Joseph Stiglitz: No, Spiraling Inequality Isn’t Inevitable

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As levels of inequality increased in wealthy countries over the past 30 years — especially in the US — some economists argued that it was a subject their discipline shouldn’t worry about. Economists, they said, should concern themselves with efficiency and growth, and not worry about how the fruits of a society’s productivity are distributed.

The lopsided recovery — with corporate profits roaring back to full strength but median incomes still below prerecession levels — made that position untenable. The issue of inequality has moved front and center. Pope Francis decried the “economy of exclusion.” Thomas Picketty’s Capital in the Twenty-First Century became a blockbuster bestseller.

But there’s still a common argument that spiraling inequality is simply a natural result of changing “market forces.” Globalization and technological innovation have increased the gap between the haves and the have-nots. The premium on higher education has increased.

Stiglitz on Fair Taxes for All

Last week, Nobel Prize-winning economist Joseph E. Stiglitz took to the opinion pages of The New York Times to argue that there’s no such thing as “natural” market forces — markets, and their outcomes, are determined by public policies — by the rules established by governments.

Stiglitz wrote that inequality is anything but “inevitable”:

We don’t need to have this much inequality in America.

Our current brand of capitalism is an ersatz capitalism. For proof of this go back to our response to the Great Recession, where we socialized losses, even as we privatized gains. Perfect competition should drive profits to zero, at least theoretically, but we have monopolies and oligopolies making persistently high profits. C.E.O.s enjoy incomes that are on average 295 times that of the typical worker, a much higher ratio than in the past, without any evidence of a proportionate increase in productivity.

If it is not the inexorable laws of economics that have led to America’s great divide, what is it? The straightforward answer: our policies and our politics. People get tired of hearing about Scandinavian success stories, but the fact of the matter is that Sweden, Finland and Norway have all succeeded in having about as much or faster growth in per capita incomes than the United States and with far greater equality.

He then asked, “So why has America chosen these inequality-enhancing policies?” For Stiglitz’ answer, read his essay at The New York Times.

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  • JonThomas

    Make sure you visit the link to read the entire essay… a very comprehensive, exceptionally well demonstrated analysis and assessment. Well done Mr. Stiglitz!

  • Anonymous

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    didn’t believe that my sister woz like actualy bringing in money part-time from
    there pretty old laptop. . there aunts neighbour has been doing this 4 only
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  • Anonymous

    While there is no way to fix capitalism, it could be less harsh. The One
    Percent will not be having anything to do with these sensible changes
    in the rules, however, since they have bought the politicians lock,
    stock and barrel. The rapacious need for ever more “growth”
    with capitalism, and the exploitation of resources for products and
    humans for labor knows no bounds.

    Humanity is on the brink of environmental collapse, due mainly to the
    domination of fossil fuels for over 150 years. Externalities is an
    economic concept that says corporations will never ever ever need to
    be responsible for the damage they do or the messes they make. They
    walk away, and see it as their right. They will defend this “right”
    in court with litigation for decades, paying lawyers more than the
    cleanup would cost. They see it as their God given irredeemable
    privilege to pollute with impunity forever. But it is really just a
    rule (that could be changed).

    Of all the water on Earth, only THREE percent of it is fresh water. Of
    that three percent, ONE THIRD to ONE HALF of it is already polluted,
    mostly by industry. Corporations are not above polluting every last
    drop of water, even as they squeeze every last drop of fossil fuel
    from the Earth. Fracking, if it isn’t abandoned, will be the swan song for the US. All those children in El Salvador fleeing violence
    many also be escaping the mining-caused pollution of 90 percent of
    the surface water. It runs deep orange, and is probably not
    redeemable. Nothing can clean fracking water or aquifers either.
    Think about that.

    Robert Reich says an economy is just a set of rules, and they can be changed
    for better or worse. What has happened since Reagan was planned and
    deliberate. It’s part of PNAC, Project For The New American Century.
    But this was never for the benefit of flesh and blood people, only
    for those very special “corporate” persons (who have
    expensive speech and will not tolerate their “religious beliefs”
    being violated).

    With all due respect for Joseph Stiglitz, who is trying to make things
    better, there is no way to fix capitalism, even ersatz capitalism.

  • Tom Finn

    The real problem is over population caused by irresponsible reproduction.