By Anca Voinea
A changing political landscape and economic challenges mean we are witnessing “interesting” but “unsettling” times, warned economist Joseph Stiglitz at the International Summit of Cooperatives in Quebec.
The Nobel Prize laureate was a keynote speaker at the three-day conference, which brings together over 3,000 delegates from across the world to discuss the future of the co-operative economy.
A world-renowned academic, Prof Stiglitz teaches at Columbia University and has written extensively about inequality, trade agreements and the main issues affecting the world economy.
At the Summit he looked at the key challenges facing the global economy and the role of co-ops in addressing them.
He said that alongside changes in the political landscape, such as Brexit and the upcoming elections in the USA, the world faced economic issues which are beyond the control of individuals and even national governments.
“These are problems which the private sector won’t solve – partly because the private sector created these problems,” he said. “Co-ops and the social economy provide a key third pillar. That’s one of the reasons why I was particularly happy to address you this morning.”
Many countries are witnessing growing inequality which was the result of “the laws of men”, he added.
“Growing inequality is a result of how we have structured the market economy – in particular how we have restructured it in the last third of a century,” he said. “Inequality has been a choice.”
Prof Stiglitz gave the example of the USA, where the income share of the richest 1% (not including capital gains) equals that of the bottom 90%. Another aspect revealing inequality is the rise in executive pay, he added, with the salaries of chief executives rising by more than 300 times than that of the average US worker.
“If CEOs are taking a larger share of income then there is less and less for reinvestment in the company,” he warned.
Medium household income in the USA has also stayed relatively constant since 1998, he said. That year, income reached USD $58,301, while in 2015 it amounted to only USD $56,516.
He said inequality also manifested itself as a lack of access to health services, opportunities and justice. A study by economist Angus Deaton from 2015 shows that death rates have risen over the last years for white USA citizens.
This shorter life expectancy, argued Prof Stiglitz, was the result of social diseases, alcoholism, suicide and drugs – and are a sign that trickle-down economics is not working.
Financialisation has also resulted in more inequality and short term thinking, said Prof Stiglitz.
“Financial integration was supposed to lead to faster growth and more stability,” he said. “This, in turn, has economic and political consequences.
“Citizens know that the establishment has either lied to them or been totally incompetent. They feel that the economic system is rigged. They have lost trust in government and in the fairness of the political and economic system.”
What is the role of co-ops in addressing this inequality? Prof Stiglitz thinks they represent a better way of responding to the risks presented by the society.
“There are alternatives to the current system, even if some suggest there are not,” he said. “Some suggest at most we need minor tweaks on the system. But problems are deep and fundamental. Minor tweaks won’t solve it.”
He criticised economist Milton Friedman’s approach, emphasizing the pursuit personal interest which indirectly contributed to the well-being of society. He believes this “selfish” pursuit is what caused the 2008 financial crisis as well as the emissions scandal at Volkswagen.
“We should learn from co-ops,” he said. “If we do, we can reshape our economy, reshape globalisation and who we and our children are.
“These alternatives make a very big difference. I believe we can construct a world where the economy performs better for all, based on solidarity”.
Joining a panel discussion on the future of the global economy, Prof Stiglitz also raised concerns over using GDP as a measure for social well-being.
“Some governments cut down on social security to grow GDP,” he said, “but the really important aspect is well-being. People actually feel better when they co-operate rather than being selfish.”