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Joseph Stiglitz: ‘There Is No Instance' Of A Large Economy Growing Through Austerity

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Joseph Stiglitz, Nobel-prize winning economist, listens during an event sponsored by the Roosevelt Institute in New York, U.S., on Wednesday, March 3, 2010. Jin Lee/Bloomberg via Getty Images
Joseph Stiglitz, Nobel-prize winning economist, listens during an event sponsored by the Roosevelt Institute in New York, U.S., on Wednesday, March 3, 2010. Jin Lee/Bloomberg via Getty Images

Nobel Prize-winning economist Joseph Stiglitz has some choice words for anyone who thinks the only way to improve the economy is to tighten the country's belt.

Among them: You're wrong.

“There is no instance of a large economy getting to growth through austerity," Stiglitz said in an interview Tuesday on “Bloomberg Surveillance.”

Stiglitz, a left-leaning professor at Columbia University, said, "Austerity leads the economy to perform more poorly. It leads to more unemployment, lower wages, more inequality.”

Instead of austerity, the U.S. needs more fiscal stimulus to grow, Stiglitz said. Without President Barack Obama’s stimulus in 2009, the unemployment rate would have reached a high of at least 12 percent, rather than the 10 percent peak it hit in 2012, he added.

Stiglitz's austerity-doubting claims align with 80 percent of economists who in an IGM Economic Experts panel agreed last year that the 2009 stimulus lowered the unemployment rate.

Nobel Prize-winning economist Paul Krugman has gone even a step further, calling austerity “an unethical experimentation on human beings,” in February. Krugman was largely referring to austerity measures in several European countries, including Spain, Greece and Italy, that are now suffering from high unemployment rates.

That said, some economists think that Stiglitz may have been a bit too far-reaching in his claim that austerity never leads to growth.

“Most people agree that austerity will slow down the economy in the short-term,” said Valerie Ramey, professor of economics and chair of the economics department at University Of California, San Diego. “But it can have long-run benefits, particularity if the economic situation is thought to be unsustainable like the U.S. is right now.”

The entire country of Sweden may take issue with the Stiglitz’s claim as well. In the 1990s, Sweden’s economy improved dramatically after using austerity measures, such as cutting public sector jobs and decreasing unemployment benefits, to deal with its financial crisis, reported The Local, a Swedish news source.

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