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Under-regulated and over-powerful banks weaken the global economy and lead to higher inequality, Nobel prize-winning economist Joseph Stiglitz told CNBC.
Highlighting the Libor -fixing scandal that has hit UK banks Barclays and Royal Bank of Scotland , Stiglitz said reforming financial markets was the single most pressing issue facing the global economy.
“A lot of inequality, especially at the top, does not come from people really making the size of the pie bigger, making our economy work better, it comes from what we call rent seeking, trying to seize a bigger slice of that pie through things that actually make our economy weaker ,” Stiglitz told CNBC’s ' Worldwide Exchange ' on Friday.
Stiglitz said he supported a “much stronger version” of current financial market regulation, with the sector forced to focus on its core purpose of providing credit. He said banks should be told: “You can’t engage in these kinds of speculative activities, these non-transparent CDSs , these gambles on the market — they are not your business.”
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