Joseph Stiglitz, the renowned economist, globalization scholar and former chair of President Clinton's Council of Economic Advisers, is a lonely man, writes Michael Hirsch for Newsweek. Like the Cassandra of lore, he predicted the seeds of our financial destruction, and the impotence of the stimulus package, but his prescience has yet to win him the ear of the president. Can we chalk it up to a decade-long feud with Larry Summers, or does Obama have a deeper reluctance to govern as a true economic liberal?
Hirsch seems to back the Larry Summers rivalry, and he bookends his piece with allusions to Summers' ego butting against Stiglitz' not inconsiderable sense of importance. Paul Krugman has another theory.
But the larger story is the absence of a progressive-economist wing. A lot of people supported Obama over Clinton in the primaries because they thought Clinton would bring back the Rubin team; and what Obama has done is ... bring back the Rubin team.The point is that even if you think the leftish wing of economics doesn't have all the answers, you'd expect some people from that wing to be at the table.
Where would Stiglitz have pushed back against the Obama team? Hirsch details two major objections to Obama's economic policy and, if you're a frequent reader of Krugman or similarly liberal economic blogs, these should look familiar:
1) "The stimulus program was too small to be effective."
2) Rather than breaking up or restructuring the big banks that failed, "the Obama administration has actually expanded the notion of 'too big to fail.'"
Of course, politics, rather than raw economic ideology, played a big role in both the stimulus and the bank bailouts. With regard to the stimulus, Senate Republicans helped force $150 billion in changes to the House version, and Obama expressed clear disappointment for how the bill changed as it moved through the congressional sausage factory. The final bill was a product of speed, necessity and votes, and it seems unlikely to me that the presence of Joe Stiglitz would have done much to change the final dollar amount.
In the bank bailouts, Krugman is right that of all the public advocates for nationalization -- which might have led to forced restructuring -- practically none of them had a home in the Obama administration. But the political reasons for Obama's disinclination to nationalize banks seem pretty defensible to me. Democrats were loathe to don the label of natioanlizers; Treasury Sec. Tim Geithner was nervous about the political avenues required to nationalize enormous banks or insurance companies; or perhaps, as Brad DeLong suggested, the administration was always holding onto nationalization in case everything else failed.
In short, I'm not sure that the influence of Joseph Stiglitz -- or even a couple Stiglitz clones -- would have dramatically changed the policy coming out of the White House.