He’s not a neoliberal, “He’s a thug” – Stiglitz on Trump, in Montreal

Joe Stiglitz is a bright guy. He won the Nobel for Economics in 2001 for his work on markets where information is asymmetric. He’s the former chief economist of the World Bank, the former chairman of the US council of economic advisers, and the author of tons of books. Tonight, he’s talking about his new book, The Road to Freedom: Economics and the Good Society, at a McGill University event in Montreal. (He and I are in town for a conference on media and democracy at McGill this week.)

(This is a liveblog. I’m going to get things wrong – feel free to let me know in the comments and I’ll fix things.)

He’s in conversation with Christopher Ragan, the founding director of the Max Bell School of Public Policy at McGill, and an accomplished macroeconomist. Ragan disclaims that he’s not going to give any questions about Donald Trump until the final question because Stiglitz’s book, and the questions it raises, precedes Trump’s presidency.

Stiglitz begins by explaining his understanding of neo-Liberal capitalism, which he believes has failed and needs to be superseded with progressive capitalism. Neo-liberal echoes back to 19th century liberalism, but hopes to do something slightly different: if you strip away regulations and created unregulated free markets, the economy would prosper. Related was the idea of trickle-down economics: if we had sufficient growth, everyone would eventually prosper.

Neo-liberalism was a reaction to the government interventions under FDR in the US to alleviate the Great Depression and the actions in Canada and Europe to create a robust welfare state. Stiglitz mentions Milton Friedman and Frederich Hayek as the dominant voices arguing that disassembling these state interventions would lead to widespread prosperity. Asked who is arguing for neoliberalism today, Stiglitz argues that most contemporary economists understand that markets often fail, particularly facing serious problems like climate change. The dominant school in macroeconomics in the US – the Freshwater school – uses models that hearten back to neoliberalism. The predilection, Stiglitz argues, is to find market solutions to problems and then to solve the problems that are created with neoliberal solutions.

The problems with neoliberalism include income inequality, the failure of markets with crises like the mortgage crisis of 2008, and the poor performance of markets in sectors like the American healthcare are sector. Americans spend 4-5x as much as Singapore, 2x of what France spends and gets much worse outcomes: “That’s the market… one factor is a large role of monopolies.” Stiglitz mentions the assassination of the CEO of United Healthcare and notes, “The frustration with US healthcare is universal”.

Ragan asks whether the problems with neoliberalism are specific to the United States, and Stiglitz wonders whether US universities have indoctrinated economists all over the world, turning them into neoliberals. He argues that the “Chicago boys” have thoroughly taken over Latin America, where figures like Javier Milei in Argentina, who is preaching the virtues of Hayek, despite the ways in which that economist’s theories have been disproven. He hails back to Adam Smith, who he says noted that market actors would conspire to rig markets rather than competing: “They persuaded themselves that markets are naturally competitive. But when you open up your eyes… it’s a cognitive dissonance I’ve never understood.”

Stiglitz’s book is titled as an obvious response to Hayek’s “The Road to Serfdom”. Stiglitz notes that classic neoliberal texts offered ideas of “freedom” as a freedom to exploit workers and markets. Friedman’s influential article on CEO’s maximizing shareholder value was basically a plea for CEOs to exploit workers, consumers and anyone else, in the hopes of maximizing profits… and in the process, social welfare. Stiglitz remembers a seminar he offered at Chicago, where Friedman confronted him afterwards – Stiglitz believed that Friedman became an ideolog around the idea of the value of unregulated markets. Stiglitz refers to Isaiah Berlin’s idea that freedom for the wolves is death for the sheep – one person’s freedom is another person’s oppression. A company’s right to pollute might lead to the unfreedom in which we suffer from pollution.

In a book written decades ago, Stiglitz tells us, John Rawls argues that you should think about public policy issues as if you didn’t know where in society you were going to end up. Once you’re actually in a society, you have a vested interest in protecting your social class. If we didn’t know what position in society we would play – if we had a “veil of ignorance” – we would make better decisions about social policy and public goods.

The USA is a great place to be born in the top 1% – preferably the top 0.001% – but a lousy place to be in the middle of the economic distribution, Stiglitz tells us. If you’re going to be born in the middle, Europe or Canada provide much better services and opportunity. When we consider trade offs that play one person’s freedom against another, the veil of ignorance helps us make wise decisions. Consider COVID-19 and mask mandates: almost any rational society would require vaccination, social distancing and masking in order to protect millions of citizens. “The freedom not to die, not to be hospitalized outweighs the freedom to not wear a mask.”

Ragan asks, “What is it about a neoliberal world that leads to income inequality?” Stiglitz notes that in absence of good regulation and income redistribution we see a natural tendency for greater market power, which means those who control the markets have enormous power. Classical economics believes that markets will squeeze out profits as firms compete: that’s clearly not the case with Amazon or Facebook. Instead, power concentrates.

