Date:20/12/2008 URL: http://www.thehindu.com/2008/12/20/stories/2008122054980400.htm

New Delhi

Stiglitz hopes Obama will check financial crisis

Staff Reporter

Nobel laureate Professor Joseph Stiglitz

NEW DELHI: Critical of the George Bush administration for failing to heed warnings of a market meltdown, Nobel laureate Joseph Stiglitz on Friday expressed hope that the Barrack Obama Government will take the necessary steps to check the financial crisis that has its origins in the United States and has affected economies of several countries including India.

During an interaction with the academicians and administrators at the Institute of Social Sciences here, Prof. Stiglitz, who was among the economists who had predicted a market crash, criticised the Bush administration for “choosing to fight a war” (the Iraq war) and not taking steps to prevent a financial meltdown.

He said while America has little choice in fighting wars in the past, fighting the Iraq war was a decision that the Bush administration opted for, which in turn led to the current economic crisis.

He expressed hope that the Obama administration would take the appropriate steps to mitigate the impact of the wrong decisions that led to the meltdown.

Mr. Stiglitz argued that the current crisis is a “system failure.” He said the administrators erred in allowing bailouts that were not required, not having any State control on market economics, allowing the gains to be privatised, but the losses to be passed on the people.

Allowing people to spend beyond their means, the war in Iraq that led to exorbitant rise in oil prices and increase in liquidity in the mortgage markets, were the reasons identified by Prof. Stiglitz for the poor state of economies.

Urging the Obama Government to develop mechanisms to check the crisis, he cautioned that the situation will only get worse if the corrective steps were not taken on a priority basis.

Referring to a question on whether India and China should be included in the G7, Prof. Stiglitz said both the countries would prefer to protect their own interests rather than the interests of the other nations. He said China too will not like to give its surplus for programmes that it does not approve of.