Wednesday, October 16, 2002
The World Knowledge Forum is being held in Seoul at the Grand Hilton Seoul Convention Centrefrom October 15th-18th, 2002. Today I had the opportunity to attend the Special Lecture presented by none other than the 2001 Economics Nobel Prize Winner, Joseph E. Stiglitz. So what did he have to say for himself? I'm no journalist and I didn't have pen and paper with me for the meeting (it was durin lunch and I was eating, as is my want). But I managed to make the following notes afterwards based on memory and a copy of the powerpoint slides I snatched:
In his speech today at the World Knowledge Forum being held at the Grand Hilton Convention Centre in Seoul from October 15th � 18th, Professor Joseph E. Stiglitz expounded his pessimistic (not very pessimistic, simply pessimistic) view of the US and world economy.
While there are weaknesses in US, European and Japanese economies, Stiglitz noted that China and India have been sources of growth and that countries best managing the global downturn have been those that are now increasing trading with these countries and diversifying their markets to reduce the level of dependency on major world markets such as US and Europe. He noted that Vietnam and Korea, two countries that have significantly increased exports to China have been able to weather the global downturn better than other countries.
Addressing the US economy, Stiglitz believed that focus should be given to how long the slowdown will continue. In highlighting the depth of the current downturn, his somewhat tongue-in-cheek boasting of US achievements over the past 12 months included the growth in unemployment, reduction in investments and the rapid turnaround in the US economy from a $3 trillion surplus (or was that $5 trillion, I forget) to $2 trillion deficit.
He noted that the 2001 recession was a combination of inventory and investment cycles. The weakening investment cycle is attributable in part to the depressing effects of corporate scandals and the threat of war. Other macroeconomic weaknesses in the economy are also serving to slow the economy, including reduced consumption and weak exports, as well as weaknesses in the stock market, labour market and business sector.
Regarding monetary policy, Stiglitz felt that the Fed should not be completely relied on to boost the economy and the fiscal ineptitude in recent times had exacerbated the fundamentals of the US economy. He advocated greater fiscal responsibility in righting the economy rather than putting too much faith in the abilities of monetary policy, citing the Feds inability to stop the current decline.
Recent corporate scandals in the US also highlighted problems with underlying fundamentals in the economy and he called on greater government regulation sensibly noting that if the information supplied for an economy is inaccurate and untrustworthy, it only serves to fuel market instability.
Concern was also noted for the sustainability of the huge US trade deficit and the threat of war in light of the current slowdown.
In the end, Professor Stiglitz saw an optimistic future for the US and world economy if reforms could be implemented to address the current weaknesses systemic problems that were preventing the US economy from rising out of the slowdown to make the economy less vulnerable to those factors which caused the current downturn.