http://www.foreignpolicy.com/story/cms.php?story_id=4856

the kind of insanity I thought we were done with once and for all. In the face of this kind of real danger, Stiglitz’ remarks do redeem him slightly, though I’ll never forgive him for endorsing Naomi Klein’s book. A bit more context on why this issue is important,

http://www.dailyspeculations.com/wordpress/?p=3862

http://www.forbes.com/2009/01/29/davos-economic-basics-opinions-contributors_0130_william_easterly.html

More serious than my excessive self-promotion is how widespread this “back to basics” movement is.

According to these regulations if you can hustle up a triple-A rating then the bank lending you capital needs only to back your loan with 1.6 percent in equity but if you are a poor unrated corporation then they have to put up 8 percent… and guess who pays for that?

These regulations lowered the flag for the big global race after the triple-As and, in just a couple of years, over 2 trillion dollars followed the triple-As to finance the increase of values of houses in the US, instead of financing other much more useful things like mitigating climate change, creating sustainable jobs and others.

Psst! Why don’t we just throw out some of the dinosaurs so that we can do some good thinking inside the box instead of us always being told to go outside to think? http://subprimeregulations.blogspot.com/

Now in the midst of the crisis why do we not discuss more what we want to get out of our banking system so that next time we get a financial hangover, as we surely will, the party has at least been worth it.

I am sure Stiglitz & Co will afterwards give a reason for the success stories and thus explain the consequence. That’s what economists tend to do for a living.

His fears and predictions don’t matter, however important he thinks his dogma of the market and democracy may be.

Stiglitz is also quite clear that “Today only the deluded would argue that markets are self-correcting or that we can rely on the self-interested behavior of market participants to guarantee that everything works honestly and properly.” Would you agree with that? Your recent writings and the fact that you think the worst that could happen is that we return to the policy regime of the first few post-war decades (a regime which helped deliver remarkably high growth in rich and poor countries, by the way) suggest otherwise.

The only problem is that poor countries don’t have the money to support their private companies like that. Their only possible defense against unfair competition is tariffs and regulatory trade barriers.

There is already a situation like that in agricultural trade. Agricultural subsidies in the rich countries have prompted the poor countries to create trade barriers for agricultural products. And the same might eventually happen for all industries that USA and other rich countries choose to subsidize.