Tags: Stiglitz | recovery | economy | US

Stiglitz: Get Ready for a Dismal 2014

By Michael Kling   |   Monday, 13 Jan 2014 01:26 PM

Many economists are upbeat about 2014, saying the recovery will finally accelerate.
Joseph Stiglitz, a Nobel laureate in economics and university professor at Columbia, isn't one of them.

"Unfortunately, the year ahead will bring little relief," predicts Stiglitz in an article for Project Syndicate.

"On both sides of the Atlantic, market economies are failing to deliver for most citizens. How long can this continue?"

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There are a few relatively bright spots, including Japan and Germany, concedes Stiglitz, chairman of President Clinton's Council of Economic Advisors and former chief economist of the World Bank.

"Elsewhere, though, things really are dismal: unemployment in the eurozone remains stubbornly high and the long-term unemployment rate in the U.S. still far exceeds its pre-recession levels."

Inflation-adjusted per capital GDP in the United States and much of Western Europe is lower than before the Great Recession.

The International Monetary Fund (IMF) predicts a "truly anemic" European growth rate of 1 percent for 2014. Even that may be too rosy, he says, noting the IMF's forecasts have repeatedly been overly optimistic.

Stiglitz has "muted optimism" for the U.S. economy. The unemployment rate is falling, GDP is growing faster and a degree of sanity has returned to Washington politics. Plus, healthcare costs are increasing more slowly.

"But we should curb our euphoria," he cautions, saying most new jobs are low-paying, median incomes are falling and median income is lower than it was in 1989.

"For most Americans, there is no recovery, with 95 percent of the gains going to the top 1 percent."

Long-term unemployment is the country's new problem, Stiglitz argues. The labor participation is rate the lowest it's been in 30 years. Some argue that's because of the growing numbers of older Americans.

"But this simply recasts the problem: the U.S. economy has never been good at retraining workers," he counters. "American workers are treated like disposable commodities, tossed aside if and when they cannot keep up with changes in technology and the marketplace."

Poor economic and social policies that are wasting human resources have created the dismal outlook for workers, Stiglitz charges.

Justin Wolfers, a senior fellow at the Brookings Institution, agrees that long-term unemployment is major issue.

"I would say it's the number one social and economic problem confronting the United States today," he tells WNYC

Many long-term unemployed are middle-aged or older men who saw jobs in their occupations disappear in the recession, but the group also includes women and younger people, he maintains.

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