Irrational exuberance: the bursting of an economic bubble.

Position:Books - Book Review




[pounds sterling]18.99 Allen Lane

ISBN 0-713-99722-2.

As chairman of President Clinton's Council of Economic Advisors for four years, and the World Bank's chief economist for a further three and a half years, Joseph Stiglitz enjoys a uniquely privileged position to comment on how the world's economy has been shaped over the last two decades.

It's said that towards the end of his tenure at the World Bank, the criticisms he was levelling at the established order were creating so much turbulence that enormous political pressure was applied on his boss James Wolfensohn to silence him. It's also claimed that Wolfensohn offered Stiglitz two options; shut up or ship out, and fortunately Stiglitz chose the later option and resigned.

The following year he won the 2001 Nobel Prize for Economics even as he set about writing the international best seller, Globalization and its Discontents (see African Business November 2002), a highly critical appraisal of the IMF and that institution's role in imposing structural adjustment policies on the developing world.

In this book, Stiglitz's follow-up to Globalization and its Discontents, the author turns his attention to the boom and bust years of the 1990s, and in particular how corporate America artificially fuelled a feeding frenzy of greed in the name of a free-market consensus.


He traces the genesis of this phenomenon to President Reagan's term of office, making a coruscating critique of Reagan's neo-conservative economic policies--policies that introduced huge tax cuts for the very wealthy, similarly large cuts in public spending which hit the poor, as well as programmes of deregulation and privatisation and the creation of a mammoth budget deficit.

Sounds familiar? Well, so it should, because these policies are still held by the current US administration as the best way to grow the economy and promote the common good. Stiglitz refutes this radical free-market fundamentalist creed with a careful, reasoned and intelligent analysis of what happened before, how much damage was caused, and the lessons that the world must learn.

Critics of Stiglitz's views invariably question his impartiality. They claim that as a Clinton loyalist, he exaggerates the role that Clinton played in reducing the US budget deficit--that, in fact, certain economic indicators point to the budget deficit closing even as Clinton took office.


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