Nobel Prize-winning economist Stiglitz tells us why 'neoliberalism is dead'

Joseph Stiglitz, the Nobel Prize-winning economist and former adviser to US President Bill Clinton, says the consensus surrounding neoliberal economic thought has come to an end.

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Since the late 1980s and the so-called Washington Consensus, neoliberalism — essentially the idea that free trade, open markets, privatisation, deregulation, and reductions in government spending designed to increase the role of the private sector are the best ways to boost growth — has dominated the thinking of the world's biggest economies and international organisations like the International Monetary Fund and the World Bank.

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Since the 2008 financial crisis, however, there has been a groundswell of opinion in both economic and political circles to suggest that the neoliberal consensus may not be the right way forward for the world. In the past few years, with growth low and inequality rampant, that groundswell has gained traction.

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Stiglitz went on to argue that one of the central tenets of the neoliberal ideology — the idea that markets function best when left alone and that an unregulated market is the best way to increase economic growth — has now been pretty much disproved. "We've gone from a neoliberal euphoria that 'markets work well almost all the time' and all we need to do is keep governments on course, to 'markets don't work' and the debate is now about how we get governments to function in ways that can alleviate this," he said. In other words, Stiglitz says: "Neoliberalism is dead in both developing and developed countries."

Stiglitz is not alone in his belief that neoliberalism has its problems, though his argument that the consensus is "dead" is somewhat more forthright than those of many others. In a blog post in May, three economists from the IMF — long one of the greatest champions of the neoliberal consensus — questioned the efficacy of some aspects of it, particularly when it comes to the creation of inequality.

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But since Cameron resigned following the UK's vote to leave the European Union, fiscal stimulus in the UK has started to gain traction once again as a viable means of stimulating growth. It is widely expected that Philip Hammond, the new chancellor under newly installed Prime Minister Theresa May, will announce some form of fiscal easing at the Autumn Statement — which will come at some point before the end of the year (last year's was in late November).

Across the Atlantic, both US presidential nominees, Hillary Clinton and Donald Trump, both favouring expanded government borrowing to fund infrastructure projects.

http://www.businessinsider.com/joseph-stiglitz-says-neoliberalism-is-dead-2016-8