South By North Strategies, Ltd.

Economist Joseph Stiglitz takes stock of the global economy as 2010 ends and 2011 begins. His assessment is not a rosy one.

I am not so bullish on Europe and America. In both cases, the underlying problem is insufficient aggregate demand. The ultimate irony is that there are simultaneously excess capacity and vast unmet needs – and policies that could restore growth by using the former to address the latter.
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Both the US and Europe, for instance, must retrofit their economies to address the challenges of global warming. There are feasible policies that would work within long-term budget constraints. The problem is politics: in the US, the Republican Party would rather see President Barack Obama fail than the economy succeed. In Europe, 27 countries with different interests and perspectives are pulling in different directions, without enough solidarity to compensate. The bailout packages are, in this light, impressive achievements.
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In both Europe and America, the free-market ideology that allowed asset bubbles to grow unfettered – markets always know best, so government must not intervene – now ties policymakers’ hands in designing effective responses to the crisis. One might have thought that the crisis itself would undermine confidence in that ideology. Instead, it has resurfaced to drag governments and economies down the sinkhole of austerity.