The US, and the world, would also benefit from a US energy policy that reduces reliance on imports by increasing domestic production, while also cutting consumption, and recognizes the risks posed by global warming. Moreover, US science and technology policy must reflect an understanding that long-term increases in living standards depend upon productivity growth, which reflects technological progress that assumes a solid foundation of basic research.
Finally, the US needs a financial system that serves all of society, rather than operating as if it were an end in itself. That means that the system’s focus must shift from speculative and proprietary trading to lending and job creation, which implies reforms of financial-sector regulation, and of anti-trust and corporate-governance laws, together with adequate enforcement to ensure that markets do not become rigged casinos.
Globalization has made all countries more interdependent, in turn requiring greater global cooperation. We might hope that the US will show more leadership in reforming the global financial system by advocating for stronger international regulation, a global reserve system, and better ways to restructure sovereign debt: in addressing global warming, in democratizing the international economic institutions, and in providing assistance to poorer countries.
Americans should hope for all of this, though I am not sanguine that they will get much of it. More likely, the US will muddle through: here another little program for struggling students and homeowners, there the end of former US president George W. Bush’s tax cuts for millionaires, yet with no wholesale tax reform, serious cutbacks in defense spending, or significant progress on global warming.
With the euro crisis likely to continue unabated, the continuing malaise of the US does not bode well for global growth. Even worse, in the absence of strong US leadership, longstanding global problems, from climate change to urgently needed reforms of the international monetary system, will continue to fester. Nonetheless, we should be grateful: It is better to be standing still than it is to be heading in the wrong direction.
Joseph Stiglitz, a Nobel laureate in economics, is University Professor at Columbia University.
Copyright: Project Syndicate