Joseph E. Stiglitz, a Nobel laureate in economics and University Professor at Columbia University, is a former chief economist of the World Bank (1997-2000), chair of the US President’s Council of Economic Advisers, and co-chair of the High-Level Commission on Carbon Prices. He is a member of the Independent Commission for the Reform of International Corporate Taxation and was lead author of the 1995 IPCC Climate Assessment.
NEW YORK – Some say there are two issues in the coming American elections: the Iraq war and the economy. On days when the war seems to be going better than expected, and the economy worse, the economy eclipses the war; but neither is faring well. In some sense, there is only one issue, and that is the war, which has exacerbated America’s economic problems. And when the world’s largest economy is sick – and it is now very sick – the entire world suffers.
It used to be thought that wars were good for the economy. After all, World War II is widely thought to have helped lift the global economy out of the Great Depression. But, at least since Keynes, we know how to stimulate the economy more effectively, and in ways that increase long-term productivity and enhance living standards.
This war, in particular, has not been good for the economy, for three reasons. First, it has contributed to rising oil prices. When the United States went to war, oil cost less than $25 a barrel, and futures markets expected it to remain there for a decade. Futures traders knew about the growth of China and other emerging markets; but they expected supply – mainly from low-cost Middle East providers – to increase in tandem with demand.
To continue reading, register now.
Subscribe now for unlimited access to everything PS has to offer.
As a registered user, you can enjoy more PS content every month – for free.
Already have an account? Log in