Compared to almost every economy in the world, the United States is currently doing very well, but there are three important caveats.
First, there is too much economic inequality. Second, corporate shortsightedness has led to underinvestment and a lack of resilience. Third, right-wing pressure to undermine government has led to underinvestment, inadequate public services, and poor regulation.
The latter has led to aging infrastructure, poor health and poor education for a large proportion of under-motivated workers, and increased costly pollution and market power.
Despite these handicaps, the U.S. economy is doing well, with fourth-quarter GDP rising to2.8 percentThanks to the strong economic stimulus package provided by the landmark bill passed under the Biden-Harris administration.Inflation Control LawAnd that CHIPS and science lawThese bills improved infrastructure, strengthened science, and helped improve a key resilience weakness in the U.S. microchip market. Inflation iscome downThe increase was rapid as markets moved to alleviate shortages that had caused prices to soar.
But there is still work to be done.
Market power (reflected in the size of the monopoly)rentandMarkup) has soared from already high levels to astronomical levels during the pandemic, and the Biden-Harris Administration has begun the difficult work of bringing it down, but it will need to pass new laws that take into account 21st century threats to a digitally competitive economy.
HomelessThis is one sign that our housing system is broken. Rich countries can do better.
Our health care system is broken and we need to fix it.Much more per capitaNo other country is performing worse than other developed countries.Short life expectancyAnd health disparities will increase.
Climate change is an existential threat, but even in the short term it is clear that we will have to spend an ever-increasing percentage of our GDP just repairing the damage caused by extreme weather and adapting to rising sea levels that will accompany it.
The Inflation Control Act should be seen as the beginning of a green transition, which will require more coordinated regulation, public investment, and carbon pricing. And we need to be true leaders in getting the global cooperation we need to address this issue. We can’t fall behind.
Neoliberal capitalism is clearly short-sighted – the 2008 financial crisis and its lack of resilience to pandemics are dramatic examples – and the biggest challenge will be to encourage more long-term thinking.
Changes in corporate governance laws and thinking could bring about change, shifting away from a focus on short-term stock market value maximization to greater consideration for the long-term well-being of all stakeholders, including customers, employees, the communities in which the companies operate, and the environment more broadly. One way to achieve this is by giving long-term owners a greater voice through loyalty shares.
The economy faces four major threats in the near term.
First, the Fed doesn’t seem to understand what’s causing today’s inflation, which is caused by shortages in sectors including housing, not excess aggregate demand. High interest rates didn’t create an additional supply of chips.Lowered car pricesAnd high interest rates will not create the additional supply of housing needed to lower housing costs. In fact, they will make these problems worse.
Second, if Donald Trump wins, he will likely repeal major bills of the Biden-Harris administration and impose expensiveCustoms DutiesInflation will rise significantly and growth will slow.
Third, financial deregulation increases the risk of a new financial crisis, and environmental deregulation not only puts us on the wrong side of history, but also reduces our competitiveness in future green technologies.
Finally, if Trump is elected, restoring and strengthening the Trump-era tax cuts risks widening inequality and reducing high-margin public and even private investment at a time when it is sorely needed.Tax cutsInvestment and growth did not increase, but deficits and inequality increased, and companiesShare buybacksAnd by paying higher dividends$1 trillionOr something like that.
As corporate balance sheets decline, companies are less able to take on big new profit opportunities, and savers pump money into companies whose market values have risen because of lower taxes and increased market power, taking capital away from productive investment.
In short, the biggest risk to our economy and to solving the problems I’ve identified is political, with both parties offering two different visions for a successful economy.
One party doesn’t understand how a 21st century economy works, and instead of going back and rewinding time, they are trying to implement policies that will undo the progress we’ve made and create an even more dysfunctional system. They may succeed in making the lives of the top few better, but even that is doubtful. When the economy doesn’t work, even the wealthy suffer to some extent.
The other side offers no panacea, because there is no panacea, but it correctly diagnoses the problems in our economy, calls for shared prosperity, and outlines a fiscally responsible strategy for achieving it (though more conservative in some areas than I would prefer).
This op-ed is part of The Hill’s “How to Fix America” series, which explores solutions to some of America’s most pressing problems.
Joseph E. Stiglitz is an American economist and professor at Columbia University. He is also co-chair of the OECD’s High-Level Expert Group on Measuring Economic Performance and Social Progress and Chief Economist at the Roosevelt Institute. Stiglitz was awarded the Nobel Prize in Economic Sciences in 2001.
