Joseph Stiglitz, winner of the Bank of Sweden Prize in Economic Sciences in memory of Alfred Nobel in 2001, was the guest of an exceptional conference at the University of Paris 1 Panthéon-Sorbonne on the theme “finance and society”. Questioned by Gunther Capelle-Blancard, professor at the University of Paris 1 Panthéon-Sorbonne, Anne-Laure Delatte, scientific advisor at CEPII, and the students of the Sorbonne School of Economics, it was notably question of the role and the place of finance, the taxation of financial transactions and sustainable finance. Here is a brief summary of the exchanges.
In your new book , you engage in a deep analysis of current economic and social problems, and their causes. It is notably a question of finance, which “has eminently contributed to creating the current economic, social and political unrest” … In the past few decades, the financial sector’s share of GDP has grown from 2.5% to 8% in the United States. It is certainly impossible to have a well-functioning economy without an efficient financial system. But the boom in the banking and financial sector has not translated into a more efficient economy. We had to endure a serious financial crisis in 2008, and the last few years have been marked by weak growth and a sharp rise in inequality. Meanwhile, wages in finance have risen considerably , and banks have been guilty of abusive practices, especially among the poorest populations.
Most of the debate concerns regulation and aims to limit the damage caused by the financial sector. But almost nobody talks about a fundamental point: what is the use of the financial sector? We must return to the essential functions, namely to collect household savings and provide financing to businesses so that they can grow and create more jobs.
The banking and financial sector has not performed its functions properly. The regulatory authorities have also failed. In Europe, before the crisis, the president of the European Central Bank at the time, Jean ‑ Claude Trichet, was worried about too high wages, and his successor Mario Draghi an excessive weight of the welfare state. But the crisis is not due to too high wages or too strong a state!
The experiment is as follows: you roll a die and must announce the result obtained that you are the only one to observe; you then receive the amount indicated by the die. If you announce that the die falls on 1 you win 1 dollar, on 2, you win 2 dollars and so on except for 6 where you do not win anything. This experiment has been performed many times and individuals generally tend to lie about the result. But above all, the study shows that this is even more true for individuals who present themselves as bankers.
In addition, much of the activity on the financial markets is unproductive, even harmful. This is the case in particular of high frequency trading, which can completely disrupt the stock markets, as in 2010 when thousands of billions of dollars were cleared from the American stock market in a few minutes , without it being based on anything. either concrete …
I was part of a committee formed after this flash crash , where I proposed to set up a simple rule to curb this phenomenon by fixing the minimum duration of stock market orders at ten milliseconds. Then I was told, “Do you want to go back to the Stone Age? ”
There is no social utility in having markets that go so fast. No rational decision is made in a millisecond, or even in ten. A well-designed financial transaction tax could correct this situation. I think there is a chance that this measure will be put in place if a Democratic president comes to power. If only because of the possible receipts. The estimate is that this tax would generate about $ 800 billion in revenue in the United States between 2019 and 2028 … It’s not huge, but it’s better than nothing. You can already do a lot with this money.
More seriously, many initiatives are to be welcomed. Banks are starting to orient their activities to meet the challenge of climate change, even if it may take time; green bonds are also going in the right direction; central banks are starting to take an interest in the systemic risk generated by the exploitation of fossil fuels; several countries now require companies and investment funds to communicate on carbon risk; Finally, there should be “green” public banks, because it is likely that the private sector does not act quickly enough. New York State has created one , and it works very well.