Joseph E. Stiglitz, 2001 Nobel Laureate in Economic Sciences – Russia’s Invasion and the War in Ukraine

Moderated by: Jan Svejnar, Richard N. Gardner Professor of Economics and International Affairs; Director of the Center on Global Economic Governance, Columbia University

Speakers: Tania Babina, Assistant Professor of Business, Columbia Business School

Ph.D. in Finance, Kenan-Flagler Business School, University of North Carolina, Chapel Hill, 2016; M.Sc. Finance, University of Alabama 2008; B.A. Economics, National Technical University KhPI, Ukraine, Summa Cum Laude 2005.

Richard K. Betts, Leo A. Shifrin Professor of War and Peace Studies; Director Emeritus, Saltzman Institute of War and Peace Studies, Columbia University.

Joseph E. Stiglitz, 2001 Nobel Laureate in Economic Sciences and University Professor, Columbia University

Joseph Stiglitz

First the effectiveness of sanctions? Secondly the vulnerability of Russia? Third point which is the relative vulnerability of the US and the West? how far will we go should we go?

It’s hard to believe, 30 years after the cold war where we thought of Russia as such a power that Russia is an economy roughly the size of Netherlands a small European state it is a primitive economy of  70. Its exports base on natural resources it doesn’t really make very much of its own its depends very highly on the west for almost everything and there’s been an asymmetry they have not been really very absorbed into western supply chains.

There are a few products there are a few interruptions right now but as far as I’ve heard almost all the cases where there is an integration of global supply chains, they could the companies find alternative supplies relatively quickly so there’s a real asymmetry here of the impacts much likely to be greater on Russia than on the west

It over time Russia will be able to adapt in certain areas if we cut off if  Unilever cuts off soap they can make soap but they’re not going to be able to make banks chips soon,  I think it is important and here I agree very strongly with Tanya that we ought to have maximal economic sanctions imposed as quickly as possible with the objective of disrupting their economy and their society as much as possible so some of the things that we’ve done have been deliberately trying to destabilize their economy, withdrawing credit cards master visa.

They could eventually set up their own transaction platforms but that will take time. Blocking the reserves has a good chance  undermining confidence within their country and I’ve been very surprised at the strength of the response of corporations in the west and withdrawing their investments from Russia so I’m optimistic that we will be able to actually have a significant economic impact,  I agree with those that say that we ought to cut off oil and gas that is the major source of income. The income of course is only valuable if you can buy things with it and so to the extent that we successfully Impose an embargo in selling things it getting stopping their revenue is not as important but there’s going to be leakages and I think this is one of those where part of what we’re trying to do is weaken the economy in every way. We can recognizing that there are going to be leakages in the sanctions and cutting off oil and gas I think is an important step many in the west worry about the politics oil higher oil and gas prices, I think there are a couple of responses you’ve read about this.

I’ve heard about it somewhat more directly but we’re trying to get Saudi Arabia,  Venezuela some of what is going on in the Iran negotiations. All there’s a big effort to to try to find alternative sources some of the gas in in the gulf so that’s one thing, secondly this is the time to cut it off because it gives them until next winter in europe to restore their supplies before winter. Thirdly I’ve suggested that we ought to have a variety of forms of soft price controls on gasoline and other oil prices the form that could take is to say for instance most of the major oil companies depend on their own reserves for their production and so they’re just enjoying huge profits as a result of the high oil prices so I would say this goes back to what we had in the 70s huge excess profits so I would say to them when I like to the oil companies you can increase your prices in tandem with your actual costs including your price of acquired oil based on your purchases earlier but not on the basis of current market prices and if you do that we’re going to have an excess profit tax of 90 or 110 percent to discourage those high prices so i think we can steer our economy in ways that at least mitigate this is just one example of mitigate some of the adverse effects on our economy.  

They’re just three other points  I want to make very quickly, the first I think we ought to reflect a little bit about the transition from the communism to the market economy you were engaged a lot of the discussions on that and you and I had a sense that we mismanaged that in Russia shock therapy we paid, we believe that somehow if we made a privatize liberalized did all those things that would lead to a democratic government we paid no attention to civil society we paid no attention to democratization we thought was go would follow privatization and liberalization I always thought that was tacomania and I think we’re now bearing the fruit and those who advocated those kinds of policies I think this is clearly evidence of the failure and of course I have to say that within the Clinton administration I was in we had intense battles over this issue and and I was on the right side I think and I won’t mention who was on the wrong side. The third comment I want to make really picks up with what Tanya said the extent of information and misinformation and disinformation in Russia but we have a problem in the US  and you know a significant fraction the republican party believes that  what happened in the inks erection on january 6 is just normal political discourse and I think it is imperative that we address this issue with miss and disinformation

The digital services act (DSA) we are well behind in that discussion finally let me say I think this is the beginning of a new cold war we are ought to be clear about this so this is the end of a naive kind of globalization. It was fraying before this but and it will be particularly accelerated i think depending on the actions that China takes and we’ve heard two different statements from its foreign ministers saying that they are standing side by side with Russia and president Xi according to some reports who has been urging Russia to move towards a ceasefire and we know in that debate who has more power president Xi but clearly if China undermines the sanctions it will accelerate the global divisions and accelerate and redefine this new cold war a different kind of cold war and the previous one had a panache of ideology this is a much simpler one, it’s authoritarian fake versus  what we think of as democracies although we recognize that our democracies themselves have some of our democracies have their problems.

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