Joseph Stiglitz, 2001 Nobel Prize winner and Columbia University professor, told CNBC Tuesday that the US economy has turned into a type of “ersatz capitalism,” a system where “you socialize the losses and privatize the gains.” According to Stiglitz, that’s not capitalism.
“An awful lot of people are not managing their own money” Stiglitz said. “In old-style 19th Century capitalism, I owned my company, I made a mistake, I bore the consequences.”
“Today, most people, [at] most of the big companies you have managers who, when things go well, they walk off with a lot of money. When things go bad the shareholders bear the costs. But it’s even worst than that” Stiglitz said, “because the people giving the money to the companies are [entities] like pension funds that are managing money on behalf of other people, so we have layers and layers of agency costs.”
There’s “moral hazard everywhere and it’s gotten a lot worst,” he added.
Stiglitz stressed he is a big believer in market economies, but pointed out that “if you don’t have the right rules and you don’t have the right referees the game doesn’t work.”
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