 I'm here with Joseph Stiglitz, who is here to present at the Australian National University the Crawford Aeration and also a seminar on income contingent loans launching a new book. Welcome to the Crawford School. Nice to be here. Now, can you tell me a little bit about how you feel that the world handled the global financial crisis? Was it correct? Overall, no. You might say, the good thing you can say, we averted another great depression. But it's now six years after the collapse of Lehman Brothers, the breaking of the bubble in the United States, and clearly, we're not back to prosperity. The gap between where we were and where we would have been had to be not have this bump and where we are today. It's about 15%. In Europe, it's almost 20%. The cumulative losses in the trillions and trillions of dollars, we probably couldn't have avoided all of these losses, but we could have done much, much better than we did. So what do you think the effect of the global financial crisis was on inequality in society? In the United States, which I know the best, it's clearly increased inequality and done so significantly. Just to give you a couple of numbers, 95% of the gains since the recovery, 2009 official recovery, have gone to the top 1%. Median income, income in the middle, half above, half below, today in the United States is lower than it was a quarter century ago. The median wealth of the United States fell by 40% back to the levels of the early 90s, which meant that all the increase in wealth over a period of two decades went to the very top. So as you look at what's happened, America, which was already the advanced country with the highest level of inequality, has become even more unequal. So what do you think is driving inequality in our society? Well, I've described there being two sources of inequality. You could have some people who are more able than others and appropriately getting more compensated because they contribute more to the national pie. There's another way of getting wealthy, which is to try to get a larger piece of the pie. We call that rank-seeking or wealth appropriation. And unfortunately, a very large fraction of the growing inequality in our society is related to rank-seeking and wealth appropriation. You can see it, if you look at the people at the top, people who made their money out of monopoly, CEOs who took advantage of deficiencies in corporate governance to seize a larger fraction of the corporate income stream, people in the financial sector who became wealthy by engaging in predatory lending, abusive credit card practices, monopolization, a whole mark of manipulation, a whole variety of activities that didn't make our economy stronger, in fact, made it weaker. But actually, we're just taking money away from other people. You've suggested that the Australian government should be spending more in the budget. If they were to spend more, what area of the budget would you be recommending that they spent more money in to reduce inequality? Well, there are a whole variety of areas and I don't feel competent enough to know the details of Australia. In most societies, and I suspect Australia is one, education is one of the most important areas. Increasingly, we've recognized the importance of preschool education. That's been stressed by the work of a fellow Nobel Prize winner, Jim Heckman. Australia is distinctive in having its contingent loan program that makes access to higher education more greater than in many other countries around the world. But to take advantage of a higher education, you have to have good elementary and secondary education. To take advantage of elementary and secondary education, you have to be able to be in a good position even before you go to school. That's why trying to expand the education system to make it particularly focusing on some of the people who otherwise would not be able to live up to the potential is so important. So, I know that you're here this week launching a book on income contingent loans. Can you talk a little more about the ways that income contingent loans can help reduce inequality within society? Maybe the best way of understanding that is to contrast the situation in Australia with that in the United States. The United States tuition has been soaring, particularly after the recession. There were cutbacks in state support for higher education. Universities had no choice but to raise tuition. But meanwhile, incomes were going down. And the only way you could fill the gap was by debt. In the United States loans now amount to well over $1.1 trillion, more than all the credit card debt in the United States. And it's having a very adverse effect on our economy. But it's having an even more adverse effect on the particular individuals. Average student who has student debt is more than 20, more than $25,000, $30,000 of debt. And the number is increasing very rapidly. They have to pay that debt no matter what happens. If they go into a low-paying profession, they still have to pay it. Next forcing them to make unpleasant choices. They might want to go into teaching or into ministry or to some other activity. The very value of our society, it just doesn't pay a lot. But essential for the functioning of our society, they can't make that. They can't do what they want to do. They have to look for a high-paying job so they can pay back the debt. But even then, they may not be able to because it's hard to get a job. Jobs are becoming more and more difficult to get. And in the United States, the bankruptcy law says that even no matter what happens, very hard to get debt discharged in bankruptcy. You can buy a yacht and get your debt discharged, but not if you invest in yourself. Well, that means that all the risk is borne by the individual. And that means poor children from poor families are hesitant to make the investments that would allow them to live up to their potential. The big advantage of Australia's income contingent loan program is it says we'll bear some of that risk. We'll allow you to spread that repayment over a longer period of time if your income isn't so great. There'll be a certain amount of debt forgiveness if it turns out that over a 20-year period, things didn't turn out very well. So it's not the news around their neck that American loan programs have become. So to me, it's a matter of good economic policy. It's also a very humane economic policy. Is there any country in the world that you would point to that is getting the economic and social policy right at the moment? Well, in general, the Scandinavians are doing it better than I think almost any other country. I mean, it's interesting. By the standard measure of inequality called the genie coefficient, Australia's inequality is twice that of the Scandinavian countries. It says something about Australia, it says something about the Scandinavian countries. It says it's not just economic laws. The same economic laws apply in Scandinavia as apply in Australia. Australia ought to have lower inequality because in Australia, a lot of your wealth is associated with minerals. If you tax minerals more, they're not going to go away. If you tax labor, if you tax savings, people might save less, might work less. Facts may be relatively small, but the iron ore is not going to go to another country. So that means you have a base of revenues that you could use to create a more equal society. Very different from Sweden, for instance, or Denmark that aren't lucky in that way. And yet you have twice the level of inequality of Denmark. Why do you think advanced economies like the US and Australia are getting it so wrong on inequality? It's obviously politics and policies. And in the United States, I understand very clearly why we're getting it wrong. Economic inequality has led to political inequality. Many of those in the 1%, top 1%, like it that way, they're short-sighted, I think. They don't see that a divided society doesn't perform as well. In fact, in the period after World War II when we had the greatest solidarity, we grew together and we grew much faster than we did in the Reagan era, where we grew apart and we grew more slowly. So it is sure exciting that so many people in the top just think of themselves and don't think of our broader society because I think even they would be better off if we grew more. But unfortunately, they don't understand that. And so they've been advocating policies that divert more and more of the country's resources to themselves and away from others. And the result of that is that we have a more poorly performing economy and society and democracy. Look, thank you so much for joining us here at the Crawford School of Public Policy at the Australian National University. We really appreciate your time and look forward to joining you at more events this week. Thank you.