Joseph Stiglitz – the _

[1366] Of Stiglitz is a fan of Malaysia

I seriously think Stiglitz is a big fan of Malaysia. His latest column at the Guardian has nothing less than high praises for the country (hat tip to the Economist’s View):

August 31 marked the 50th anniversary of Malaysia’s Merdeka: independence after more than 400 years of colonialism. Malaysia’s peaceful, non-violent struggle may not have received the attention that Mahatma Gandhi’s did in India, but what Malaysia has accomplished since then is impressive – and has much to teach the world, both about economics, and about how to construct a vibrant multiracial, multi-ethnic, multicultural society.

The numbers themselves say a lot. At independence, Malaysia was one of the poorest countries in the world. Though reliable data are hard to come by, its GDP (in purchasing power parity terms) was comparable to that of Haiti, Honduras, and Egypt, and some 5% below that of Ghana. Today, Malaysia’s income is 7.8 times that of Ghana, more than five times that of Honduras, and more than 2.5 times that of Egypt. In the global growth league tables, Malaysia is in the top tier, along with China, Taiwan, South Korea, and Thailand.

Moreover, the benefits of the growth have been shared. Hard-core poverty is set to be eliminated by 2010, with the overall poverty rate falling to 2.8%. Malaysia has succeeded in markedly reducing the income divides that separated various ethnic groups, not by bringing the top down, but by bringing the bottom up.

Part of the country’s success in reducing poverty reflects strong job creation (pdf). While unemployment is a problem in most of the world, Malaysia has been importing labour. In the 50 years since independence, 7.24 million jobs have been created, an increase of 261%, which would be equivalent to the creation of 105 million jobs in the United States. [The Malaysian miracle. Joseph Stiglitz. September 13 2007]

This is not the first time he sings for Malaysia. He has mentioned Malaysia several times in his books too. If I am not mistaken, two of those books are The Roaring Nineties and Globalization and Its Discontent. There is possibly one big reason why he loves Malaysia: country’s audacity to say no to IMF during the Asian Financial Crisis in the late 1990s and then came out well and alive.

There might be some background to this article too: he was in Malaysia recently for a public lecture organized by Khazanah Nasional Berhad, the government of Malaysia’s investment arm. That might have sincerely encouraged him to write something about Malaysia.

Nevertheless, while Malaysia may have achieved what many others failed, there are others that are more successful than Malaysia. I fear Stiglitz’s praises for Malaysia may come a little too early. The future beacons and Malaysia must adapt to the brave new world, or risk being overtaken and left behind by other countries.

[1019] Of Krugman is ditching Rubinomics for realpolitik

The Republicans and the Democrats are the yin and yang. They balance each other in many ways. Yesterday, Paul Krugman suggests that the Democrats should stop playing a balancing role (reg. req.):

Now that the Democrats have regained some power, they have to decide what to do. One of the biggest questions is whether the party should return to Rubinomics – the doctrine, associated with former Treasury Secretary Robert Rubin, that placed a very high priority on reducing the budget deficit.

The answer, I believe, is no. … Rubinomics made sense in terms of pure economics, [but] it failed to take account of the ugly realities of contemporary American politics. …

In a saner political environment, the economic logic behind Rubinomics would have been compelling. … Since the 1990s were an era of peace, prosperity and favorable demographics…, it should have been a good time to put the federal budget in the black. And under Mr. Rubin, the huge deficits of the Reagan-Bush years were transformed into an impressive surplus.

But the realities of American politics ensured that it was all for naught. The second President Bush quickly squandered the surplus on tax cuts that heavily favored the wealthy, then plunged the budget deep into deficit by cutting taxes on dividends and capital gains even as he took the country into a disastrous war. And you can even argue that Mr. Rubin’s surplus was a bad thing, because it greased the rails for Mr. Bush’s irresponsibility.

The Economist’s View has a copy of the article.

Jugding from Stiglitz’s writings, Stiglitz would probably support Krugman. In the Roaring Nineties, I think, Stiglitz isn’t too supportive of Rubinomics and advocate instead more spending and investment on intangible and tangible public infrastructures. His rationale is that the returns from investment would be large enough to justify the cost.

Regardless, what Krugman says does make sense politically, but economically, I feared the worst if the Democrats choose to disturb, if I may say so, the balance in the “Force”.