Tuesday, July 21, 2009

No, Not Everyone...

I know this is old, but that doesn't mean it's any less deserving of a smack down:
"The truth is, we and everyone else misread the economy," declared Biden. "The figures we worked off of in January were the consensus figures and most of the blue chip indexes out there."
Actually, the truth is that plenty of people have been right in predicting the economy over the last 8 years, and you chose to shut them out of the Administration. A recent Newsweek article attempts to figure out why Joe Stiglitz was left out:

Stiglitz has warned for years that pro-market zeal would cause a global financial meltdown very much like the one that gripped the world last year. In the early '90s, as a member of Clinton's Council of Economic Advisers, Stiglitz argued (unsuccessfully) against opening up capital flows too rapidly to developing countries, saying those markets weren't ready to handle "hot money" from Wall Street. Later in the decade, he spoke out (without results) against repealing the Glass-Steagall Act, which regulated financial institutions and separated commercial from investment banking. Since at least 1990, Stiglitz has talked about the risks of securitizing mortgages, questioning whether markets and authorities would grow careless "about the importance of screening loan applicants." Malaysian economist Andrew Sheng says, "I think Stiglitz is the nearest thing there is to Keynes in this crisis."

. . .

Stiglitz's defenders say one possible explanation for his outsider status in Washington is his ongoing rivalry with Summers. While they are both devotees of Keynes, Summers often has supported deregulation of financial markets—or at least he did before last year—while Stiglitz has made a career of mistrusting markets. Since the early '90s, when Summers was a senior Treasury official and Stiglitz was on the Council of Economic Advisers, the two have engaged in fierce policy debates. The first fight was over the Clinton admin-is-tration's efforts to pry open emerging financial markets, such as South Korea's. Stiglitz argued there wasn't good evidence that liberalizing poorly regulated Third World markets would make any one more prosperous; Summers wanted them open to U.S. firms.

The differences between them grew bitter in the late 1990s, when Stiglitz was chief economist for the World Bank and took issue with the way Treasury Secretary Robert Rubin, and Summers, who was then deputy secretary, were handling the Asian "contagion" financial collapse. After World Bank president James Wolfensohn declined to reappoint him in 1999, Stiglitz became convinced that Summers was behind the slight. Summers denies this, and maintains that no rivalry exists between them. Summers's deputy Jason Furman says that Summers now "talks to [Stiglitz] a lot." "A lot" is an exaggeration, Stiglitz responds. "We've talked one or two times," he says.

. . .

Today, settled as a professor at Columbia, Stiglitz occasionally finds himself welcomed in the nation's capital, though usually at the other end of Pennsylvania Avenue, to testify before Congress. While he had no great desire to go back into government, friends say he was deeply disappointed when an offer didn't come from Obama last fall. Not surprisingly, Stiglitz believes his old rival was behind it, though Summers denies this.
As readers of this site know, my biggest worry about Obama's presidency remains his economic advisers and their handling of the banking crisis. Obama had a choice about whose ideas would bring us out of this economic crisis, and he chose to trust those who've repeatedly been wrong about these issues in the past.

There's always the increasingly small chance that they figure things out this time around, but when you have access to the people who've been right all along, I still can't understand why you'd bet your political capital on the fuck ups.


  1. "The first fight was over the Clinton admin-is-tration's efforts to pry open emerging financial markets, such as South Korea's"

    Uh, what is going on with the word 'administration' there?!

  2. Trying to pry it open?

    I don't know, that doesn't make any sense.

  3. Yeah, I wondered about that too. WTF?

    Anyway, I had the pleasure of seeing Stiglitz talk in January at this patent conference I went to. He was completely fantastic, both entertaining and directly useful.