Renowned Nobel laureate economist Joseph Stiglitz expressed alarm that President Donald Trump's policies, particularly on trade, put the United States on course for a decline in global investment — and perhaps something much more severe, The Guardian reported Monday.
Stiglitz, who authored "The Price of Inequality," has long been concerned even before Trump's election that U.S. politics were heading for a dangerous turn away from international cooperation, warning in 2023 that both political parties' competition to look tough on China could undermine global efforts on climate change. He also sounded the alarm on Trump's policies and partnership with tech billionaire Elon Musk right before the election, calling his plans "a vision of crony rentier capitalism that has enticed many captains of industry and finance."
The real risk, he said, is not just the direct effects of sharp new tariffs, which economists broadly agree could send prices spiraling up again after years of trying to get inflation under control. It's also creating uncertainty that makes foreign countries and investors think twice about putting their money in the United States altogether.
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“If you’re a corporate in the US or in Europe, do you think you have a global market, or do you have just a European market? Where do you locate your factories?” he said.
And it goes beyond trade too, with Musk changing policies on the fly that affect millions of people.
“The government has a huge number of contracts and we’re just tearing them up. How much risk do you want? The US has become, I would say, a scary place to invest," Stiglitz said.
The end result, Stiglitz feared, is a scenario the United States hasn't had to deal with since the 1970s.
“It risks the worst of all possible worlds: a kind of stagflation," he said.
Stagflation is the common term for a situation in which inflation is high, but the job market is also failing to grow as fast as expected, or even contracting. This is a rare phenomenon, as usually weak job growth is characterized by falling prices. The typical cause of stagflation is a sharp decrease in the supply of some resource or input critical to the economy, as in the oil crisis of the 1970s. Theoretically, a large trade war that reduces the supply of goods and materials could also give rise to this situation.