Nikkei Asian Review : 18 March 2016
TOKYO -- The global economy will be in a state of "great malaise" this year, Columbia University professor Joseph Stiglitz told the Nikkei Asian Review. The Nobel Prize economist, citing the slowing Chinese economy and the struggling eurozone, predicted Thursday that 2016 would be "even weaker than 2015," the world's worst year since the global financial crisis.
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"Even earlier I said the consumption tax is not a right tax," he said. "Tax policy should be used for what you are worried about," including global warming, inequality and underinvestment. A carbon tax, for example, could help stimulate the economy. Stiglitz also emphasized the necessity of fiscal stimulus. Considering that the global economy remains weak despite all the efforts of central banks, the "obvious implication is you need something else," he said. Stiglitz suggested investment in basic social needs such as technology, education and child care.
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The impact of the Bank of Japan's negative interest rate policy introduced in February is relatively weak, but it is "better than nothing," Stiglitz said. He appreciated the BOJ's careful introduction of the policy, noting that some countries that adopted the negative rate policy earlier hurt banks' balance sheets and discouraged them from lending.
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Stiglitz expressed concern about easing policy. He said quantitative easing led to more inequality in the U.S. because it helped shareholders but hurt the Treasury bill owners, who are disproportionally retirees. He said "many of the models central banks have used were not sensitive enough to these kinds of intergenerational effects," limiting the impact of monetary policy.
TOKYO -- The global economy will be in a state of "great malaise" this year, Columbia University professor Joseph Stiglitz told the Nikkei Asian Review. The Nobel Prize economist, citing the slowing Chinese economy and the struggling eurozone, predicted Thursday that 2016 would be "even weaker than 2015," the world's worst year since the global financial crisis.
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Stiglitz described malaise as a situation where few people are suffering but almost no one is prospering, such as Japan's experience after 1989. "For the people on the top, it is OK, but ordinary citizens are finding it hard," he said. The economist met with Japanese Prime Minister Shinzo Abe on Wednesday and warned against raising the consumption tax to 10% from 8% in April 2017.
"Japan's economy is not very strong," Stiglitz said. "And the global economy on which Japan depends so much is, I believe, in a very weak situation." Consequently, he said, "this is not the time to raise the consumption tax.".
"Even earlier I said the consumption tax is not a right tax," he said. "Tax policy should be used for what you are worried about," including global warming, inequality and underinvestment. A carbon tax, for example, could help stimulate the economy. Stiglitz also emphasized the necessity of fiscal stimulus. Considering that the global economy remains weak despite all the efforts of central banks, the "obvious implication is you need something else," he said. Stiglitz suggested investment in basic social needs such as technology, education and child care.
.
The impact of the Bank of Japan's negative interest rate policy introduced in February is relatively weak, but it is "better than nothing," Stiglitz said. He appreciated the BOJ's careful introduction of the policy, noting that some countries that adopted the negative rate policy earlier hurt banks' balance sheets and discouraged them from lending.
.
Stiglitz expressed concern about easing policy. He said quantitative easing led to more inequality in the U.S. because it helped shareholders but hurt the Treasury bill owners, who are disproportionally retirees. He said "many of the models central banks have used were not sensitive enough to these kinds of intergenerational effects," limiting the impact of monetary policy.
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