Exclusive | Economist Joseph Stiglitz on the US-China trade war and the death of ‘hyper-globalisation’

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American economist Joseph Stiglitz, who won the Nobel Prize for economics in 2001, served as chairman of the Clinton administration’s Council of Economic Advisers. He is a professor at Columbia University and a former chief economist at the World Bank.

Stiglitz spoke to the Post about the US-China trade war, the economic ramifications of next month’s presidential election in the United States and the future of globalisation. This interview first appeared in SCMP Plus. For other interviews in the Open Questions series, click here.

The US Federal Reserve announced a half a percentage point rate cut last month, the first in more than four years. What is your view of the US’ economic situation right now and what do Fed rate cuts mean for the US economy and the world?

I thought that the Fed increased interest rates too far and too fast, because it made a fundamental error of judgment that the inflation we were experiencing was due to excess demand but, in fact, it was a result of the shock of the Covid-19 pandemic and the war in Ukraine. I thought that the higher interest rates might actually worsen the problems, not improve them.

So, for instance, if we have supply side interruptions, you want to make investments to alleviate them, and the higher interest rates make those investments more difficult. A significant contributor to inflation has been the price of housing, and raising interest rates exacerbates the shortage of housing. So it was exactly the wrong medicine. It was a medicine that hurt the economy. So I am very pleased that they’re lowering interest rates, and I think it will be good for the economy.

I think the US economy has been very robust. The data says it’s slowing, so the rate cut was a little late. I think they have made a double mistake in that sense, because I didn’t think they should have increased it as much or as fast. I think their rates should have been lower, and we will pay a price for their mistake. I don’t think it’s going to be too high of a price, it’s just that I think they should have cut it earlier.

Let’s talk about the impact of the US presidential election. What are the respective prospects for the US economy when either Donald Trump or Kamala Harris wins the November election?