Nobel Prize for Economics in Chile: “Neoliberalism should have died many times before and it seems very difficult to bury it”

“The economic theory that tries to emulate the physics of the nineteenth century is not really adequate for a world with constant shocks, which are totally unpredictable and have very important consequences,” said Joseph Stiglitz in his first lecture at the U. de Chile.

Joseph Eugene Stiglitz He is an American economist and professor, born in Indiana in 1943, who received the John Bates Clark Medal (1979) and was laureate of the Bank of Sweden Prize in Economic Sciences in memory of Alfred Nobel (2001).

E. Stiglitz, is known for his critical view of globalization, of free market economists (whom he calls “free market fundamentalists”), and of some of the international credit institutions, such as the International Monetary Fund and the World Bank. .

In 2000, he founded the Policy Dialogue Initiative, an international development think tank based at Columbia University (United States), and since 2005 directs the Brooks Institute for World Poverty, of the University of Manchester.

Generally considered an economist of the New Keynesian Economy, he was during 2008 the most cited economist in the world. In 2012, he entered as a corresponding academician at the Royal Academy of Economic and Financial Sciences of Spain.

Nobel Laureate in Economics, Joseph E. Stiglitzvisited Chile, invited by the Faculty of Economics and Business (FEN) of the University of Chile to talk with the academic and university community and the general public.

“Neoliberalism should have died many times before and it seems very difficult to bury it. And that seems to be true even in Chile,” said Joseph Eugene Stiglitz.

Neoliberalism and the multiple dimensions of its failure, its alternative vision to this economic system called “progressive capitalism” and its theoretical proposal of “imbalance”, for a macroeconomy closer to the economic reality of the last 20 years, were the main topics. addressed by the award-winning American economist during his visit to the University of Chile. The event, organized by the Faculty of Economics and Business, was attended by Dean José De Gregorio and former Minister of Economy of Argentina, Martín Guzmán.

We share below the presentation of the Nobel Prize winner Joseph E. Stiglitz, University of Chile registration / Part 1: “Understanding the macroeconomic imbalance”

Presentation of Nobel Laureate Joseph E. Stiglitz, Universidad de Chile registry / Part 2: “The power of people and profits: Reforming the global economy”

See note below: Press University of Chile

The Nobel Prize in Economics, Joseph E. Stiglitz, visited the country invited by the Faculty of Economics and Business (FEN) of the University of Chile to talk with the academic and university community and the general public. During the afternoon of this Thursday, October 27, the distinguished American economist gave two consecutive conferences: “Understanding the macroeconomic imbalance” Y “People Power and Profit: Reshaping the Global Economy”. In the first of these activities, in addition, the former Minister of Economy of Argentina, Martin Guzmanand the dean of the FEN, Joseph Gregory.

The Columbia University professor is known for his pioneering work on asymmetric information theory and his research focused on income distribution, risk, corporate governance, public policy, macroeconomics, and globalization. Critical of the current economic model, he proposes what he calls “progressive capitalism”, a concept through which it seeks to reform the rules created by neoliberalism for an economic and social system that allows growth, but with social justice and a better quality of life for all. Part of his theories were addressed included in his talks today.

In his first lecture, the academic raised observed that “the world we live in is not really a world of balance. In the last 20 years we have lived through many shocks, we had 9/11, the financial crisis in 2008, then we had another disaster, the election of President Trump. And that was a major shift in the way we view globalization. We had been working for a world without borders, and suddenly borders began to rise. And then just a few years later, we had the Pandemic. And in Chile, they had some riots in 2019, and these continue. And then we had the Russian invasion of the Ukraine. None of those things could have been predicted, and each of those things has had important macroeconomic effects that policymakers have had to deal with.”

In this way, the professor listed the shortcomings of those standard economic models, based on optima and equilibrium, and explained his proposal for imbalance, a vision that he defined as closer to reality and that provides better prospects for today’s economic policies. “In many ways, economic theory that tries to emulate 19th century physics is not really adequate for a world with constant shocks, which are totally unpredictable and have very important consequences. If we were to start from scratch, the metaphor, the model we should be thinking about is more that of evolutionary biology and not the equilibrium theories that were dominant in physics in the 19th century, which had a huge influence on the evolution of standard economic thinking. ”, Professor Stiglitz said.

