Stiglitz and Sen profit and pain

Every economist - and Joseph Stiglitz and Amartya Sen are iconic iconoclasts within the tribe - is career-habit-and-hide-bound to pay his homage to the wisdom of market forces, even when he is critical of them

ASEEM SHRIVASTAVA/ Hardnews/ DELHI

An economic transaction is a solved political problem. Economics has gained the title of queen of the social sciences by choosing solved political problems as its domain - Abba Lerner

NOBEL ECONOMIST JOSEPH Stiglitz has recently expressed his views on the ongoing food crisis around the world. Given his pre-eminence in the profession and his vast experience as an advisor to governments, his views deserve to be scrutinised carefully.

The Stiglitz diagnosis
Stiglitz traces the problem of inflation in food and energy prices around the world to the policies that have been enacted in the US and elsewhere during the past few decades. He finds fault with the massive financial deregulation and generous tax cuts for the rich in the Anglo-Saxon world since the Thatcher-Reagan years, attributing to them rightly the "huge increase in inequalities in most countries," the dramatic fall in household savings rate in the US, significant declines in employment prospects for most people everywhere and most worryingly, threats to nutrition standards even in the so-called developed world. A less flattering catalogue of global failures would be hard to summon.
The proliferation of opaque financial products in the wake of deregulation didn't so much manage risk as enhance it, converting the world economy into a gambler's paradise (since most countries were made to choose similar policies of deregulation - by the IMF and the World Bank), which has been systematically transferring wealth and real income from the poor to the rich globally, relying on the unerring precision of market forces.
Additionally, Stiglitz points to two significant policies of the Bush administration that have exacerbated food and energy crises in recent years. He points to Washington's war on Iraq. Bush's foolish policies have made the connection between food and energy markets tight, thanks to a misguided biofuels programme during the past few years.
Stiglitz makes it a point to underscore how Third World agriculture has been put in severe jeopardy not just because of benign neglect by governments, international financial institutions and aid agencies, but also because of unfair competition from a systematically and heavily susbsidised agriculture in the rich world. This last is a criminal hypocrisy (the West being at the forefront of the messianic crusade for ‘free' markets) too banal to belabour. The powerful World Bank is once again waking up slowly to the resilient truth that there is simply no way to reduce (let alone eliminate) poverty in the world without paying special attention to agriculture.