Raise taxes on very rich to stimulate economy: Joseph Stiglitz to govt

Stiglitz emphasized on the importance of targeting and how it can maximize the effect even within budgetary constraints

Contain the Covid-19 pandemic and use your money well, that’s economist and Nobel Laureate Joseph Stiglitz’s advice to the government.

The first priorities are helping the vulnerable and containing the disease, he said. Stiglitz emphasised the importance of targeting and how it can be maximised even with budgetary constraints. However, he also said it might be necessary to raise taxes on the very rich. 

“If you can’t get resources, one way of dealing with it is, raise taxes on the very rich – you have a lot of billionaires in India — and if you spend that money well, it actually stimulates the economy,” he said while addressing an interaction organised by Federation of Indian Chambers of Commerce & Industry’s (Ficci’s) West Bengal state council.

Stiglitz’s advice came as a response to a question from Sanjiv Mehta, Hindustan Unilever’s chairman and managing director.  Mehta said, the Indian economy is about $2.9 trillion and it had a good run in the past three decades. But in the June quarter it contracted by about 24 per cent. 

“The government has done a good job of ensuring that no one goes hungry in the rural areas, which is also visible as the consumption is becoming a bit buoyant in rural areas because of the direct transfer of money, as well as a good harvest. Now, the government has been circumspect in spending money because they are worried that the fiscal deficit may go out of control. We don’t have deep pockets like the US, inflation might get out of control, but we need to kick-start the economy, what would be your advice,” Mehta asked.

Stiglitz said the United States and India can basically print money. “We are not inflicting any inflationary pressures and a case for spending money is compelling. If we don’t, there will be long-term damage. Companies that go bankrupt don’t go un-bankrupt in two years’ time.”

He told Mehta, the government (in India) has succeeded in giving money to the most vulnerable. Spending the money in a way to prevent contagion of the disease and helping people provides a double dividend. 

Sanjiv Puri, ITC chairman and managing director, during the interaction, asked Stiglitz about social inequity and climate change risks. He also asked about ESG (Environmental, Social and Governance) investing and whether the trends were creating purposive actions in the right direction or making more noise. 

Stiglitz said, there was a lot of discussion in the US right now, should corporations just maximise shareholder value or should they take a broader agenda — ESG, stakeholder capitalism, about the environment, natural capital, the community, workers, customers — a whole array of constituents.  “At this point there is a broad consensus in Europe and the US that there should be broad stakeholder capitalism, ESG is very important,” he said.