Ragan and Stiglitz do a pretty good job of staying off contemporary politics until NAFTA comes up – Stiglitz was advising Clinton when the agreement was on the table, and raised concerns that trade with Mexico – essentially transferring low-skilled labor to that country in the form of importing cheaper goods – would lower US wages. For Clinton, the idea that economic growth would raise all boats, was an article of faith. (Ragan notes that Canadians thought that NAFTA was a pretty good idea until about two weeks ago. Stiglitz quips, “That’s because you believed in the rule of law. I’m an academic – I’m more cynical than that.”

Rather than the freedom to move jobs anywhere it’s cheapest, Stiglitz argues that we need a freedom of opportunity, a freedom for children to access education and healthcare. That means we need to reduce economic disparities within societies and between societies. “In the US, we have a meritocracy – at least it looks like a meritocracy. But your ability to go to Harvard, Columbia or other elite schools is highly dependent on your parent’s income.” These schools are “need blind”, but the high schools students attend reflect the economic inequalities of the communities people live within.

The economic system we live within is not a free market, Stiglitz explains: there’s countless rules that matter immensely, and those rules are set within political processes. The US Supreme Court interprets the first amendment to allow money to have unbridled political influence. When a state government was concerned about the inequalities of this system, hoping to equal campaign funds, the Supreme Court intervened and argued for the importance of economically unequal speech. “Consider this an advertisement for becoming the 51st state.”

The dysfunction in the US comes in part from market power over media. The information ecosystem is affected by who owns the media – including social media – and what regulations they are controlled by. Not long ago, Stiglitz reminds us, we had rules like the Fairness Doctrine, which required equality in representation of views. Having eliminated those rules, we now have nakedly partisan media like Fox News. “When you have a media that can be bought by wealthy media, the views of that group get amplified.” What results is not a town square, but an echo chamber for those at the very top.

In 1996, Stiglitz reminds us, the US passed the Communications Decency Act, which included section 230, which means social media has no liability for what they carry – he reminds us that there was no public discussion of this provision. This provision should have been discussed, he argues – “it means there is no accountability, no responsibility” for what’s on these platforms. “You have junk going in to the information ecosystem… to get rid of the pollution takes a lot of work!” It’s a public good to clean up this ecosystem, Stiglitz argues.

Ragan points out that there are significant free speech arguments that get raised by Stiglitz’s idea of “cleaning up” online speech. Stiglitz argues that we’ve never had entirely unrestrained speech: we prohibit incitement, child sexual abuse material. He suggests we might need to rethink the balance around online speech: perhaps we reconsider a “right to vitality”. (This is often talked about as “a right to reach” on social platforms.) “In the midst of a pandemic, telling people that vaccinations are dangerous is, itself, dangerous.”

An hour into a conversation, we’ve largely avoided mentions of Trump. But his last question from the stage asks whether Trump is a neoliberal – his emphasis on tariffs contradicts neoliberal doctrine.

Stiglitz is blunt: “He’s a thug.” He understands Trump more in terms of Russian oligarchs than traditional economics. Telling a story about a dinner with a Russian oligarch, he oligarch told him :”Trump is just a traditional Russian businessman.” Russian oligarchs don’t honor contracts, they don’t make ethical commitments. Understand Trump in those terms and he makes more sense.

Ragan asks whether Stiglitz is surprised at Trump’s approach towards allies like Canada, Panama and Denmark. “Some of this is bluffing: the Art of the Deal is about seeing what you can get.” Canada has an advantage that a major fraction of exports are natural resources. That means there’s a global market for those products. (Not electricity, I’d note…) There’s some rents around Canadian oil given pipelines to the US – Ragan notes that developing LNG will give Canada more independence in this sector. “One needs to think about how to impose pain on the US.”

Is there a way to look at the current moment through a lens of optimism? Stiglitz notes that we are still in democracies – a fragile one in the US – and that most people agree on the policies behind progressive capitalism. Even in the US, policies like high equality education and healthcare have broad support. Ragan says “You’re arguing that any rational society would agree with progressive capitalism – are we not a rational society?”

Stiglitz targets the media again. People keep hearing a narrative that tarifffs will make Americans rich again — it’s going to take a while for people’s lived experience to counter those narratives. He notes that Trump’s tax cuts for the wealthiest became deeply unpopular once people realized how few benefits they saw from those policies. The only downside, Ragan notes, is that we might need to wait months or years for people to see these harms unfold.

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I was struck by a question Stiglitz took and his answer. The questioner asked him a) why he was speaking about his book in Montreal at this moment of tension between the US and Canada and b) about the chutzpah he was showing in critiquing Trumpian economics so directly. Stieglitz explained that a) this is what academics do – we go to conferences and share ideas and b) if you’re lucky enough to have tenure, you should use it to say provocative things, knowing you’re protected. I was happy to hear that, particularly at a moment where anyone from Columbia, where Joe is affiliated, has every reason to be gun-shy.

I disagree with some of Joe’s remarks near the end on restricting online speech and hope to have the chance tomorrow to persuade him that middleware is a better solution to speech problems than censorship.

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