Finding a balance between government regulation and market forces is key to improving a country’s economy, but there is not just one way to achieve this, said Joseph Stiglitz on Monday in Beijing.
“We now recognize that especially after the crisis, unregulated markets can not work. We need both government and markets,” said Stiglitz, Nobel Laureate in Economic Sciences and professor with Columbia University.
He made the remarks at the 16th World Congress of the International Economic Association (IEA) held at Tsinghua University — where world renowned economists gathered for the five-day congress.
There is no single Third Way and different policies are needed depending on the circumstances of a country, he said.
As one of his most important contributions, Stiglitz defined the economic philosophy of the “Third Way.” It postulates the important, but limited, role of government. Unfettered markets often do not work well, but government agencies can not always correct the limitations of the market.
“So, at some stages, you may need a larger role for government,” he said, adding that a larger government role might be needed in countries with urban congestion and environmental problems.
In the earlier stages of development when governments should promote innovation and research in universities, greater government intervention is needed. So the role of government may be differ in China than in the United States, he said.
The global balance has changed dramatically especially since the global financial crisis, Stiglitz said.
He said that the ideas of China’s policymakers are much different from their counter-parts in the United States, because they recognize the need for more regulation and a more active government.
The International Economic Association is the association of national economic associations. The united theme of the congress is “Approaches to the Evolving World Economy.”
“In spite of China’s amazing performances in the economy, I still do not think that there is already a shaped model of China,” said Wu Jinglian, a well-known economist with the Development Research Center under China’s State Council, or cabinet.
“China is still at the stage of transition,” Wu said.
Sharing similar ideas with Wu on this point, Stiglitz said “it is a moment of transition now.”
“China seems to be following its own way through this turmoil and it could well be an example of Stiglitz’s ‘Third Way’,” said Tangen, BizTimes columnist and author of the book Kunshan Way.
(Xinhua Writer Ni Yuanjin contributed to the story)