The Nobel anticipated a large set of sovereign debt problems in the Third World, lacking good mechanisms for debt restructuring. Regarding inflation, he argued that today’s world is very different from the one that existed half a century ago, so it is not possible to solve this problem using the same old strategies proposed by the standard model. “The bottom line is that this disequilibrium theory, I think, puts macroeconomics back on better and more relevant foundations. We know that we don’t know, but there are certain common things that we do know, that in an economic downturn, fiscal policy can be very effective. We know that automatic stabilizers can be very effective. So what I want to emphasize is that we know less than we pretend to know with the equilibrium model, but it does not leave us rudderless. We know a lot. Y If we focus on what we know based on imbalance models, I think we can do a better job of politics than pretending we know more than we really do.”.

The funeral of neoliberalism

“The power of people and profits: Reforming the global economy” was the title of Professor Stiglitz’s second conference at the University of Chile, an activity that was organized by students from the Faculty of Economics and Business within the framework of the Critical Congress of Economic Sciences and Administrative. In it, the academic focused on the neoliberal model and the “multiple dimensions of its failure”, as well as on the alternative vision of it, which he calls “progressive capitalism”, which seeks a balance between the market and the Statethrough an ecology of institutions that needs to be strengthened.

One of the reflections of the Nobel was referred to Chile as the laboratory where the neoliberal model of the so-called Chicago Boys was implemented. “In Latin America, reference is often made to the Chicago Boys influence and, as you know, its president (Boric) in one of his great campaign statements, which I loved, was that if Chile is the place where neoliberalism was born, Chile would be the place where it would be buried. So one of the reasons why he was so excited to come to Chile is to see the burial and be at the funeral. But sadly, there is a saying that he has nine lives. Neoliberalism should have died many times before, and it seems very difficult to bury it. And that seems to be true even in Chile”.

“Social justice was not on the agenda, but efficiency was. The predictions of neoliberalism turned out to be untrue », he pointed out about the implementation of this model in Chile. “Neoliberalism was one of America’s bad exports. We must apologize for exporting Chicago Boys ideas to the rest of the world. And I apologize for them. But finally in the United States the discussion has already begun about what the world will look like after the end of neoliberalism. It has become a huge topic of discussion and research,” she added.

The promise of greater economic growth that would benefit all social classes was not real, he assured. In this line, he continued, «while most Americans haven’t seen any increase in their income in a long, long time, those in the top 1% have done very well. So when you say that the United States is a very prosperous country, it’s a bit moot.” On this point, he highlighted that the real wages of the poorest people in the United States are lower than they were 65 years ago. “In real terms, they haven’t gotten a raise in 65 years. So if someone says that the American economy works well, it works for the top, but it doesn’t work for a large part of the population, “he said.

Regarding the concept of “progressive capitalism”, he explained that one of the proposals he puts forward is “that not only rules and regulations are needed, it is important to have a rich set of what I call an ecology of institutions that we need to strengthen, to have a balance between the market and the state“, although it emphasizes the need to strengthen the State in some countries. In this line, he exemplifies with the case of the United States, stating that “if we had not had the State to stop the fall of the economy, we would have had a depression worse than the Great Depression. So, COVID-19 shows the importance of the State.

Another aspect that he highlighted is the role of the press and its relationship with economic power. “One of the really important things that I’ve come to focus a lot of my thinking on more recently is the importance of the press in shaping public discourse. And when you have a press controlled by a few rich people, like Murdoch controls Fox, that helps shape public discourse and public understanding. For this reason, we should think a lot more about how we create a more independent and diversified press and thoughtabout how we create better institutions for fact-checking and truth-checking.”

In 2011, Stiglitz was named by Time magazine as one of the 100 most influential people in the world. He is the author of numerous books and several best-sellers. His most recent titles are ‘People, Power and Profits, Rewriting the Rules of the European Economy’ and ‘Globalization and Its Discontents Revisited’.