In his latest publication, which he wrote in cooperation with the Foundation of European Progressive Studies (FEPS) and numerous European scientists, Joseph Stiglitz underlines the necessity of reshaping European economic policy. The laureate introduced the book for the first time during an event on 21th March 2019 and demanded: ”Economic action must first and foremost serve society”. Hence, it is necessary to reformulate the rules, under which this has to take place. Possible measures for the EU were discussed during a subsequent conversation with EU Commissioner Pierre Moscovici and MEP Jeppe Kofod (S&D).

Employment instead of austerity

During the economic crisis 2008, the EU relied on massive austerity programmes and on lowering public spending. However, the far-reaching waiver of countercyclical measures resulted in the fact that thousands of people lost their job, that welfare state benefits were minimised or, as in the case of Greece, were completely cancelled. Stiglitz emphasises that instead of a strict austerity programme, social investments in employment, education etc. would have been more effective. These would have strengthened economies rather than weakening them.

Development of the welfare state

Apart from that, Stiglitz emphasises the importance of the European Welfare state. Countries with a well-developed welfare state would have overcome the crisis much better than countries with a poor social safety net. However, reducing welfare state facilities during the crisis had weakened the welfare state, which led to uncertainties in society and strengthened extreme political movements. “Welfare states are the solution and not the problem of modern society”, emphasised Kofod a therefore required its expansion.

Strengthening labour rights

Also needed are investments in good jobs with decent wages, as otherwise the danger of “working poor” is too big. This requires strengthening the trade unions and their position in collective bargaining as any weakening of the social partnership has proven to result in more inequality. Apart from that, the EU must develop solutions for the changes in the labour market through increasing digitalisation to be able to guarantee long-term good living and working conditions.  

Neue investments

Another challenge is climate change. “The future society must be green”, demanded Moscovici, who thinks that the EU should act. Required are investments in environmentally friendly and green economic areas as well as the introduction and increase respectively of taxes in non-sustainable sectors. The social consequences of climate change must also be considered in the decision-making processes. Instead of liberalisations, public investments in technology, industry, education, health and infrastructure are required, as this kind of spending is important for economic growth.

Holistic approach

To be able to cope with the challenges of our time, a one-dimensional approach to wealth is no longer sufficient. Economic growth may no longer be the  be-all and end-all; it is important to also take social and ecological factors into account. Hence, future political decisions require a holistic approach. Alternatives to existing rules and the political will to change things are required to achieve this.   

Further information:

Publication by Joseph Stiglitz: Rewriting the Rules of the European Economy

Video of the event “Rewrite the Rules of the European Economy”: Opening address by Joseph Stiglitz