A man who can see into our future but who can also understand our past: Joseph Stiglitz, one of the world’s leading economists and a current professor at Columbia University, hosted an evening on 9th February in London in attempts to promote his new book ‘Freefall: America, Free Markets, and the Sinking of the World Economy’.

The event, although a book promotion, was more about the man himself and his stance on the current global recession (it was also, in fact, the evening of his 67th birthday!). Held in Kensington Great Hall, an air of formality in the theatre immediately sent off a serious tone. The night began with a bang as Stiglitz was introduced by BBC presenter Evan Davies, who outlined a list of Stiglitz life achievements from his Nobel Peace Prize to his current professorship at Columbia University.

Dressed in a suit, with a smart but rough around the edges look, the audience of scholars, journalists and students was immediately captivated by Stiglitz, hoping for the answers to numerous questions about this current financial turmoil. His introduction was followed by a short speech, during which he himself explained the focus of his book and its aims of clarifying exactly what caused the biggest economic crisis since the Great Depression of 1945.

Throughout his 15-minute time limit, his speech sparked off various questions to which he immediately provided the answers. He spoke about how his book could be seen somewhat as an outline of the general battle of ideas that led to the deregulation of the financial markets. Additionally, how it can be used as a tool in confirming the inefficiency and inability of markets to self-adjust and finally what short-run and long run goals should be met as a means of targeting deeper economic problems.

Stiglitz successfully provided the answer to a fundamental question that still remains unresolved in Britain: why did the global financial markets fail?

His claim: the misallocation of capital and the mismanagement of risks. ‘But why did these mismanagements take place?” he questioned aloud. “The Financial institutions had incentives to take risks,” he explained, “and, as most economists agree, incentives matter.” The general bank thought process was “Gamble and win, go home with the profits. Gamble and lose, and the government picks up the tabs.’

More lightheartedness and jokes swept by as he carried on to more morbid consequences of the crisis, outlining how bad bank lending will lead to negative equity in the US with 2 to 3.5 million Americans losing their homes and life savings in 2010. ‘This,’ he said, ‘is more than just an economic problem, but a social problem to say the least.’

His anger towards Financial Institutions, bonuses and bailouts was evident throughout his explanation of the lack of conditions banks have when allocating money and taking risks, and via his support of the new ‘Robin Hood Tax’ that taxes Financial Institutions on their bonuses. ‘Bonuses for record losses, what is that?!’ he cried. Over 140 banks were closed in America last year, but not the big investment banks, instead small banks that were providing credit for new businesses and creating new jobs, or as he calls them ‘the money organs to gambling casinos.’

Stiglitz ended his speech with a not-so-positive prognosis of the global economies, stating that they will not surface unscathed any time soon. Americans previously consumed beyond what they could afford and now stand at zero consumption in hopes of paying off colossal debt, which shows there has been a clear failure in the creation of an economic system that provides long-term stability and future sustainability, particularly in the US.

Dialogue open to the floor allowed members of the audience to eagerly question various aspects of economies from Britain, to Spain, to Greece. However, although a range of economic aspects was covered during the speech and the evening was a gentle snap back into reality, it seemed as though one question remained: how and what can we as the general public do to improve our current economic situation?

Answer: there is no clear answer, but a good starting point may be to read the book! Because with Stiglitz analysis of the recent crisis evidently taken from a very realistic and technical standpoint, it is highly likely that the book will answer such questions and more, for those worried Scrooges in our society today.