Recovery not robust: Stiglitz

BUSAN - The global economy is much better off than it was a year ago, but still has a long way to go to get back to pre-crisis levels, Nobel Prize-winning economist Joseph Stiglitz said yesterday.

"My view is that obviously we`re much better off than we were a year ago, at the state of free-fall after the collapse of Leman brothers," Stiglitz told a news conference at the third OECD World Forum in Busan.

"But we are nowhere near a robust global recovery."

Stiglitz, a professor at Columbia University and 2001 Nobel Prize laureate in economics, was appointed by French President Nicolas Sarkozy to chair the Commission on the Measurement of Economic Performance and Economic Progress in 2008.



He said GDP growth numbers in the United States and other countries are expected to turn positive in the fourth quarter, but that does not mean the world is back on the track of sustainable growth. "The United States is facing significant problems in the financial sector and there remain serious problems of insufficiency of aggregate demand," he said.

Uncertainty about the sustainability of the U.S. government`s stimulus policies - both fiscal and monetary - is another significant issue that can hurt the recovery, he added, saying consumption-prompting programs like cash-for-clunkers are only temporary.

Asia has been performing relatively well because of China`s strong GDP growth and stimulus effects so far, but the region is too small to lead growth for the United States or Europe, Stiglitz noted.

Regarding the weakening of the dollar, he said the trends will continue due to the large U.S. trade deficit.

"We can continue to expect a considerable level of instability and very likely a longer term weakening of the dollar, given the size of the U.S. trade deficit and unsustainable global imbalances," he said.

Stiglitz said that Korea`s hosting of the Group of 20 Summit in 2010 reflects the changing global economic landscape.

"The movement from G8 to G20 was an important step forward that you cannot address the global economic and environmental problems just with eight countries," he said.

Asked to comment on the 2.9 percent quarterly growth of Korea in the third quarter, he said Asia`s robust recovery is not much of a surprise.

Prior to the press conference, Stiglitz said in his keynote speech during the morning plenary session of the OECD World Forum that the world has been putting excessive focus on GDP measures, and that the global financial crisis showed that the conventional measure of GDP can be misleading in gauging people`s quality of life.

Over 40 percent of corporate profits in the United States between 2005 and 2007 were wiped out in 2008, telling us that the measurement of profits was "totally distorted," he added.

(yoonmi@heraldm.com)



By Kim Yoon-mi