Joseph Stiglitz | Whose freedom is freedom?

Capitalism has two faces. One swears by the market, which will regulate everything perfectly if only allowed and the state does not intervene. This view is primarily associated with two names: Friedrich August Hayek and Milton Friedman. They were awarded the Alfred Nobel Memorial Prize in Economic Sciences in 1974 and 1976, respectively. The other face is presented by Joseph Stiglitz of Columbia University in New York, who also received this award from the Swedish Academy in 2001. In his new book, "The Road to Freedom," he calls for an economics for a just society. It is an argumentative sparring match with the proponents of neoliberalism. Stiglitz demonstrates past and present failures of market capitalism, blatant violations of the principles of fairness, morality, and efficiency. It is a fascinating read and is written with combative verve, yet, given the market power of today's all-pervading "social" media, it is accompanied by doubts about the feasibility of his noble ideas.

What is a "just society"? From an ideologically neutral position, Stiglitz looks "behind the veil of ignorance," invented by the American philosopher and Nobel Prize-winning economist John Rawls to enable decisions free from self-interest. From this perspective, all "trade-offs" must consider whose freedom can or should be curtailed and to what extent. Every expansion of freedoms means restricting the freedoms of others. The negotiation process must be based on criteria of justice, necessity, and morality. This requires the expansion of democratic structures and the dismantling of the dominant power of a few business leaders and their resulting influence on political decisions.

Regulatory government intervention is especially necessary in the case of "externalities," i.e., events that impact the markets from outside. Stiglietz doesn't trust the so-called self-healing of the market. As an example, he cites the necessary government intervention during the 2008 crisis, when states had to support banks that were struggling through their own fault. Taxpayers paid for it.

Even during the COVID-19 pandemic, the government had to act to protect the lives and health of millions of people. Thanks to scientific research in publicly funded institutes, effective vaccines were developed, but the profits from their sale were pocketed by pharmaceutical companies. The government should skim off these surplus profits from the pandemic to finance further research and investments in socially relevant areas. The decision cannot be left to the market.

Stiglitz takes a similar view of the greatest challenge (externality) of our time, the climate crisis. He takes climate change deniers to task, naming the super-rich corporations, especially those in the oil sector and the booming fake news industry in the supposedly virtually uncontrollable social media. Here, too, the state must intervene and rein in unregulated market mechanisms. Because "if there is an excessive concentration of power in the profit-driven private sector, then the rich and powerful corporations, regardless of the formal structures, will exert disproportionate influence in the public sphere," says Stiglitz.

With scientific research based on fair trade-offs in democratic societies with informed citizens and a pluralistic media landscape, capitalism can function without compromising its efficiency and fairness, the US economist believes. The former chief economist of the World Bank is convinced that this applies not only to national economies, but also globally.

Stiglitz has also worked in and for developing countries and is familiar with the "fine print" in trade agreements between rich and poor countries. The US and China, as well as the EU and other "rich" countries, are behaving in a manner that can no longer be described as neoliberal, but even neocolonial. The recently spectacularly signed raw materials agreement between the US and Ukraine is likely to be no exception.

Donald Trump, the "America First" man, along with Hayek and Friedman, is the target of the author's fiery accusations, which he champions for a fair balance of freedoms. A key sentence in his book: "Power relations are central to understanding growing inequality and the widespread perception that the system is 'rigged.'" These "play a significant role in the disillusionment with democracy and its institutions, as well as the rise of populism."

Joseph Stiglitz: The Road to Freedom. Economics for a Just Society. Translated from English by Thorsten Schmidt. Siedler, 477 pp., hardcover, €28.