An economist for all seasons

Stiglitz's willingness to honestly evaluate the Clinton administration's successes and failures leads to some interesting and somewhat contradictory conclusions. One of Clinton's great successes was balancing the federal budget, a feat that many citizens look back at longingly in these days of half-a-trillion-dollar deficits. Clinton defenders argue that the deficit-reduction policies brought the U.S. economy out of recession and set the stage for the economic boom of the '90s. But Stiglitz notes that such an argument runs in the face of well-established economic theory, which holds that budget deficits are actually the correct prescription for getting out of a recession. He argues that the the economy was already emerging from recession by the time Clinton reached office and that the fixation on the deficit, largely undertaken to please Wall Street bond traders, kept the administration from making the kinds of investments -- in healthcare, basic scientific research, education and other areas -- that would have ensured long-term growth of a more solid nature than what ended up being, in part, mere stock-market speculation.

Such an argument, made at precisely a time when Democrats and left-wing economists are in a frenzy about the Bush administration deficits, leads one to wonder: If running a deficit is the right policy to get a country out of recession, mightn't Bush be doing the right thing now? Not necessarily, says Stiglitz, not when the tax cuts that are in large part responsible for the currently ballooning deficits benefit mainly the extremely wealthy. The poor and the middle class would benefit the most from tax cuts targeted at relieving their burden (and their spending would help the economy the most).

The argument can get convoluted, and at first one might wonder why Stiglitz, an economist who came to Washington at the behest of Clinton, might begin his account with an attack on one of that administration's signal achievements. But ultimately, the approach lends credence to the rest of the book's arguments. This isn't a book by a political hack, attempting to take credit for a decade that saw some astounding economic achievements. This is a sober look at both the successes and the failures of the Clinton administration, an effort to sort out what went wrong and what went right.

What went wrong? The New Democrats of the Clinton administration tried to prove that they could out-Republican the Republicans, by pursuing deregulatory policies that put into effect a set of incentives that encouraged manifold abuses. By failing to crack down on stock-option accounting, by comprehensively deregulating the telecommunications industry, and by being overly deferential to Wall Street at the expense of the general public, the Clinton administration helped created an atmosphere in which corporations and executives were truly free to follow their selfish interests -- at the expense of shareholders, employees and the global economy.

What went right? During the '90s, unemployment hit historic sustained lows, inflation was kept down to a negligible level, and increases in productivity were real. The stock market may have experienced a bubble, but the changes wrought by the Internet and cellphones and the spread of computer technology were substantial. The Clinton administration cannot take credit for every positive datum, but there is evidence to suggest that it was more focused on basic goals that benefited the entire nation, such as increased employment, than its successor has been.

Not surprisingly from the author of "Globalization and Its Discontents," the chapter on globalization is one of the strongest in "The Roaring Nineties," detailing the extraordinary hypocrisy of the United States as it pursued policies abroad that it refused to enact at home. For example, the United States required foreign countries to remove trade barriers blocking the import of advanced financial services -- the kind that U.S. companies specialized in -- while at the same time massive subsidies to domestic industries made it impossible for foreign countries to compete.

Through it all, Stiglitz keeps reminding us not only to ask whether a particular economic policy is efficient or productive, but also to examine what purpose the policy serves. Stiglitz is unafraid to bare his own liberal chest. As he states flatly in a chapter called "Toward a New Democratic Idealism: Vision and Values": "We should be concerned with the plight of the poor. It is a moral obligation."

Stiglitz came to Washington to pursue the goals of social justice, and of at least one thing he is convinced after his years of research and politics: If the proper rules aren't in place, people will seek their own interest in ways that do not necessarily benefit the common good. The litany of disasters that befell the U.S. economy at the end of the '90s and the beginning of the new century is as clear proof of that fact as one could ask for.

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