Spend for growth
Photo by R. PAVAN
If you think the United States’ policies are to be blamed for the global financial uncertainty, think again.
Nobel laureate in Economics Joseph Stig-litz feels it is the structural shift in the global economy, especially in the developed economies that has caused the crisis and thinks that the governments take lead in finding solution to it.
“The financial crisis represents structural changes taking place in the global economy. The world is shifting from a manufacturing-based economy to that of a services-based one. The Great Depression was also due to structural changes, which were witnessed when there was a shift from agriculture to manufacturing,” Dr Stig-litz said here on Friday.
A staunch critic of self-regulation for markets, Dr Stiglitz said the world was able to get out of the Great Depression due to the World War II, which increased government spending on armaments (also reconstruction) ser-ved as an industrial stimulus to the developed world.
“But now (when the world faces a crisis of similar magnitude), governments are cutting spe-nding, making the pros-pects of recovery bleaker,” the Columbia Univ-ersity Professor said.
Reacting to the calls of spending cuts, Dr Stiglitz said the growth can achi-eved by higher government spending and higher taxes.
“A cut in government spending cannot be solution. It will worsen the situation,” he explained.
“Scandinavian countries — Denmark, Norw-ay and Sweden — are best examples of sustainable growth and welfare economy,” the Columbia Uni-versity Professor said.
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