Joseph E. Stiglitz: The People Who Break the Rules Have Raked in Huge Profits and Wealth and It’s Sickening Our Politics

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A replica of the iconic Wall Street bull is lifted as a symbol of greed during a protest rally to support low-wage workers as part of National Day of Action in New York, Tuesday, July 24, 2012. (AP Photo/Bebeto Matthews)
A replica of the iconic Wall Street bull is lifted as a symbol of greed during a protest rally to support low-wage workers as part of National Day of Action in New York City on Tuesday, July 24, 2012. (AP Photo/Bebeto Matthews)

This post originally appeared at AlterNet.

The following is taken from a transcript of Joseph Stiglitz’s remarks to the AFL-CIO convention in Los Angeles on September 8, 2013.

I’m an economist — I study how economies work and don’t work. It’s been clear to me that our economy has been sick for a long time. One of the reasons it’s been so sick is inequality and I decided to write an article and a book about it.

Two years ago, I wrote an article for Vanity Fair called, “Of the 1%, by the 1%, for the 1%,” which really got to the gist of it. For too long, the hardworking and rule-abiding had seen their paychecks shrink or stay the same, while the rule-breakers raked in huge profits and wealth. It made our economy sick and our politics sick, too.

You all know the facts: while the productivity of America’s workers has soared, wages have stagnated. You’ve worked hard — since 1979, your output per hour has increased 40 percent, but pay has barely increased. Meanwhile, the top 1 percent take home more than 20 percent of the national income.

We have become the advanced country with the highest level of inequality, with the greatest divide between the rich and the poor. We use to pride ourselves — we were the country in which everyone was middle class. Now that middle class is shrinking and suffering.

The Great Recession made things worse. Some say that the recession ended in 2009. But for most Americans, that’s simply wrong: 95 percent of the gains from 2009 to 2012 went to the upper 1 percent. The rest — the 99 percent — never really recovered.

More than 20 million Americans who would like a full time job still can’t get one, incomes are still lower than they were a decade and a half ago, wealth in the middle is back to where it was two decades ago. Young Americans face a mountain of student debt and dismal job prospects.

We have become the advanced country with the highest level of inequality, with the greatest divide between the rich and the poor. We use to pride ourselves — we were the country in which everyone was middle class. Now that middle class is shrinking and suffering.

The central message of my book, The Price of Inequality, is that all of us, rich and poor, are footing the bill for this yawning gap. And that this inequality is not inevitable. It is not, as Rich said yesterday, like the weather, something that just happens to us. It is not the result of the laws of nature or the laws of economics. Rather, it is something that we create, by our policies, by what we do.

We created this inequality — chose it, really — with laws that weakened unions, that eroded our minimum wage to the lowest level, in real terms, since the 1950s, with laws that allowed CEOs to take a bigger slice of the corporate pie, bankruptcy laws that put Wall Street’s toxic innovations ahead of workers. We made it nearly impossible for student debt to be forgiven. We underinvested in education. We taxed gamblers in the stock market at lower rates than workers and encouraged investment overseas rather than at home.

Let us be clear: our economy is not working the way a well working economy should. We have vast unmet needs, but idle workers and machines. We have bridges that need repair, roads and schools that need to be built. We have students that need a 21st century education, but we are laying off teachers. We have empty homes and homeless people. We have rich banks that are not lending to our small businesses, but are instead using their wealth and ingenuity to manipulate markets and exploit working people with predatory lending.

If we could ensure that everyone who wanted a job and was willing to work hard could get one, we could have an economy and a society that is both more equal and more prosperous.

It is plain that the only true and sustainable prosperity is shared prosperity. If we could ensure that everyone who wanted a job and was willing to work hard could get one, we could have an economy and a society that is both more equal and more prosperous.

To achieve that we need to grow our economy. But we can’t do that when paychecks aren’t growing and while insecurity is growing, with looming cuts to Medicare and Social Security.

If we have regulators or a Fed chief who protect the bankers’ jobs and bonuses rather than jobs and rights for all Americans, we won’t achieve it.

We won’t achieve it through mindless cutbacks in public spending, whether in schools, hospitals, police or firemen. These are ways to keep our economy sick. And an economy in which 95 percent of the growth goes to the top 1 percent can only be called that: sick.

What we do need is investment in our future — in education, technology and infrastructure.

And our problems are deeper than weak growth. We are losing the ability to call ourselves the land of opportunity. It used to be that what an American could achieve in life was a result of how hard she or he worked. Today, it depends a lot more on the family we are born into – their income and educational attainment. And it’s worse in America than in almost any other advanced country. We are losing the American dream.

If we became the land of opportunity again, we could find our way to being more equal, more dynamic, more prosperous and fairer.

But to achieve this we need markets to work like they are supposed to. We can’t let monopolists and the 1 percent use their power to siphon off more of the country’s income — away from ordinary Americans.

Our democracy is in peril. With economic inequality comes political inequality. We have a Supreme Court that declares that corporations are people and should have unchecked rights to spend money to influence politics. Our unions are being curbed. Rather than a people’s government, we are becoming a government of the 1 percent.

