Austerity a challenge to rule of law says Nobel prizewinner
Nobel economics laureate Professor Joseph Stiglitz yesterday urged lawyers worldwide to help safeguard access to justice in the face of deep cuts to state aid for legal representation.
'Inequality was growing before the financial crisis and has been exacerbated by it,' he told thousands of lawyers gathered in Dublin for this year's International Bar Association conference. 'In 2010, 93% of growth went to the top 1% - many of you in this room,' he added. Median full-time male wages in the US are back to 1968 levels and 'economic inequality leads to political inequality'.
The 'challenge for the legal profession', said Stiglitz (pictured), alluding to legal aid cuts, is to ensure 'the promise of justice for all' does not become 'justice for those that can afford it'.
Stiglitz, former chief economist and vice president of the World Bank, is a prolific author and arch-critic of the management of globalisation and 'free-market fundamentalism'. He opened this year's event with a stark warning that governments have misdiagnosed what is wrong with Europe's economy and that austerity will not solve the crisis.
He advocates further fiscal stimulus, noting that in the US the government can borrow at negative real interest rates.
'The only positive about Europe is that its plight makes Americans think "things could be worse",' he said. Europe's debt as a percentage of GDP before the crisis was lower than the US and only Greece of the eurozone countries could rightly be accused of profligacy, he said. Because the problem was misdiagnosed as overspending, the prescription is austerity, which Stiglitz said has 'almost never worked'.
He added: 'It was tried in 1929, the International Monetary Fund tried it in Asia and Latin America. Each time it succeeded in turning downturns into recessions, recessions into depressions.'
The eurozone is fundamentally flawed because it was based on a political not economic model, said Stiglitz. Structural change is required but he doubts the political will is there to achieve this. Calling for a common banking system with deposit guarantees and the mutualisation of debt, he stressed that at present banks are only as strong as the governments that prop them up. Money flows out where governments are weak, weakening economies such as Spain further.
He said there needs to be 'more or less Europe', the preferred option being that Germany leaves, though he does not expect this to happen. The alternative, a disorderly breakup of the 17-nation eurozone, would lead to a 'boom for the legal profession', he joked, as lawyers dealt with a rash of bankruptcies and restructuring of contracts.
'Europe is going to face turmoil whichever direction it takes,' he concluded.