World-renowned economics professor Joseph Stiglitz says the power of “special interests” in Australia is preventing action on climate change and a reshaping of the economy to ensure “shared prosperity” in the wake of the pandemic.
During a live stream on Thursday organised by think tank The Australia Institute, Stiglitz said around the world we are seeing “ersatz capitalism” whereby “you socialise the losses but you privatise the gains”.
In a rebuke of the Australian government’s priorities of company tax cuts and deregulation as a way to save the economy from another Great Depression, Stiglitz said the “unambiguous” evidence was that this would not work.
Instead, huge public spending on infrastructure was required to avoid a prolonged downturn, and the Australian government was “fantasising” if it thought the economy would “snap back” in a V shape recovery.
As the government pushes more fossil fuels and a gas-fired recovery, Stiglitz says we need to “reshape the economy to reflect our values” rather than “save the industries that have been destroying our environment”.
Governments have spent decades stalling action on climate change arguing it would be too big a disruption on the economy, but were quick to shut down entire sections of the economy when the virus hit.
“At one level it’s very simple … special interests, the mining industry, certain parts of the mining industry are very influential in Australia … they’re not asking what’s good for the country they’re asking what’s good for their pocket book,” said Stiglitz.
Stiglitz endorsed an idea from former Treasurer Wayne Swan that there should be a tax on digital giants making windfall profits to pay for the programs required in recovery.
“We can’t be just giving gifts to the corporations who are doing very well … we’re going to have to impose for instance a tax on our monopolies, a digital tax as part of raising the revenue that we’re going to need to be able to address this very deep – and i’m afraid if we don’t do anything correctly, very long – prolonged downturn,” Stiglitz said.
The Australian government has foreshadowed coming out of the crisis with more neoliberal policies such as small government, company tax cuts, deregulation and a weakening of industrial relations protections. This is at odds with policy think tanks and economists like the Australia Institute which say governments should ramp up spending and create large infrastructure projects that would create jobs.
Stiglitz said a “very large role of government” and “collective action” was required to solve problems like the pandemic and climate change, with “progressive taxation”, “social solidarity” and a “green transition” necessary to ensure “more shared prosperity”.
“What’s happening is just the opposite the money is going to where the lobbyists are the strongest,” said Stiglitz.
Stiglitz said globalisation enabled multinational corporations to easily avoid taxes by declaring their profits in tax havens. He said the “enormous” tax cut delivered to the wealthy by the Trump administration in 2017 “did not stimulate investment, what it did is lead to almost a trillion dollars of share buybacks”.
“We’ve created a framework for multinational tax avoidance, we have to close it down … it’s not that complicated, it’s a matter of politics,” he said.
Stiglitz said there was “cognitive dissonance” at play whereby “the banks were the strongest proponents of free market economics until 2008 came along and then they were among the most enthusiastic recipients of hundreds of billions of dollars of [public] money”.
They then used that money irresponsibly on share buybacks, bonuses and dividends, rather than building up capital buffers that would’ve left them in a better position to withstand the pandemic.
“The companies believe in accountability when and only when it’s convenient for them,” said Stiglitz.
Stiglitz referenced research by Australian economist Andrew Charlton, who was an adviser to the Prime Minister during the 2008-09 Global Financial Crisis, which showed that “lowering the corporate tax rate did not lead to more investment”.
Stiglitz said it was “outrageous” that a company like Delta Airlines paid nothing in corporate taxes “and now we have to bail it out to the tune of billions of dollars”.
He said “COVID-19 is not an equal opportunity virus” and he expected inequality to be larger after the pandemic, particularly as big corporations were ensuring that the funds for recovery were largely going to them rather than to households.
Stiglitz said giving money directly to workers would have cost a fraction of the amount and been “far more effective”.
“What worries me is that this crisis is going to worsen inequalities because it is those people at the bottom who are being affected the most,” he said.