Nobel laureate Joseph Stiglitz, in an exclusive interview with timesnownews.com, talks about what is wrong with current American capitalism, rise of a new kind of politics emerging from dissent towards government and more. Here are some excerpts from the interview:
What’s needed is a mandatory course on ethics and the limits of knowledge.
Moral philosopher. 1723-1790
– By Noah Smith. Bloomberg View. https://bloom.bg/2vue79V
Economics remains one of the most popular majors for college students. Most econ students, of course, don’t go on to become professional economists; instead, they fill the ranks of the U.S.’s vast pper-middle-class of business managers and professionals.
The models they learn in their college classes inform the way they think about the world, even if they don’t end up using them for quantitative purposes after final exams are over.
For several weeks, the guys and gals at CNBC and Bloomberg News, and their guests, have been talking about the coming tax reform (cut) legislation that the Republicans finally seem to have in their grasp. Well, maybe not exactly reform, maybe not revenue-neutral, but at least tax cuts for the corporations that give them campaign money. All the cheerleaders, both in Congress and the White House, assert confidently that faster growth will pay for the cost of the tax cut, even though virtually all economists (including me) say that it won’t.
The continued decline in GE share prices (now around $13 per share) have been a major topic in the financial press (and TV) during the past year. Jeffrey Immelt (Jack Welch’s protegé) is gone, no doubt with a sizeable “golden parachute” to comfort his golden years. Yet in GE’s peak year, under Welch, in August 2000 (just before the “dot.com” crash) GE was worth more than $600 billion. Currently it hovers around $115 billion. As of September 2017 GE was still in the Dow-Jones Industrial Average (DJIA), since it is by far the biggest US manufacturing company in revenues, if not in profits. The annual dividend, formerly $0.90 per share, is now $0.48. In other words, GE is not earning enough to cover its traditional dividend payout. The company is likely to sell around $20 billion in assets in 2018, just to cover expenses.
In December I travelled to the city of Kunming, in Yunnan province, China. The occasion of the trip was to attend a conference on planning and give a talk on economics at that conference. The host was the newly appointed provincial Governor, who is also the Communist Party Chairman for Yunnan. The organizer was the former chief planner for Singapore, and the attendees were academics and civil servants in the urban planning departments from all of the major cities of organizer was the former chief planner for Singapore, and the Yunnan province. I was invited on short notice (only two weeks) and I was asked to provide a copy of my talk in advance, without much detailed information about the actual situation. What I did know about China was more applicable to Beijing and Shanghai than to Kunming. So, I had to “punt”, as they say.
The all-white, all male finance committees of both Houses of Congress got behind this bill.
With straight faces, the salesmen for the Trump tax cut have promised a miracle: increased corporate profits, a surge of investment in CAPX, more and better jobs with higher pay, all to be paid for by accelerated economic growth. In fact, the all-white, all male finance committees of both Houses of Congress, with Treasury Secretary Mnuchin and Chief Economic Advisor Hassett say that the US will grow at 3% p.a. or more for the next ten years – no recessions – and that the tax cuts will actually generate a profit for the government of $300 billion in that time. Sadly (and no irony intended) this combination of goodies is a pipe dream. In the next few paragraphs I will explain why, and why Trump and the Republicans are selling snake oil to the suckers. What is surprising is how many financial professionals are buying it.
Robert Ayres, INSEAD with Michael Olenick and Lu Hao
Tax cuts, wages and salaries: Will lower taxes help workers? And the economy?
For several weeks, the guest experts on CNBC and Bloomberg News have been talking about the coming tax cut legislation (for corporations) that the Republicans finally seem to have in their grasp. The Bill, as it is currently proposed, will eliminate the insurance mandate for health care and may leave quite a lot of upper middle class salaried people, worse off, especially in high tax states.
The sure winners will be the shareholders of multinational corporations and “pass through” enterprises, especially real estate partnerships. The “supply-side” cheerleaders for the plan, both in Congress and the White House (Mnuchin, Cohen, Mulvaney, et al) argue that economic growth be much faster, that it will pay for the cuts, and that wages and salaries will rise, thanks to a burst of new investment.
By contrast, virtually all top economists say that the cuts won’t pay for themselves, that the deficit and the national debt will increase, and that growth will not accelerate.