Yet Another Covid Victim: Capitalism

This is an article from World Review: The State of Democracy, a special section that examines global policy and affairs, and is published in conjunction with the annual Athens Democracy Forum.

The coronavirus pandemic has exacerbated the gap between the haves and have-nots and thrown capitalism into question: That is the conclusion reached by Joseph Stiglitz and Hervé Berville, two economists who spoke at this year’s Athens Democracy Forum, an annual event held in association with The New York Times.

Professor Stiglitz — winner of the 2001 Nobel Memorial Prize in Economic Sciences, a former chief economist at the World Bank and a professor at Columbia University — said in a pre-conference interview that the private sector had proven incapable of responding alone to the global health challenge and that government had a big role to play.

Mr. Berville — a French deputy from the centrist party of President Emmanuel Macron and author of a 2018 report on reforming French aid policy — said in a separate conversation that rich countries had spent billions on themselves and done little to help those countries that needed it the most.

The following interviews have been edited and condensed.

Joseph Stiglitz

Professor Stiglitz, do you think that the pandemic will pave the way for a more socially conscious capitalism?

Yes, very much so, and for several reasons. We saw that, as in the financial crisis of 2008, markets were not quite as “good” as we thought. They weren’t resilient. They couldn’t make face masks, protective gear, complicated products like that. We had supply-side interruptions.

The image that markets can solve all problems has really been undermined. We recognize that in this moment of crisis, we turn to government to help us confront the macroeconomics and the vulnerabilities, but also to protect us in terms of public health. And we’re not going to turn to the private sector next time we have a pandemic. What we really need is a stronger public sector.

How has capitalism as a system and a way of life been thrown into question?

The pandemic has exposed some of the rawness of our capitalism: the inequalities. It has shown the strength of the private sector in being able to produce the vaccines so quickly, but also the weakness. They still can’t produce enough vaccines to protect the rest of the world, and we’re going to be hit by another wave, potentially coming from some developing country where the disease hasn’t been controlled.

You point out in your books and speeches that markets pay no attention to social justice and income distribution. Yet capitalism is built on the notion of free markets. How are we going to change things?

Through politics and through a change in societal norms. Let me just give you a couple of examples. This kind of awareness has led the vast majority of the people in the Business Roundtable [an association of chief executives of leading U.S. companies] to support a move away from shareholder capitalism to stakeholder capitalism. Even if not all of them really mean it in their heart of hearts, that change in the way they conceive of it will have effects over time.

I’ve been at meetings where a C.E.O. of a large company said: “I hadn’t realized how bad we’d been paying our workers, that a large fraction of our workers were not getting a livable wage. And when I recognized it, I changed it.” His consciousness, before, was minimizing his labor costs. And his consciousness now is much more: What kind of enterprise do we want to have?

What kind of measures should governments introduce?

The first obligation is to make sure that everybody who is able and willing to have a job can get a job. That’s our first failure, and we need to correct that.

Over the next 30 years, we have an enormous amount of work to do to make the green transition, to make sure that everybody has an adequate education, to have a decent infrastructure and so forth.

What about a universal basic income?

Given all of the other things that we need to do, I think we still need to focus our spending, our support payments on those who can’t work and who are the most needy. If we had more money, it would be different, but right now, I don’t see that. We have so many other needs.

Hervé Berville

How has the pandemic worsened the gap between the West and emerging economies?

It has revealed to an absurd degree the prevailing inequalities. We have seen that countries in Europe and North America have been able to run up billions and billions worth of debts and introduce vast recovery plans. And yet we were incapable of coming up with solutions for emerging economies. We had to impose a moratorium on their debt, and they had no access to financial markets — when they were the ones who needed the most help.

Only 2 percent of the population of those countries are vaccinated, whereas in European countries, we’re at 80 percent vaccination rates, and talking about administering a third vaccine dose.

The capitalist system today is not correcting imbalances, it’s reinforcing those imbalances.

In fairness, globalization and free markets have allowed a reduction of world poverty to levels never seen before.

It’s true that millions, if not billions, of people have been taken out of poverty. The question now is how to reduce and even eliminate those remaining pockets of poverty. It’s unacceptable that at a time when billionaires have reached unprecedented levels of wealth, there should still be people with no access to food and basic health care.

It’s not enough for goods and services to be made available to those countries. They also have to be made accessible. Even if a health care center charges no more than 1 euro, if people can’t get to that health center, there’s inequality of access. We need to work on infrastructure, and on social and geographic mobility.

How has capitalism contributed to the profound inequalities between the West and rest of the world?

There has been a major scaling back of governments and of public services, and a push for minimal taxation: a race to the bottom. Nations were viewed as more economically virtuous and likely to attract multinationals and foreign investment if they imposed lower taxation. We realize now that this was a political and economic mistake, and that the victims of it were the poorest populations.

There was insufficient investment in human capital. We also paid too little attention to the consequences of what we were doing to natural capital. We assumed that the allocation of financial capital would boost a country’s human and natural capital. So there was chronic underinvestment in training, education, health and the protection of biodiversity — on the part of governments, but also on the part of international institutions.

The mistake in economic development strategies was to assume that one size fits all: that the same formula would work in completely different countries.

We can’t respond to common global challenges — the questions of education, health, terrorism — without a common action involving all countries in the world. We can’t tackle issues such as poverty and inequality all alone in our little corner. Just as socialism in a single country can’t happen, reformed capitalism in a single country can’t happen either.

In 1945, we created the International Monetary Fund. I would like to see the creation of an International Cohesion Fund. We need to put the issue of solidarity at the core of our market economy.