Joseph Stiglitz He arrived on time -8:30 in the morning-, sat down in a simple neutral-colored chair and flashed his best university professor’s smile. Nobel laureate in 2001, adviser to Bill Clinton, critic of the Washington Consensus and personal friend of Martín Guzmán, Stiglitz questioned the strategy of high rates promoted by central banks to placate inflation, assuring that world leaders “moved slowly” in the face of the crisis caused by the war in Ukraine and warned that climate change is an issue on the global agenda that deserves permanent attention.
The Columbia Professor believes that it is necessary to apply a tax on unexpected income and agricultural exports in Argentina, and predicts a world debt crisis that would be deeper than the one that happened after the fall of the Berlin Wall. “It will be worse because there is no framework for its restructuring,” he said before Infobae.
Here is the full report with Stiglitz:
-What is your opinion about the current economic situation that is affected by the post-pandemic effects and Russia’s war against Ukraine?
-The consequences of this global scenario will depend on three major uncertainties: we do not know how long the war will last, we do not know how the effects of the pandemic will be handled, particularly in China, and we do not know how the central banks will respond. A big concern for me is that central banks raise interest rates too fast and too hard, which would lead to an unnecessary deep fall in the economy.
-The world leaders who met at the Summit of the Americas, the Hamburg G7 and the last United Nations General Assembly agree that the war in Ukraine complicated food security, energy supply and the stability of supply chains . In this context, do you consider that these world leaders are reacting well to the global crisis?
-I believe that world leaders have done important things, but I also think they moved very slowly. In any case, they did good things: they negotiated the shipment of food to Ukraine, and thus they were able to break with this dynamic that Russia had, which was terrible, and they also tried to put a ceiling on oil. In addition, many countries put in a windfall tax to help people who were dealing with high oil and energy prices.
Are those strategies correct?
-Some time ago I wrote an article that said that we were in a war against Russian aggression, therefore an economy cannot be implemented in times of peace. The United States, in particular, should use more renewable energy, resort more to fracking, and thus increase supply at this juncture and then lower it. There is also the war with climate change, but we cannot now worry about the climate. That will be after the war with Russia. So we have to tell our farmers to produce more, and not stop them. Much more could have been done to get more energy and more food. Many countries are not implementing this windfall profits tax, but they should.
– Do you believe the multilateral credit organizations – the International Monetary Fund, the World Bank and the Inter-American Development Bank – are acting in accordance with the circumstances of the global agenda and the needs of poor and middle-income countries?
-So far, some of these organizations are doing a good job, and others have been less active. The long-term problem obviously remains climate change. The World Bank -until now- has not lived up to the magnitude of the problem that climate change implies. There is a debt crisis, and many countries could be involved in this crisis.
-What does it depend on?
-If these problems continue, the price increases and the economic recession that I anticipate, there will be many countries with debt crises because there is no framework for their restructuring. And it’s going to take a lot of help. The current debt crisis is much more complex than the one that occurred in the 1990s, mainly because there are many more actors involved. There is China, there are the bondholders. So solving the debt problem today is more difficult, because there is no framework.
-Assuming that a debt crisis and a global recession arrive, is there any possibility of mitigating its effects with the coordination of measures between the central countries and international credit organizations?
-The United States is in a policy where its increases also generate increases in its neighbors. But even in this case, it is possible that the World Bank, the US government and other actors will mobilize more money for developing countries and emerging markets. In this way, if the supply of energy and food is increased, it would lower prices and discourage central banks from raising rates.
– In a context of war in Europe, is it possible to set a policy that can lower inflation globally?
-It may not be possible to reduce inflation to pre-pandemic and pre-war levels, because it was not only the war that caused this. The pandemic also brought shortages and generated changes. So, not only the war generated changes. However, certain policies could be adopted to reduce the level of inflation but also to deal with the pressures generated by high inflation. There could be a windfall profits tax to help the most vulnerable people, or a massive increase in renewable energy production.
– And in the case of Argentina?
-For Argentina, the imposition of a tax on extraordinary profits and a tax on exports of agricultural products would help reduce prices and would give the government more income to face this crisis situation.
– Assuming that the crisis can deepen and that Argentina has a debt with private creditors, the IMF and the Paris Club, Could there be new room for another negotiation with private holders and multilateral credit organizations?
-Argentina has already restructured its debt in a way that isolates it, and fortunately it is protected. We just have to see if the current situation extends over time.
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Joseph Stiglitz: “A tax on windfall profits and agricultural exports would give the government revenue to face the global crisis”