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Stiglitz again
Source Michael Perelman
Date 01/10/21/02:03

Notice that Stiglitz seems far to the left of the Democratic
party. Has this appeared in the US press?

Ha'aretz Editorial & Op-Ed Friday, October 19, 2001
Cheshvan 2, 5762 Israel Time: 06:19 (GMT+2)

Rebalancing priorities

By Joseph Stiglitz

Weeks after the terrorist attacks on New York and
Washington, Americans continue to feel a level of
anxiety not felt since the darkest moments of the
Cold War, such as the Cuban Missile Crisis or the
Berlin Blockade. America's economy has almost
certainly moved from a slowdown into a full-fledged
recession. Americans are rethinking the wisdom of
their unilateralist approach to foreign policy.

Beyond these changes are two others which may be
equally profound in their implications. There is a
greater sense of America as a community, a greater
sense of social cohesion than has existed for
years, perhaps decades. With that is coming a long
overdue re-examination of the role of government.
Pride in our firemen and our policemen, a
recognition of their heroism and their willingness
to sacrifice themselves for others, is broad and
deep. There is a growing sense that we may have
lost our way, put too much emphasis on material
self-interest, too little emphasis on shared
interests.

In retrospect, some of what both the Bush and
Clinton administrations did in echoing market
fundamentalists around the world - but carried even
further - seems particularly absurd. It made no
sense to "privatize" a vital area of public concern
such as airport security. The low wages paid to
private-sector airport security guards led to high
turnover. Airlines and airports may have made more
profits in the short run, but they, and the
American people, lost in the long run, as we now
know, to our horror.

It made no sense for President Bush's Secretary of
the Treasury Paul O'Neill to spurn the Organization
for Economic Cooperation and Development (OECD)
agreement on money laundering. Whatever Mr. O'Neill
said, the true reasons for his objections were
clear - protect financial interests. The offshore
banking centers were not an accident. They exist
because Wall Street and the other financial centers
around the world wanted safe-havens, protected from
regulations and taxes. There has been bi-partisan
hypocrisy here - while America called for
transparency in the emerging markets in the
aftermath of the East Asia crisis, both Larry
Summers (President Clinton's last treasury
secretary) and Mr. O'Neill joined in efforts to
protect offshore banking centers and hedge funds.

Other actions, taken in secret or with almost no
public discussion, remain equally troubling. In
1997, the United States privatized the US
Enrichment Corporation (USEC). Only a few know what
lies behind that innocent-sounding name: USEC
enriches uranium to make both core ingredients for
atomic bombs and nuclear power plants. It also was
responsible for bringing out of Russia nuclear
material from old Soviet warheads and to convert
that material into low-enriched uranium for power
plants, a true "swords to ploughshares" initiative.

Once privatization occurred, however, USEC had
every incentive to keep the material out of US
markets for the Russian material would depress its
prices and profits. As chairman of the Council of
Economic Advisers, I saw the enormous risk in
keeping the material in Russia, posing perhaps the
most serious threat of nuclear proliferation. This
was a matter not only of national interest but also
of global interest. But the temptation of private
firms to put profits above collective interests is
almost irresistible.

It made no sense to privatize USEC and thus expose
its managers to this temptation. My concerns were
borne out - faster and in a manner far worse than I
had ever expected. We uncovered a secret agreement
between USEC and Minatom (the Russian agency in
charge of the nuclear materials) in which, in
response to a Russian offer to send more of their
nuclear material to the United States for
safekeeping, USEC said, "No, no thanks," and then
went on to pay $50 million in hush-money to the
Russians not to disclose the offer.

USEC repeatedly tried to hold the American taxpayer
for ransom, saying that it would not continue to
bring the Russian material into the United States
unless it was paid additional money. How could
America's government have proceeded with this
privatization, which on its face seemed so absurd?
While the privatization ideology may have played a
role, financial interests played their part, too:
The Wall Street firm handling the privatization
lobbied hard and made a hefty profit.

Once again, America's Treasury (Mr. Summers as well
as Robert Rubin) put Wall Street's interests above
the national interests. The thirst for an extra
billion dollars in revenues in the budget in one
year - even though revenues in future years would
be lowered - sealed the deal. In light of the huge
surpluses, this budgetary shortsightedness now
looks particularly foolish. The final outcome of
this sad episode is yet to be told. Congress
rightly felt nervous about turning over control of
nuclear production to a firm in weak financial
condition, and required Treasury certification. It
is not clear now whether USEC will continue to
satisfy those conditions (unless the US Treasury
turns a blind eye). Concern is mounting in
Congress, with suggestions of the need for re-
nationalization.

What should now be clear is that this decision by
the American government, taken largely behind
closed doors, affects more than Wall Street, more
than America: It affects the whole world. When
America gets things wrong, as it did in its stance
on money laundering and privatizing responsibility
for recycling nuclear weapons, it puts the whole
world at risk. America has heralded globalization.
But it should now recognize that with globalization
comes interdependence, and with interdependence
comes the need for collective decision making in
all the areas that affect us collectively.

Joseph Stiglitz, professor of economics at Columbia
University and winner of this year's Nobel Prize
for Economics, was formerly Chairman of the Council
of Economic Advisers to U.S. President William J.
Clinton and Chief Economist and Senior Vice
President of the World Bank.

Copyright: Project Syndicate, October 2001

Copyright 2001 Ha'aretz. All rights reserved

--

Michael Perelman
Economics Department
California State University
Chico, CA 95929

Tel. 530-898-5321
E-Mail michael@ecst.csuchico.edu

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