There are two Joseph Stiglitzes: the brilliant economist and the repetitive polemicist.
Unlike “The Price of Inequality,” a book wrapped by Stiglitz the rambling, Nobel-flashing celebrity blogger around the nucleus of a very incisive article written by Stiglitz the brilliant economist, this forward-planned, structured book is 100% the work of the brilliant economist. To be sure, he is starting to sound a lot like his alter ego, but the transformation is far from complete and what we have here is a genuinely exhaustive, if not amazingly deep, treatise that has a beginning, a middle and an end.
The book is divided in five sections (that are however grouped in four parts):
• First a “you are here” section that lays out the author’s views of where we stand and how we got here
• Second, a three-part expo on (i) how currency unions are meant to work, (ii) where the Euro diverges from this ideal and (iii) the (negative) role of the ECB
• Third, a long whine against the Troika’s work in Greece and (less so) Ireland
• Fourth, the Stiglitz manifesto of how to (semi-centrally, you have been warned!) run an economy, mischievously mis-branded “Creating a Eurozone that works”
• Fifth, a daring and provocative “what next” section
A quick read through chapter 9 (the manifesto) may be the best starting point for the reader. Read that and you will calibrate how much to the right you are of the author (or to the left for the 5% of the human population who are thus inclined). Agree or disagree, you are now reading the book with the author’s ideal world in mind and that’s how you will get the most out of it.
The bits I thought were unparalleled in the literature were the section entitled “Internal devaluations and external imbalances” (pp. 97 to 110) that nestles inside the already very strong chapter on “When can a single currency ever work,” the entire chapter on how the ECB was conceived, how it thinks and whom it serves (brilliant, brilliant) and the final section of the book that takes you through how we can go about executing on “more Europe” or “less Europe,” as opposed to muddling through to assured destruction.
That said, the final section will make your stomach turn if you are German, and you will be right to object. If Europe was the only economy on earth, I can see how perhaps Germany could pay its workers more / restrict its trade surplus / whatever. I’m not saying I buy it, I’m just saying I can see it. But it’s competing with Japan, China and South Korea, to say nothing of the US. Not Italy. Not Spain. Not even France any more. Most certainly not Greece. I’d say it has the most luxurious setup for its workers from all of its competitors. Hell, Angie picked up 20% of workers’ wage bills at the depths of the crisis to keep them employed. And the unions have board seats in most major employers, as often does the state. Stiglitz knows all this (and it bothers him when it comes to German companies buying Greek state assets, for example) but is selective about when he remembers it.
Also, the book sets the ambitious goal of explaining that Europe is suffering from poor policy design rather than from having muddled through too long without engaging in structural reform. This the author fails to do, entirely. The treatment of structural reforms is not worthy of a high-school essay.
I won’t even bother going into the arguments, just count the number of pages dedicated to looking at structural reforms and draw your conclusions.
But I’ll cite two examples where the author’s judgement on specifics is almost as awful as his judgement on macroeconomics is brilliant:
1. The author sides with the pharmacists in my country (full disclosure, my mom’s a Greek pharmacist) who are plainly one of many extractive agents in an economy that is full of extractive agents. Suffice it to say Greek pharmacists went on strike, citing the Hipporcratic oath, when the troika threatened to break their stranglehold on baby formula. You heard that right, it was (and may still be, I’ve stopped following) illegal for a supermarket in Greece to sell baby formula. You’ve got to pay up and buy it at the pharmacist. Just an example.
2. The author mentions more than once that George Papandreou was crusading against the press-owning oligarchs. Point of information: George Papandreou was a third-generation prime minister. Both his grandfather George and his father Andreas have served as prime minister, multiple times. Look it up on Wikipedia, some crazy percentage of the time since WWII the prime minister or the head of the opposition in my country was called Papandreou. If you think a political clan can maintain that position and not be in cahoots with the oligarchs you know nothing about Greece. You probably know nothing about planet earth. Or you are blinded a bit by your views, perhaps…
So this book is not without its foibles. Overall, however, it does a tremendous job of laying out a view and it is the only book currently in print that covers so many facets. And it is not afraid to shout from the rooftops that the emperor has no clothes.
It makes excellent background reading for my favorite book on the Euro, the one by the FT’s Martin Sandbu. Sandbu goes deep, and if you want the skinny on his “straw man” you’ve got it right here!