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The challenge will be to find passable paths while formulating and defending American values. Writes Joseph E Stiglitz, an economist, professor at Columbia University and chief economist at the Roosevelt Institute.
Joe Biden listens to Janet Yellen, after introducing her as Finance Minister in his new government.
This is a discussion post. Writers are responsible for opinions.
President-elect Joe Biden’s decision to appoint Janet Yellen as Finance Minister is good news for the United States and the world. The United States has lived for four years with a lying president who does not understand or respect the rule of law, the fundamental principles of democracy, the market economy, or even common human honesty.
Donald trump he has used the time after his loss to spit unsubstantiated lies about voter fraud. He has also managed to convince a large majority of his party to believe in them, thus exposing the fragility of American democracy.
It will not be easy to repair the damage it has caused, especially in the midst of the covid-19 pandemic. Fortunately, no one is better equipped than Yellen to address today’s economic challenges. I met her when she was a doctoral student at Yale University in the 1960s and she has the intellect, the experience, the values, and the ability to work together.
At the top of the agenda are the consequences of the pandemic. Now that several different vaccines will soon be available, the most important task is to transition to a post-virus economy. It is no longer possible to think in terms of simple recovery.
Many companies have has gone bankrupt and more are expected to do so in the coming weeks and months. Household budgets and cash reserves are depleted. However, the seriousness of the situation is underestimated. The pandemic has left a serious wound at the bottom of the income and welfare pyramid, and those who have insured against evictions and foreclosures still end up increasingly in debt.
The situation would have been much brighter if we had had a president and a congress that already in spring recognized that Covid-19 would not disappear on its own. The support measures, which should have been strengthened and expanded, were not renewed and caused damage to the economy that could have been avoided but are now difficult to repair.
The devastation in restaurants and travelers has received a lot of attention, but it may well be just the tip of an iceberg. Educational institutions, especially many colleges and universities, have been hit hard. State governments and local politicians, whose economic room for maneuver is controlled by the budget and limited, see revenues plummet. Without federal aid, they will be forced to make significant cuts in personnel and operations, weakening the economy as a whole.
America is screaming Need for comprehensive support and rescue programs for the most vulnerable households and industries in society. Debt incurred from increased spending should not be an obstacle. In comparison, it costs a lot of money to do very little. Also, interest rates are close to zero and are likely to stay there for several years, so the costs of new debt are low.
Many of the necessary support programs can be designed to meet multiple objectives by providing the economy with a more sustainable, resilient and knowledge-based foundation. Much depends on Congress, but the economic arguments for increasing support measures are obvious and Yellen can formulate them.
Debt consolidation is necessary for the world economy to recover. An increasing number of countries in the world will soon no longer be able to repay their loans. A quick and deep rebuild would be of great help to them. The Biden Administration must make clear that it is in the United States’ interest to push for a rapid and comprehensive $ 500 billion restructuring of the International Monetary Fund at the center.
The last For four years, countless conflicts between the United States and virtually everyone else have created turmoil in the global economy and damaged both trade agreements and the willingness to invest. Another way to restore confidence is for the United States to return to what was normal before Trump, such as the United States re-entering the Paris Agreement on Climate Change and the World Health Organization, WHO, and resuming its participation in the Organization. World Trade, WTO.
A regression to normalcy, on the other hand, should not mean a return to neoliberalism and its belief in rampant deregulation. We know that it has had a series of political and social consequences, such as reduced growth and greater inequality. Now the pandemic has hit the last nail in the coffin of neoliberalism.
Policies need to be reviewed and modified with respect to trade and many other parts of the economic framework. No one yet knows how far Biden is willing to go, but we can at least dare to believe that his administration will not engage in the zero-sum logic that existed for the Trump majority.
Achieving global stability requires broad cooperation on climate change, pandemics, and other threats. The challenge will be to find passable paths and, at the same time, formulate and defend American values. Trump seriously undermined the economic and international order, but the cracks were there long before he came to power.
Yellen can contribute to the leadership needed for a better world after the pandemic. If it is to be successful, America must abandon the ideology that benefits the few at the expense of the majority and replace it with one based on democratic values and shared prosperity.
Joseph E Stiglitz, a professor at Columbia University and chief economist at the Roosevelt Institute. He has received the Alfred Nobel Memorial Prize in Economics and has been Chief Economist of the World Bank. His latest book is called People, Power, and Profits: Progressive Capitalism for an Age of Discontent (2020).
Translation: Karen Söderberg
Syndicate Project
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