On paper, we may still uphold equality and the principle of one person-one vote. In reality, some voices are heard more loudly — much more loudly — than others. As a result, we have heard far too much from Wall Street, not enough from Main Street and America’s workers.

Rather than justice for all, we are evolving into a system of justice for those who can afford it. We have banks that are not only too big to fail, but too big to be held accountable.

Rather than justice for all, we are evolving into a system of justice for those who can afford it. We have banks that are not only too big to fail, but too big to be held accountable.

One hundred and sixty five years ago, Lincoln said, “A house divided against itself cannot stand.” We have become a house divided against itself – divided between the 99 percent and the 1 percent, between the workers and those who would exploit them. We have to reunite the house, but it won’t happen on its own.

It will only happen if workers come together. If they organize. If they unite to fight for what they know is right, in each and every workplace, in each and every community and in each and every state capital and in Washington. We have to restore not only democracy to Washington, but to the workplace.

It will only happen when workers realize that they own much of our country’s capital, through the pension funds, but that we have allowed this capital to be managed in ways that exploit workers and consumers alike.

We academics can describe what is going on in statistics — but it is you who know what is going on by what you see and experience every day.

The challenge facing you has seldom been greater. You are still a small fraction of America. But you are the largest group representing the vast majority of Americans who work hard and play by the rules.

You must get others to join you, to work with you, to organize with you, to fight with you. It is only you who can raise the voice of ordinary Americans and demand what you have worked so hard for. Together, we can grow our economy, strengthen our communities, restore the American dream and re-establish our democracy — a government not of the 1 percent, for the 1 percent and by the 1 percent, but a government of all Americans, for all Americans and by all Americans.

Joseph Stiglitz, Nobel prize winning economist
Joseph E. Stiglitz teaches at Columbia University. He won the Nobel Prize for Economics in 2001 with A. Michael Spence and George A. Akerlof. He was a member of President Bill Clinton’s economic policy team; a member of the US Council of Economic Advisers, of which he became chairman in June 1995; and senior vice president and chief economist of the World Bank.
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  • http://www.facebook.com/RPManke.solar RevPhil Manke

    Uhm, Joseph, With respect, most of us already know this. How would you awaken the deluded masses? And what needs to be done?

  • Guest

    We all know this already, the owns breaking the laws are also making the laws and in control of the lawmaking process. Deluded masses? Nope. Dominated and oppressed masses who have been programmed to live out their lives in debt under an oppressive false consciousness. This is all by design and we figured it out too late. All that’s left is either Revolution or despair, likely there will be despair either way.

  • Marshall Bennett

    We all know this already, the ones breaking the laws are also making the laws and in control of the lawmaking process. Deluded masses? Nope. Dominated and oppressed masses who have been programmed to live out their lives in debt under an oppressive false consciousness. This is all by design and we figured it out too late. All that’s left is either Revolution or despair, likely there will be despair either way.

  • Texsbill Gran

    i began studying ECONOMICS 1978 – about the same time the wealthy CULTURE started increasing their share of u.s. assets & power…past
    5 years alone i’ve red 75 books on economics; including 3 by professor stiglitz…controlling much of the media limits important information made available to the public….and we are bombarded with “news” which contains partial truths or of little impact….MILLIONS of people in the usa have been – and still are – being PUSHED down into harder, worse, and SHORTER LIVES.

  • J William Pope

    There are some great bumper sticker slogans here.

  • Anonymous

    It’s easy to inspire envy. Pandering to the frustrated masses by characterizing success as “rule breaking” is also very simple. Try encouraging people to work hard, work long hours, and never quit even after failure. That’s not so easy. And that’s usually what it takes to be successful.

  • S Johnston

    Cowards like you are what is really ruining this Country. Spewing right wing talking points, all the while, hiding behind your computer screen. JustChuck57 is really JustaCowardPussy.

  • http://www.newpowerofwomen.com Richard Pawlowski

    Unfortunately Marshall, I have to agree with you. Two other big parts of the forthcoming mess is the denial of global warming and the increased population. Another part of this is total fear by those of us who see the world as it really is and have no where to go to escape.

  • Anonymous

    Sickening politics and looting got out of control when they declared “You are with us or with the enemy”!!! Congressional democrats were floored and the nation was cowed by beady eyed greedy goons creating tyranny for the 99%…They rigged election the second time with voting machines. …The dogs of unbridled plunder took over and amassed power/wealth unprecedented in world history. The culture of corruption usurped money, organizational hierarchies and mingled god into the power structure. Now the densest members of society at the apex are dictating policies and intimidate anyone with guns and goons who opposes irrationality. If not stopped, we will be ruled by gun-wielding mobs taking orders from the same elements who declared “If you are not with us, you are with the enemy”!!!! Dark forces are circling this nation and losing the rule of law seems to be at stake. Where have all the thinking people gone?

