Nobel Prize-winning economist: Here’s what Labour should do to improve the economy

Joseph Stiglitz, Nobel prize-winning economist and professor of economics at Columbia University, reacts during a Bloomberg Television interview in London, U.K., on Tuesday, May 19, 2015. Photographer: Simon Dawson/Bloomberg via Getty Images

Nobel Prize-winning economist Joseph Stiglitz has said Labour should be “bolder” on the economy to break the UK out of its growth malaise.

“I really think they’re under-promising,” Stiglitz told City A.M. “They’re not going far enough. I understand why they do not want to be as aggressive as I would be.”

“I don’t have to appeal to the British conservative voter so I can be a little bit bolder,” he added.

“I would say if you want to grow the economy you have to think broadly about what makes for a 21st century economy. Its partly the green transition, its the services sector, its housing – there’s a shortage of housing which is an important part of well-being, which in turn is a part of productivity,” he argued.

Stiglitz praised President Biden’s “forward thinking” policies on green investment, which he contrasted with Trump’s plans to rebuild 1950s-style manufacturing. This was a “recipe for disaster,” he said.

Labour’s economic plans self-consciously ape aspects of Biden’s programme, such as the focus on the green transition and a more active state.

In her Mais Lecture, Shadow Chancellor Rachel Reeves positioned her economic agenda as part of an “emergent economic consensus” crossing both sides of the Atlantic. However, some on the left have criticised Labour for not matching the ambition of Biden’s regime, particularly when it comes to government investment.

The opposition recently scaled down its £28bn a year investment programme in green projects, blaming the Conservatives’ reckless management of the economy.

However, Labour is still committed to enabling the construction of 1.5m homes over the course of the first parliament through reforms to the planning system.

According to Britain in a Changing Europe, the construction of new houses in the UK fell by 46 per cent between 1970 and 2023, even though house prices more than quadrupled in that period.

Planning reforms might also enable greater infrastructure investment, which Stiglitz noted was a “source of controversy” in the UK. A government report published last year showed over half of infrastructure decisions had delays, with the average delay lasting nine months.

“There are clearly infrastructure investments that would make a difference,” he said. He recently told the House of Lords Economic Affairs Committee that public investment in infrastructure could yield returns of around 10-15 per cent.

Stiglitz recently published a new book, The Road to Freedom: Economics and the Good Society, which tries to recover a progressive concept of freedom. It argues freedom should refocus on ‘opportunity sets’, which measure

A Labour spokesperson said: “Our economy is stuck in a high tax, low growth doom loop which has left working people worse off. That’s why the country desperately needs change.”

“Our long-term plans mean economic stability and ambitious reform to get Britain building again. We’ll deliver 1.5m new homes, unlock more than £20bn of investment in the green industries of the future, and create more than 650,000 good jobs in Britain’s industrial heartlands.”