Sustainable growth only possible with policies designed for innovation: Joseph E Stiglitz

NEW DELHI: India, which is the fastest growing economy after China, will be able to sustain the growth momentum only if policies are designed to foster knowledge and innovation, said Nobel-winning economist Joseph E Stiglitz.

“Successful and sustained growth requires creating a learning society,” he said while delivering the 42nd Jawaharlal Nehru Memorial Lecture. “This is especially so in the twenty-first century as we move to a knowledge economy,” he said.

The world is currently going through the worst crisis since the Great Depression of 1930s, he said, adding that faulty understanding and application of economic principles were responsible for the current crisis.

“My own work on economics of information had shown that the reason that Adam Smith’s invisible hand often seemed invisible was that it was, in fact, not there,” he said questioning one of the basic tenets of modern economics.
He termed the American growth as anti-poor, which hurts the development of the middle class.

In the current scenario, around 20-25% of the wealth generated in the US accrued to the upper 1%, he said. Mr Stiglitz dismissed the free market policies, saying the crisis had proved to be a nail in the coffin of such economic policies.

He called for a balance between an imperfect government and an imperfect market, both working to keep a check on each other. He said that GDP was not a good measure of well being, and policies, which narrowly focused on increasing GDP, were misguided. India had has had enormous success over the past 25 years in terms of GDP and it now seeks to ensure that it continues on the path of growth with benefits shared by all.

He trashed the popular belief that growth in income will have a trickle-down effect. “Trickle-down economics never had much empirical support, but in recent years, it is an idea that has fared particularly badly,” he said.