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News & Events

Rewriting history

Nobel Prize-winning economist Joseph Stiglitz sees the ‘prosperous’ 1990s as something else

By Deborah Leigh Wood

2/1/2004 - Joseph Stiglitz could have told you the financially booming 1990s would go bust. As a matter of fact, he does tell you in The Roaring Nineties: A New History of the World’s Most Prosperous Decade.

What many viewed as a period of great economic expansion looked to Stiglitz, who won the 2001 Nobel Prize in economics, like the recipe for financial fallout. He sticks it to the Clinton Administration for “sowing the seeds of destruction” and skewers President George W. Bush for sending a fledgling recession into a full downward spiral.

Although his book is titled The Roaring Nineties, Stiglitz slides into the next century to assign a great deal of blame to Bush. “The Fed under his administration didn’t want to be a party pooper,” Stiglitz told a standing-room only audience (TGIF notwithstanding) at a recent lecture sponsored by the year-old Kellogg Emerging Markets Club (KEMC) in the Owen Coon Forum.

So instead of taking steps to stimulate the economy in the short-term and enhance its long-term growth, the current administration made a series of moves that marched the nation into a recession, said Stiglitz, a Columbia University professor of economics, chairman of President Clinton’s Council of Economic Advisers and chief economist of the World Bank during the East Asian financial crisis.

In a style as wry as the title of his book, Stiglitz proffered reasons, which could be turned into a Letterman-like list, why the United States is up a creek:

  • The Bush administration inherited a 2-percent surplus from the Clinton Administration and turned it into a 3-, then 5-percent deficit.
  • Bush gave tax cuts to the rich.
  • The U.S. mismanaged globalization by taking a unilateralist vision that forced other countries to open their markets while we cloistered ours.
  • Deregulation permitted corporations like Enron to furnish distorted financial data as they were “stealing money from their unwary shareholders.”
  • Financial analysts, determined to stay on the inside track, created a conflict of interest by misrepresenting the financial health of companies to investors.
  • The free market went haywire, leading to the loss of three million jobs and untold billions of dollars in U.S. coffers.
"The test of an administration is what it does with its inheritance,” Stiglitz told his audience. He gives those who presided over the nation in the ‘90s and beyond an A for effort but an F in comprehension.

© 2001 Kellogg School of Management, Northwestern University