Boosting exports helps in reducing deficits, asserts Nobel Prize-winning economist Joseph Stiglitz during a conference in Romania
Joseph Stiglitz, the celebrated US economist and professor at Columbia University, slipped Romania a lesson on economic recovery during his visit to Cluj-Napoca. The Nobel laureate in Economics for 2001 told an eager audience that governments should crank up exports and key sectors when facing red ink.
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Stiglitz jetted into Romania on May 8, receiving the title of Doctor Honoris Causa from the prestigious Babeș-Bolyai University of Cluj-Napoca. In a media scrum, he doled out economic wisdom for countries in distress.
Some stark numbers paint Romania's economic picture: spending typically trumps state revenues, and imports outpace exports. In the last quarter of 2024, Romania had the EU's highest current account deficit. The country also boasted the EU's highest budget deficit at 9.3% of GDP last year. Romania needs to get its act together with the National Recovery and Resilience Plan and avoid forfeiting EU funds. The local currency's slipping, and political instability is jacking up borrowing costs.
"Two recipes for response exist," Stiglitz shared, according to Economedia. "One has a dismal past of failures: austerity." Austerity, he argued, is a fool's errand: it's cutting government spending and throttling the economy even further. The idea is to restrict the economy so much that imports diminish, and thus the trade deficit falls. However, this means choking the economy to save the trade deficit—a disastrous idea.
Instead, Stiglitz proposed a more aggressive agenda that prioritizes economic development and boosts exports. It's about investing in strategic sectors to up productivity and competitiveness, which can help shrink trade deficits by increasing export value. In short, Stiglitz thinks governments should be more proactive in promoting economic growth and development.
Austerity measures have a history of missed targets. As an example, Greece, having recently returned to the same per capita income, shows that austerity doesn't work. "Greece's austere policies haven't worked," he concluded.
Joseph E. Stiglitz, a global heavyweight in economics and public policy, spearheads the High-Level Expert Group on the Measurement of Economic Performance and Social Progress at the Organization for Economic Co-operation and Development (OECD). He's also the chief economist at the Roosevelt Institute, the World Bank's former chief economist, and the ex-chairman of the Council of Economic Advisers in the United States.
Stay tuned for more economic wisdom from Stiglitz and his fellow trailblazers!
(Photo credit: Universitatea Babeş-Bolyai on Facebook)
In light of his visit to Romania, it's crucial for Romania to reconsider its economic strategies, asustere measures like austerity have proven ineffective, based on the case of Greece. To foster economic growth and recovery, Romania should focus on investing in key sectors, boosting exports, and promoting development, as suggested by Nobel laureate Joseph Stiglitz. To gain deeper insights into Stiglitz's economic perspectives, consider becoming a Romania Insider member.
