Columbia Business School posted an article on its blog this week by Professor and Nobel laureate Joseph E. Stiglitz about the potential economic fallout that the United Kingdom’s recent “Brexit” referendum could have on the global political arena in the not-too-distant future.
Stiglitz referenced the “hard line” that president of the European Commission, Jean-Claude Juncker, has taken publicly. According to Stiglitz, Juncker argues that in order “to deter other countries from leaving, the EU must be uncompromising, offering the UK little more than what it is guaranteed under World Trade Organization agreements.”
This kind of tough love approach counters recent trends in conservative British and American politics in which citizens have seized “upon trade agreements as a source of their woes.” While this over-simplified issue is often implemented as a divisive political tactic, Stiglitz argued that trade agreements historically weaken the bargaining positions of workers and undermine unions in favor of corporate interests. A much more immediate problem that has spurred increases in corporations’ market power, according to Stigliz, is “industrial concentration.”
He elaborates:
“The effects of stagnant and declining real wages have combined with those of austerity, threatening cutbacks in public services upon which so many middle- and low-income workers depend. When wages can’t or won’t be lowered, unemployment increases.”
Economic mismanagement in the Eurozone has made unemployment a major concern in recent years and caused what Stiglitz described as “the evisceration of the middle class.”
The 2008 financial crisis, Stiglitz argued, clarified the inequity of our current economic system to a degree from which it will be difficult for John and Joan Q taxpayers on either side of the aisle to fully recover: “Ordinary citizens knew that the system was unfair, but they came to see it as even more rigged than they had imagined, losing what little trust they had left in establishment politicians’ capacity or will to correct it.”
Stiglitz astutely pointed out that, “Countries that have done a better job at reducing unemployment will predictably end up with more than their fair share of refugees,” which in turn will contribute to rising political and economic tensions.
Stiglitz concluded,
“Voting in anger does not solve problems, and it may bring about a political and economic situation that is even worse. Politics should now be directed at understanding how, in a democracy, the political establishment could have done so little to address the concerns of so many citizens.”
This post has been republished in its entirety from its original source, metromba.com.
