providing that kind of competition and that kind of choice would improve the efficiency of the private sector because it would spur them to compete. So the irony is, of course, that the private health insurance companies said, we don't want any competition. And we know what happened when we try to provide health insurance that was essentially the same as Medicare for the elderly. It cost us 20% more because of our higher administrative cost. So we are less efficient, and so we can't compete with the government in that area. Now, the fact is that resources are limited and we have to have some way of making sure that resources are allocated efficiently. The private sector rations health care. Every time you want a test, you have to get approval and you have to convince the insurance company that it's needed. We will still have to have some procedures like that. You know, it's not going to be. Everybody who wants to have a knee surgery can get a knee replacement, but the idea that people will voluntarily want to get, just because it's free, get triple bypass surgery is a little bit ludicrous. You don't go get triple bypass unless you need it. So I think a lot of the worries about excessive utilization of things like heart surgery are exaggerated.
- [48:21]
Felix Hammond
But also to answer the question, if you have the public option that basically what you're saying is that anyone who wants to buy Medicare, there's a price for it and they can write a check and get Medicare. And if your expensive knee surgeon is not in the Medicare system, then that's off limits. But at least you have something. You have Medicare.
- [48:37]
Joe Stiglitz
Exactly. And we restrain when we go to, you know, the insurance I get through Columbia says if I go to some doctors, they'll pay for everything except for a copay. But there are other doctors that are out of network in which I have to pay a lot. And so we will wind up with some system similar to that. How much these differences in network and out of network are will have to be worked out. But the fact is that not everybody can get surgery from the same surgeon. He just doesn't have enough time. So there's some way. We have to have allocating resources.
- [49:15]
Felix Hammond
So I think that's basically it.
- [49:17]
We have to wrap up. But thanks all for coming.
- [49:20]
Joe's gonna hang out and sign this.
- [49:24]
Book for those that want to play. Goddamn, man.
- [49:28]
So that was me talking to Joe Stiglitz.
- [49:31]
I hope you enjoyed it. Thanks for listening all the way through to the end. Give yourself a gold star.
- [49:35]
And we will be back on Saturday.
- [49:38]
With a regular episode of Sleep Money.