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SPIEGEL INTERVIEW WITH ECONOMIST JOSEPH STIGLITZ
Government Stimulus Plans are 'Not Enough'

Former World Bank economist and Nobel Prize winner Joseph Stiglitz talks to
SPIEGEL about the danger of a new Great Depression, a way to reform the
American bailout system and struggling nations' urgent need for help.

SPIEGEL: Many people are comparing the financial crisis to the Great
Depression. Will it really be that bad?

Stiglitz: It's going to be bad, very bad. We're experiencing the worst
downturn since the Great Depression, and we haven't reached the bottom yet.
I'm very pessimistic. Governments are indeed reacting better today than
during the global economic crisis. They're lowering interest rates and
boosting the economy with economic stimulus plans. This is the right
direction, but it's not enough.

SPIEGEL: The American government has committed over a trillion dollars to
save the banks and $789 billion to boost the economy. Do you think this is
too little?

Stiglitz: I do. More than $700 billion sounds like a lot, but it's not. On
the one hand, a large part of the money will first be given out next year,
which is too late. On the other, a third of it is drained away by tax cuts.
They don't really stimulate consumption, because people will save the
majority of that money. I fear that the effect of the American economic
stimulus plan won't be even half as big as expected.

SPIEGEL: At least governments worldwide are bracing themselves against the
recession, as opposed to the global economic crisis where they accelerated
the recession through their savings policy.

Stiglitz: That's right. That's why I'm confident we'll get off lighter than
during the Great Depression. On the other hand, there's a series of
developments that make me very anxious. The state of our financial system,
for example, is worse than it was 80 years ago.

SPIEGEL: Hundreds of banks collapsed in the US at that time. Today most of
them are being saved by the government. What's so bad about that?

Stiglitz: The banks that survived 80 years ago continued to lend money.
Today many banks aren't lending money anymore, above all the large
investment banks. This will deepen the crisis.

SPIEGEL: The US government's emergency plan is supposed to prevent this,
though. The banks receive money from the state so they can continue to give
loans.

Stiglitz: That's the idea, but it doesn't work. We're just throwing money
at them and they pay billions of it out in bonuses and dividends. We
taxpayers are being robbed for all intents and purposes in order to reduce
the losses that some wealthy people bear. This has to be changed.

SPIEGEL: What do you suggest?

Stiglitz: We have to reorganize our bailout system for the financial
sector. For one thing, any bank that actually lends should get money from
the government; more money to small and medium-sized banks in smaller towns
and less to Wall Street institutions. The government must also accept the
consequences when banks become insolvent ...'
Lees verder: http://www.spiegel.de/international/world/0,1518,616743,00.html