Why would the IMF put dealing with inequality at the centre of their economic agenda? Professor Joseph Stiglitz explains in his National Press Club Address.

The Australia InstituteFollowNov 16, 2018 Professor Joseph Stiglitz. (photo: Sasha Maslov)

1 // Progressive economics make more equal societies.

“Why would an institution like the International Monetary Fund (IMF) put dealing with inequality at the centre of their economic agenda?” asks Professor Joseph Stiglitz, speaking to the National Press Club in Canberra.

“It’s because they realise that economies with more equality perform better. They have higher growth and more stability. And so, once you recognise that, you recognise that having a progressive agenda with greater equality actually leads to higher economic growth and that higher economic growth then generates more tax revenue, and that more tax revenue gives you a source of funding for more progressive reforms, which in turn, make a more inclusive society.

“These advances in our understanding of economics really mean that in this day and age, there is no excuse for not having a progressive economic agenda.”

2 // Government has rewritten the rules of the labour market over the last generation, that’s why wages are going nowhere.

“We changed labour relations law to make it more difficult for unionisation, to make it more difficult for industry-wide collective bargaining. And when you change the laws, if you don’t have any collective voice for workers, obviously workers are not going to do as well. They have not been doing very well. It was predicted and it’s now happened,” says Stiglitz.

“The bargaining power of workers has been eviscerated.

Workers need bargaining power to translate economic growth into higher living standards.

“The economy is supposed to be helping increase people’s living standards and part of living standards is enjoying leisure. Having a life where you don’t get the same time off that everybody else does is really interfering with your wellbeing. And if you have to work on a Sunday, you should get compensated.

“And, If you work more than the standard working hours, you should be compensated extra. It goes back to the facts that the bargaining power of workers has been eviscerated. And if workers had a bargaining power, they would say: I don’t want to work on Sunday, but they can’t say that. So that’s why there’s a really important role for a government to set hours and overtime standards.”

3 // We need collectivism to tackle climate change.

“We are individuals — and it’s important to encourage individual initiative. But also, we are a collective,” says Stiglitz.

“So, why is it that the United States has been afflicted by these hurricanes and these wildfires that are killing people — the loss of property alone last year in our two hurricanes was about 2% of GDP, these are enormous numbers — it’s climate change.

“Absolutely no doubt about it, it’s climate change. And yet, we can’t get the collective action that we need to deal with climate change.”

4 // The first step of corporate responsibility is paying your taxes.

“Taxes are a necessary part of our working together as a society. But one of the things that corporations have excelled in, used their intelligence in, is to avoid paying taxes,” says Stiglitz.

“These companies talk about ‘corporate responsibility’, but the first element of corporate responsibility is paying your taxes. There is an international effort to stop -this kind of tax evasion. It has to be done at a global level. And it can be done.”

5 // For the last 40 years, benefits of economic growth have flowed predominantly to the top.

“Markets don’t exist in a vacuum. They have to be structured. They’re structured by rules and regulations. By a whole set of legal frameworks, from labour laws to tax laws, expenditure policies and monetary policies,”

“Over the last 40 years — since Reagan and Thatcher — those rules have been changed, and those rules have actually led to slower economic growth and a lower economy. And what paltry economic growth has occurred, has seen the benefits all gone to the top.”

6 // Our truth-telling institutions are essential to the future of democracy.

“Demagogues like Orban in Hungary, and Trump in the United States, are systematically trying to destroy all of our truth-telling institutions: the media, the judiciary, our universities,” says Stiglitz.

“One of the most insidious aspects of America’s 2017 Tax Bill was a tax imposed on Harvard and Princeton and other leading universities. So while other countries are trying to encourage universities, America is taxing them to try to discourage them. The upshot of this is — not only will our economic prosperity be put into jeopardy, but so will our democracy.”

Professor Stiglitz is in Australia to receive the Sydney Peace Prize. He was awarded the Prize at the City of Sydney Peace Prize Lecture on 15 November, and spoke at the National Press Club on 14 November.

The Australia Institute is an Impact Partner for the 2018 Sydney Peace Prize and Professor Stiglitz visited Canberra to address the National Press Club as a guest of The Australia Institute and Sydney Peace Foundation.