  • Irena Barbara Nagler

    I think it’s the rules themselves that are technically incapable of creating a better situation. Creating money through debt and interest automatically generates runaway cycles of exponential growth (with environmental depredation), and crashes and panics, and cannot help but put more and more into fewer and fewer hands. The rules need to change to the core. Symbolic exchange needs to be generated- not just distributed- directly, at points that are completely connected to actual exchange of services and materials. I’m not speaking morally/ethically- though the current “rules”, institutionalized about 700 years ago beginning in Europe, do create untenable situations on that level, promote unethical behavior, and were originally formed by a group that rationalized away any scruples to suit themselves. It’s really more that they just don’t work. Maybe it would help to put aside some of the finger-pointing for a little and concentrate on trying to find something that does?

  • Andrew C Livingston

    Or round up everyone in the top 10% or so and give them a stark choice: their idea of liberty or our idea of life. When a small number of people, numbering less than a few thousand, can hold an entire nation to ransom, there is no choice left: cut the head off this snake before it bites us even more.

  • Cara James

    banks, corporations,investment companies, will never get honest or change, greed corruption run their souls, and if we try to force them to change they will extort us to the point of homeless penniless jobless starving people , they have our savings, mortgages, loans, paychecks, 401k,s bonds,and if we get them too upset ,we will be left with nothing, they will take our money and put it in junk bonds again, or to another country, just see what happen to us little people, and we have seen what the banks, investment companies, corporations did with all that bail out money,5% went back into the community, what happened to the 95%, we are stupid to trust these robbers, thieves, with a penny, you must be crazy, my money will never see a bank again, i will burn it before that happens

  • Meggie

    Who are we supposed to vote for when both parties are in the pockets of the 1%. I am just finishing a book by Kuttner that was written in 2010…I should have read it earlier or I might not have voted again for Obama and his promises of change. Turns out that Obama chose Rubin to continue the elitist policies he advocated in the Clinton administration and he chose Rahm Emanuel to negotiate with big corporate insurance so that whatever REFORM happened would not upset big insurance to the extent that they would stop giving political contributions to Democratic candidates. Who, exactly, can we vote for who will actually do something about the inequalities? Because what we have now is two parties who are really both on the same side and who have tricked us into thinking that they are different. What they are really doing is a variation of “good cop/bad cop.” And it’s never going to change until we throw them all out and start over.

  • Meggie

    they also have almost all of the interest they used to pay for savers’ money. And Bernanke “explained” this by saying that some savers have other sources of income. As though bankers don’t. I can see this coming…they got away with stealing all but a tiny sliver of interests that used to be paid (college students now must pay 40 to 80 TIMES (not percent) more for their loans than savers get for providing the money) and almost nobody objected. What is going to happen next is that the same excuse’, ‘some have other sources of income” is going to be used when they snatch away first Medicare and then Social Security. Just as it didn’t matter that we saved our whole damn lives to accumulate enough to have some peace of mine and security when we retired, they ripped that a way in a nanosecond, and Bernanke got reappointed. It won’t matter that we paid into SS and Medicare, it will be GONE, because the 1% don’t want to have to participate in repaying what was filched to pay for their tax cuts and their wars. We really need a third poloitical party, THE DECENCY PARTY, because both parties we have now are in on the scam. As John Oliver said, Obama has appointed nothing but dingos when he should have hired baby sitters. He is no better than the GOP, maybe even worse, because he was the one who promised CHANGE. And his first act was to reappoint the two biggest corporate-butt kissers from the Clinton administration, Rubin and Emanuel.

  • Meggie

    I mean it….the FEDs saying that it’s ok to take all but a sliver of interest from ALL savers because SOME of them have other sources of income is the precursor of telling us the same thing when it comes to taking away Medicare and Social Security. The theft of savers’ interest was the test run for the coming theft, and they got away with it and almost nobody complained. So brace yourselves for what is coming next. They have nothing to lose, and their “explanation” has already passed the test market.

  • Brad

    Nader said back in the failed Gore election that the only real difference between Repubs and Democrats is how quickly they fall to their knees when corporations come calling. I’ve seen that get even worse in the last 14 years. When are people going to either allow 3rd and 4th parties to legitimately win, or completely upend the system with publicly funded elections?

  • Ivan Boatwright

    This is not our country or government. It belongs to the greedy and powerful. They should fight their wars and leave us to ourselves. If they own the money, property and control the system, let them fight to save it.

  • Chucklou

    That won’t happen. They are too busy preaching hatred of gays and blacks and raking in donations to “help” their agenda of hate. They will change only when preaching hate does not fill their coffers anymore.

  • Chucklou

    we have become a country in which justice matters only if you are rich. Bernie Madoff went to jail not for breaking the law, but for stealing from the rich. Had he stolen from the poor he would be a free man today.

  • Brad

    It’s strange…part of me despises the elites and greed of the rich since we all know they control the political process and make it virtually impossible for 3rd party candidates to enter or real change to happen. But I also see the entitlement and stupidity that surrounds me when I’m mingling with “the masses,” at work, at parks, in the subway, at airports…I see the complete idiocy of so many people, and I wonder, why should I care if these people are too lost in their own small-minded ways that they can’t dig themselves out of holes they’ve created, taking on mortgages far too big, and using credit cards far too deep, buying crap they don’t need, paying overdraft fees for banks having to float them money, just so they can buy that Xbox for the kids…