Nobel Prize winning economist, Professor Joseph Stiglitz, has given an interesting interview on Business Spectator’s KGB program (above).
Among the themes discussed are: the US economy; entitlement reform; the Budget; healthcare, education and superannuation; and tax avoidance by major global companies.
For me, the most interesting aspects of Stiglitz’ interview were Stiglitz’ comments on the Abbott Government’s “ending of the age of entitlement”, whereby he argues that the focus should be on rent-seeking monopolists in the private sector, particularly in health and the financial sector, rather than on the individual:
What is true is that there those in the financial sector who would like to privatise the social security system or old-age retirement so they can make more profits. The UK did some partial privatisations and the result of that was that benefits went down by 40 per cent because the rest was eaten up in transaction costs. The private sector, financial sector, likes to maximise transaction costs.
The government’s programs have been trying to maximise what old-aged people get in terms of benefits. It’s that simple. The US has the least efficient healthcare system because it’s basically privately based. Australia has a very efficient healthcare system that delivers more at half the cost of the US. There are those – the private healthcare firms in the United States — who believe that they are entitled to get monopoly profits. So, there are these entitlements of the rent-seekers and those are the ones that I would go after.
His comments on debt the quality of public spending are also well-reasoned:
The real question shouldn’t be do we have too big of a debt, the question is: what are we spending the money on?
I know the expenditure patterns in the United States. I know the money that we are spending to subsidise effectively the pharmaceutical companies, healthcare insurance companies, is money that’s wasted…
I know that in the United States, we overpay for much of our defence expenditures and we’re spending a lot of money on weapons that don’t work against enemies that don’t exist. That’s wasted money.
But when we are spending money on infrastructure, on technology, on education, on investments, on poor families so that the children of these poor families can have access to food, healthcare, have an opportunity to make somewhere in the future — those are investments in the future. And if you have to finance those investments through debt, that you spend the money wisely, I think that’s money well spent.
As are his criticisms of Australia’s superannuation system:
Your superannuation scheme, there are some inefficiencies. The cost of delivering retirement benefits through the for-profit financial sector is very high. The loss of tax revenues I associate with the tax deductibility for high-income people is costing your Treasury a lot. So, there are some important reforms that ought to be undertaken…
While I don’t believe in everything that Stiglitz says, for example that raising immigration levels would necessarily provide the economy with a ‘free lunch’, overall he talks a lot of sense, and the interview is well worth watching.
