Flak Magazine: Review of The Roaring Nineties, 11.13.03

There is little "new" in Joseph E. Stiglitz's "The Roaring Nineties: A New History of the World's Most Prosperous Decade." Anyone who was not aware that the unprecedented growth under the Clinton administration was as much a result of fiscal policy as luck, or who did not realize that the subsequent corporate scandals and recession could have been prevented during the '90s, has been living in a bubble (or in denial). And anyone who hadn't realized that the Bush tax cut exacerbated the recession and slowed the current recovery probably voted for the "MBA president."

Even Stiglitz's personal accounts of confrontations between the Council of Economic Advisers — on which he served from 1993 to 1997 — and the voices of Wall Street interest groups in the Department of Treasury should come as little surprise. The story is a familiar one: the economic advisers present their sound analysis of a situation; enter politics. But economists have long groaned about seeing their reasoned policy recommendations sidelined by political wrangling. Even the International Monetary Fund has retorted that the very policies so heavily criticized by Stiglitz in his last book, "Globalization and its Discontents," failed because policy-makers implemented them improperly.

Rather than giving his readers a truly new account of the rise and fall of the roaring '90s, Stiglitz offers two major contributions to the interpretation of the previous decade.

Stiglitz develops a perspective he calls "democratic idealism" — a mix of sober economics and social responsibility with an unyielding, optimistic belief in the democratic political process. "I see the market as a powerful instrument for doing good," Stiglitz says, "but one which has not only not lived up to its potential, but has, in the process, left some behind, and actually made some worse off." Critics at the Economist claim that this personal philosophy "provides little operational guidance." There is some truth to the censure since most of Stiglitz's examples are (inevitably) assessed in hindsight. And there is certainly an aspect of mea culpa in Stiglitz's assessment of the Clinton administration that is often couched in a sorrowful tone of if-only.

Still, Stiglitz's prescriptions for moderation and social commitment are refreshing. At a time when protectionism is emerging as a backlash against what Alan Greenspan called the "irrational exuberance" of the '90s, Stiglitz's perspective swings the pendulum back toward the center. In contrast to both those who tout the perfection of the markets and those who have become disillusioned with American capitalism, Stiglitz calls for a balance between government and markets, for transparency to better inform the public and for social justice and empowerment at all levels. His sober perspective urges debunking the myths of the New Economy without disparaging its successes in the '90s — in deficit reduction, economic recovery and poverty reduction.

Through "The Roaring Nineties" and "Globalization and its Discontents" Stiglitz has also developed a new nonfiction genre of the economist-laureate cum memoirist. Despite a repetitive and at times overbearing style, Stiglitz's nontechnical texts are an attempt to provide some of the transparency he champions in his books. For an economist whose major academic contributions — and those for which he received the Nobel Prize in 2001 — focused on the effects of asymmetric information on markets, making the public aware of even just his own perspective on the '90s is a step in the right direction. "If democracies are to work," he argues in his preface, "citizens must understand the basic issues confronting our societies and the way their government works."

In Washington, Stiglitz was often considered an outsider, an academic who based his policy recommendations on empirical evidence rather than partisanship. Moreover, Stiglitz was known for his persistence. In 1999, Jonathan Chait wrote in the American Prospect that "the trouble, as far as the White House was concerned, was not that Stiglitz took the wrong side of the argument, but that he wouldn't shut up." His tenacity was driven by a fundamental belief in giving the public the information to demand sound economic policy.

With "The Roaring Nineties" Stiglitz advances this objective and once again distinguishes himself from many of his colleagues in economic policy who are loath to so candidly confront public scrutiny.

— Noam Lupu (noam at flakmag dot com)