A Roundtable Examination of The

Stiglitz ReportHeld at the annual Council of

Georgist Organizations conference, Minneapolis, Minnesota

5 August, 2011

Edward J. Dodson, Moderator

Participants

Mary (Polly) Cleveland Fred Harrison

Nic Tideman

Participants

Fred Foldvary Mase Gaffney Adele Wick

Major Conclusions Reached

• The financial and economic crisis was caused by a combination of private sector activities and flawed public policies.

• Changes in law and policy were driven by an ideological bias that markets are self-correcting.

• Movement to market-oriented economics systems has benefited many in some countries but worsened life for many in others where the primary economic activities are natural resource exploitation

• In many developing countries environmental degradation has been a serious consequence of the global financial structure

• Globalization has been accompanied by high levels of instability, particularly in developing countries

• Massive rescue packages have thus far staved off global depression, to a certain degree positively by stimulating spending to address long-term environmental problems

• Global discussions have been taken over by the G-20 nations, but too many nations remain excluded from such discussions

• The need for financial reform is broadly recognized, but there is yet no consensus over needed changes in laws and regulation affecting corporate governance, competition and bankruptcy

• There remains significant concerns over protectionist steps adopted by some governments

• Reforms must reflect a board view of social justice, poverty reduction and protection of the environment

• Current institutional arrangements must be greatly strengthened, reformed and made independent of political considerations to be effective

• The need for a new global reserve system is critical to resolve problems of shrinking aggregate demand

Last words from Joseph Stiglitz

THE ROUNDTABLE DISCUSSION

1

Is the Stiglitz team correct that financial markets are not self-correcting?

2

There is no mention of a need to return to a distinct separation between commercial banks and investment banks. Is this a serious oversight by the Stiglitz Team?

3

The Stiglitz Team has nothing to say about the responsibility of the bond rating agencies for the proliferation of private placement mortgage-backed securities collateralized by “no doc” subprime mortgage loans. What should be done about the rating agencies?

4Is there anything in the report that would seriously restrict the ability of the United States government to continue to accumulate debt?

5

Do you concur with the Stiglitz team’s conclusion that the sub-prime mortgage crisis was an outgrowth of a dramatic increase in the supply of credit generated by the “global capital markets,” a widespread failure of central banks to “dampen the speculative increases in housing and other asset prices,” and “lax financial regulation” in the United States and several other countries?

6

Is there any merit in the Stiglitz team’s called for “a new bank or banks operating without the bad debts of the failed institutions” but without “a competitive advantage over existing banks?

7

The Stiglitz team writes that environmental resources must be appropriately priced in order to lessen global warming. Is charging market rents the right policy choice, or the only effective policy choice?

8

Do you share the Stiglitz team’s view that the “quarter century following World War II is noteworthy for its absence of financial crisis” because of the measures adopted by governments during and after the Great Depression?

9

To curb the abuse in banking, the report calls for strengthening of antitrust law, increased premiums for deposit insurance, stronger regulation and authority to break-up large institutions. Are these measures significant enough?

10

The report notes that the poor in developing countries have suffered severely by globalization, with increased food and energy costs but is short on solutions. What would be your advice to the governments of developing countries on these problems?

11

The Stiglitz team calls for replacement of the U.S. dollar with a “supranational international reserve currency.” Is “this is an idea whose time has come?”

12

Regarding tax policies, the Stiglitz team advocates “taxes on pollution,” noting: “It is more efficient to tax bad things (like pollution) than good things (like work and savings).” Is there justification for such taxation to be imposed by a global governmental body?

13

Land ownership and taxation issues are not addressed in the report, even indirectly. Why do you think the Stiglitz team fails to see the central role of credit-driven speculation in land?

14

Fred Foldvary argues that the Stiglitz team misdiagnoses the reasons for the financial crisis. He writes: “There was a small amount of deregulation combined with a vast increase in subsidies, chiefly to real estate, which inflated the land values upon with the structure of mortgages, mortgage-based securities, and mortgage-based derivatives were erected.” Do you concur with Fred?

15

Adele Wick finds reason to be optimistic that Joseph Stiglitz can be brought over to Georgist perspectives. Adele writes: “He speaks of the importance of getting incentives right, in and out of government. …When he talks about taxing bad things, he just needs to add ‘privilege’ to ‘pollution’. And he’s that near-oxymoronic individual, an economist interested in equity, most notably in addressing poverty.” Has Adele read Stiglitz correctly?

16

The Stiglitz team?

17

The Stiglitz team?

18

The Stiglitz team?

19

The Stiglitz team?

20

The Stiglitz team?