Economic models: debating progressive capitalism

JOSEPH STIGLITZ: I've been advocating a form of capitalism

that I call progressive capitalism, distinct,

for instance, from neoliberal capitalism,

the kind of capitalism that we've had for the last 40 years.

Neoliberal capitalism emphasized shareholder value maximization,

minimizing the role of the state,

limiting regulation, paying no attention to inequality,

and paying little attention to the environment.

Progressive capitalism is almost the antithesis of each of those.

It recognizes the objective of our economy

is to promote the well-being of society.

It's not that we are supposed to serve the economy.

The economy is supposed to serve us.

And it asks, how can it do that best?

It is about capitalism.

Markets are an important part of the success

of any economy and any society, but also

recognizes there's a more important role of the state.

There's a more important role for other forms

of collective action.

For instance, a central issue that we are facing

is climate change.

None of us individually can address climate change.

Markets, firms are an important part of the solution.

But they have to be motivated, either by carbon price

or regulation.

So we're going to need collective action if we're

going to save the planet.

I think good regulation can promote innovation.

Let me give you one example.

We've been moving towards more regulation of carbon emissions.

We've done it in a number of different ways, automobile

regulation, many states, California,

New York, a lot of discussion about carbon prices.

It's clear that's the direction that we're moving.

And what has been the response?

An enormous amount of innovation and renewable energy

to the point where the price of renewable energy has plummeted.

It has plummeted with very little government

financial support.

It has really been the private-sector-led innovation

that has brought the price of renewables down to the point

where it's competitive with old fossil fuels, many areas much

cheaper than fossil fuel.

If we have a societal problem and we design regulations

to respond to that societal problem,

the private sector will innovate to help solve the problem.

I don't see these as in conflict at all.

Good regulation creates good innovation.

And by good innovation, I just mean

innovation that actually has the effect of increasing

societal well-being.

Metrics are part of the move.

Just let me give you an example.

Is labor just a cost center?

And do you want to lower wages, see

how much you can exploit them?

Or do you think of them as an asset,

as part of your social and moral responsibility?

How do you empower them, increase their capabilities?

You know, they spend a large fraction

of their life in the corporation.

And so if you give them some flexibility, like family leave,

sick leave, if you give them maybe even more responsibility

and decision making, that can make a big difference.

I think people feel better in general

in thinking that they are contributing in a broad way

to society, but also, say, I think in the long run

this is going to be profitable.

It is better for the organization,

for the corporation, and for the leaders themselves.

A number of years ago, 1944, Friedrich Hayek

wrote this very influential book, The Road to Serfdom.

He worried that the creation of the welfare

state, a strong government helping individuals

would lead to authoritarianism.

We now know that he was wrong.

If we look around the world, populism,

authoritarianism is associated not with government

doing too much, but doing too little.

By doing too little, it has given rise

to discontent that threatens our democracy

and threatens our ability to respond to the major challenges

that we face.

And one of the reasons I wrote the book, what

I call The Road to Freedom, was that I wanted to highlight

that progressive capitalism is really

the vehicle through which we are most

likely to be best able to respond to these challenges

that we are going to be facing.

If we're going to create an economy that serves society,

we have to reform it, change it in fundamental ways.