It's structural change, stupid!

Last Monday November 5th, Nobel Laureate Joseph Stiglitz gave the inaugural lecture of the Barcelona Graduate School of Economics. You can for information on the lecture here. But let me highlights two things on it, one that Stiglitz mentioned and one that he didn't. Among the very interesting aspects he touched upon, Stiglitz mentioned that the current crisis is above everything else the result of a structural transformation. In the same way, he said, in which the Great Depression marked the transition from an agricultural economy to an industrial economy, right now we are experiencing the consequences of a transition from an industrial economy to one based on services. In that light, the crisis is not financial in its origin; the financial side of it is less a cause than a consequence of a much larger phenomenon. For Stiglitz, thus, governments are making a huge mistake pursuing austerity measures. They should rather help and foster the transition to the new period.

The second aspect, the one which Stiglitz did not mention, was political economy considerations. It is typical of him to say without ambiguity how bad economic policy has been, how many wrong measure have been taken, how income inequalities and irresponsible deregulation has been permitted,and even how bad advising  many macroeconomists have provided. But he seldom provides any reason for that, and for sure no political economy angle, which I sorely miss from his analyses. I understand that Stiglitz does not need these explanation to help him to convey his message but in my view, any explanation that neglects those aspects is incomplete and ultimately unsatisfactory.

For instance, you can find a nice political economy-esque explanation for the explosion of debt in this post by documentary filmmaker Adam Curtis.