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JOSEPH STIGLITZ: Macau to face challenges on inequality and “good jobs” for middle class
Macau’s economy is booming but American Nobel Prize laureate Joseph Stiglitz has made a distressing diagnosis: income inequality and the lack of jobs for the middle class will eventually become significant challenges that MSAR needs to address. Speaking at a seminar organized by the Monetary Authority of Macau, the economist reviewed the crisis in the United States and Europe, as well as giving advice to China.
“Macau has done very well,” he said, causing laughs in the audience, before continuing with a warning, “but the challenge is going forward; there are two challenges that you know better than I do. The first is inequality: the mean (average) income is much higher than the median (those in the middle) income. When there is a big gap between them, it’s a sign of inequality,” he explained, providing a few examples from the United States to indicate “how bad things can go.”
Stiglitz assured the audience, “if a society makes someone like Bill Gates richer and richer, it does not mean it is performing well.”
The other challenge he warned of for Macau’s future was even more complex to address: “How do you create good jobs for a large number of people?” he asked. “In the US, we have a few good jobs for people at the top, lots of jobs for people in the bottom, but we haven’t created jobs for people in the middle. That is going to be one of the big challenges for Macau,” he stated.
As the economy flourishes in Macau, the Nobel laureate asked the MSAR to “think about what you’re doing with all the money you’re making.”
In his opinion, there is a need to invest in the future, particularly in “creating alternative sources of economic activity” that will provide “employment for the best middle of the population.”
He added, however, that this seems to be “the major challenge that you have, going forward.”
Growing inequality is not only a problem that will affect Macau, but also China, the United States and other countries across the globe.
According to Stiglitz, before the 2008 crisis, there were already underlying issues that no one had addressed. For instance, he says that there is a lack of global aggregated demand. “There is no demand; there are no jobs (…) countries with a surplus do not need to spend all their income and countries with a deficit have to cut back their spending,” he explained.
Furthermore, Stiglitz thinks that “the surpluses are not being recycled into the places where they’re needed. What’s been saved does not get translated into potential investment,” he proclaimed.
Although China, for instance, has achieved an incredible rate of economic growth, which many wouldn’t have thought possible, Stiglitz sounded a note of caution: “It is important to move from quantitative growth to a more inclusive and sustainable growth, where the environment, for instance, is protected.” Staff reporter
Euro zone needs to be restructured
Nobel laureate Joseph Stiglitz has declared that Europe needs structural reform. Speaking at a seminar organized by the Monetary Authority of Macau on Friday, he explained that rather than a structural reform of individual countries, “it is the structure of the eurozone that needs reform.” “What they need is a banking union,” he added, clarifying that Europe had created a single market, without establishing the necessary institutions for that market to work.
Reviewing the errors Europe had made to find itself in such a severe crisis, Stiglitz stressed that “the euro was a mistake,” particularly because “productivity growth was markedly different in each country.”
Along the way, “they have made weak countries weaker and strong countries stronger,” he emphasized. He went even further to say, “it is a system designed to increase disparities.” Stiglitz also criticized the introduction of severe austerity measures: “Then they introduced a policy of austerity to combine private sector diverges with public sector diverges...what you have now is recession and zero growth, unless they change the structure of the euro zone.”
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