Nobel Prize winning economist Joseph Stiglitz joined us on Quest Means Business today. He told guest host Max Foster the U.S. needed more stimulus and that the country could “clearly” afford it. Stiglitz also said, both the U.S. and Europe need to focus on the “direction of spending” and believes there could be dire consequences if they don’t.
“I think it's more likely that the United States and Europe may sink into what might be called a Japanese-style malaise. Growth might be a little higher than in Japan, because in Japan, population/labor force growth was zero,” Stiglitz said.
In contrast, “We have, in the United States, a population - a labor force growth of around 1 percent. Growth in the last quarter was a little over that, 1.6 percent. But this growth is so slow that it won't be able to get the unemployment rate down. So that is where I think we're more likely to go - slow growth, not enough to get us back into a really healthy situation.”
Stiglitz said spending on wars was a lack of the direction of spending in the U.S. and Europe. “Obviously, if you're spending money on wars that don't really enhance your security, you're wasting money and debt is […] going up. If you redirected that money from those unproductive spending to more productive spending, the balance sheet can actually be improved.”
Foster asked Stiglitz if he still stood by the claim he once made that the true price of the Iraq war would exceed $3 trillion USD. Stiglitz stood by his findings saying the data that have come in suggest the cost could be even higher than he first believed. “The number that the politicians focus on is the actual expenditures that goes on the books. And what we did in our study is looked at the costs that go beyond that. For instance, almost 50 percent of those who fought in Iraq are coming back disabled. We're going to be paying for health care and disability payments for the rest of their lives.”
Stiglitz called his original estimates conservative. “The numbers coming back with these disabilities are significantly higher than we estimated. And the cost for each is higher than we estimated. So the numbers that have come in look like that $3 trillion was a conservative number.”
So what do you think? Did the spending on the war in Iraq help bring the U.S. and Europe into a recession? And could both regions be headed for a "Japanese-style malaise" as Stiglitz put it? QMB wants to know what you think. Leave us your thoughts in the comments section, join us on Facebook or Tweet Richard your thoughts to @RichardQuest. Be clever and we just might use your response in the show!