The Price of Inequality

Joseph Stiglitz is one of the most respected economists of our times and a person who has also held positions of significant influence, including chief economist of the World Bank and chairman of the Council of Economic Advisors for the US President (Clinton). In 2012 he authored "The Price of Inequality: How Today's Divided Society Endangers Our Future," which preceded other important works on the topic, such as the English version of Piketty's Capital (2014) and Milanovic's "Global Inequality" (2016) and Reich's related book "Saving Capitalism" (2015). Stiglitz was not the first to raise the issue of inequality, but he did raise the level of importance and changed the nature of the debate.

This book is about American inequality. The problem, as many others have stated, is not the market but the rules (not) regulating the market and policies that ensure the benefit is not only distributed but invested to enable future growth: "the inequality is cause and consequence of the failure of the political system, and its contributes to the instability of our economic system, which in turn contributes to increased inequality – a vicious downward spiral into which we have descended, and from which we can only emerge through concerted policies" (p. xi). The contribution made by Stiglitz in this book is to challenge the myths about inequality, and in particular to argue how inequality is bad for everyone: "we are paying a high price for our inequality – an economic system that is less stable and less efficient, with less growth, and a democracy that has been put into peril. But even more is at stake: as our economic system is seen to fail for most citizens, and as our political system seems to be captured by moneyed interests, confidence in our democracy and in our market economic will erode along with our global influence" (p. xi).

The book is replete with examples about how the powerful use their power to create and change the "rules of the game" in their favour (see p. 201, for example). The answers, or way forward proposed by Stiglitz, compose many recommendations, beyond summary here. They include making the tax system fairer, raising taxes on the top, reducing military spending, removing subsidies for major corporations, eliminating loopholes, ensuring resources are paid for appropriately, and introducing and enforcing regulations (particularly on the financial sector). He also calls for greater investment in education, technology, infrastructure, and social security. Doing so "would simultaneously increase economic efficiency, fairness, and opportunity" (p. 268). More fundamentality, Stiglitz argues the very core of America and American values are at stake "America is no longer the land of opportunity" (p. 265).

Stiglitz frames inequality as the issue of our times. Although, inequality is not simply about inequality. The debates "rest on broader ideas about human rights, human nature, and the meaning of democracy and equality" (p. 155). It is often these deeper, sometimes value-based, positions that result in policies that create inequality. "There is a real battlefield of ideas. But it does not, for the most part, involve a battle of ideas as academics would understand it, where evidence and theory on both sides are carefully weighed. It is a battlefield or "persuasions," of "framing," of attempts not necessarily to get to the truth of the matter but to understand better how ordinary citizens' perceptions are formed and to influence those perceptions" (p. 162-163).

He concludes: "Maintaining the kind of society and the kind of government that serve all people – consistent with the principles of justice, fair play, and opportunity – doesn't happen by itself. Somebody has to look after it. Otherwise our government and our institutions get captured by special interests. At the very least, we need countervailing powers" (p. 281). A call to action.

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Global Inequality

Inequality is headline news. Recently Oxfam reported that only 8 individuals own as much as the poorest half of the world's population. In 2014, Piketty published a widely read book on the subject, taking a historical economics approach. But, this question is not new. Amin addressed it in his 1976 book "Unequal Development", the greater level of attention and sense of urgency, along with improved data and new approaches, make the more recent publications unique. Branko Milanovic, in his 2016 book "Global Inequality: A New Approach for the Age of Globalization", also attempts to address the causes, and potential remedies, of inequality. He author looks carefully at both national inequality and global inequality, and argues that "a study of global inequality over the past two centuries, and especially during the past twenty-five years, allows us to see how the world has changed, often in fundamental ways" (p. 2).

This book responds to Piketty, and builds on Kuznets. Rather than a cycle, Milanovic focuses upon Kuznets waves: "I think that it is more appropriate to speak of Kuznets cycles, or waves, and to view the current upward swing in advanced countries as the beginning of the second Kuznets wave. Like the first wave, it is the product of technological innovation and change, of the substitution of labor by capital ( the "second machine age"), and the transfer of labor from one sector to another. In the first Kuznets wave, the transfer was from agriculture (and thus rural areas) to manufacturing (and thus urban areas); in the second, it is from manufacturing to services… this second wave is also driven by pro-rich changes in economic policies" (p. 93). On global inequality: "The world where location has the most influence on one's lifetime income is still the world we live in. It is the world that gives rise to what we might call a "citizenship premium" for those who are born in the right places (countries), and a "citizenship penalty" for those born in the wrong places (countries)." (p. 131).

At points, Milanovic draws attention away from globalization and toward the rules structuring it, similar to how Reich (2015) has done in addressing questions about capitalism. "It is this fundamentally ambivalent nature of globalization that I hope to bring out in this book. The reader needs to be constantly aware that globalization is a force both for good and bad" (p. 30). He continues, "As is nicely illustrated in Europe and the United States for the period after the Great Depression and World War II, the strength of trade unions, the political power of socialist and communist parties, and the example of military threat of the Soviet Union all curbed pro-rich policies by constraining the power of capital. But once these political limitations weakened or disappeared and economic factors became more favorable to capital, including skill-biased technological change and the large expansion of global labor that came with the opening of China and the fall of communism, the situation reversed, and the advanced economies entered a period of rising inequality, the second Kuznets wave, which is still in force" (p. 87).

What are the forces enabling inequality to rise in this second wave, particularly within the higher income countries? Milanovic explains that "middle class and poor people are being diverted, largely by design, from looking after their own economic interests into caring about other concerns, especially social or religious ones that are often divisive. This diversion does not necessarily arise from any sort of backroom conspiracy, but rather from a collectively manufactured elite consensus. It is, to some extent, an understandable (and acceptable) strategy because voting decisions are multidimensional: people do not vote solely on economic issues and many care deeply about such matters as migration, religion, and abortion. But given the enormous amount of private money that is used in politics and media, one cannot but think that the aim of these investments is very similar. In one case (politics), influence is sought directly; in the other case (the media), influence is created through shaping public opinion so that it agrees with the opinion of the funders. The creation of a false consciousness takes place through ideological matraquage (a French term that means a breain-beating as if by a nightstick), where newspaper readers, TV viewers, and internet surfers are bombarded with issues – running from abortion and gun control to the threat of Islamic fundamentalism – that distract popular attention from the basic economic and social problems like unemployment, the incarceration rate, war profits, and billion-dollar tax loop holes for the rich. In other words, the culture war has a function, and that function is to mask the real shift of economic power toward the rich." (p. 202).

Predicting the future in economics does not have a great track record. Milanovic points to three key challenges: "the belief that the trends that appear to be the most relevant at a particular time will continue into the future, the inability to predict dramatic single events, and an exaggerated focus on key global players, especially the United States. All three problems, even if accurately diagnosed, seem to be very difficult to solve" (p. 158). But, he offers some: "The great middle-class squeeze (which I discussed in Chapters 1 and 2), driven by the forces of automation and globalization, is not at and end. This squeeze will in turn further polarize Western societies into two groups: a very successful rich class at the top, and a much larger group of people whose jobs will entail servicing the rich class in occupations where human labor cannot be replaced by robots" (p. 214-215). And, that it is "hard to imagine that a system with such high inequality could be politically stable. But perhaps inequality will decline, and the problem of instability will disappear. What happens next depends on (1) the nature of technological progress, which might evolve in a pro-poor way, as by the replacement of people in some occupations that are very well paid now, say, professors, with lower-paid workers, and (2) the ability of the "losers" in this system to organize themselves politically. If the losers remain disorganized and subject to false consciousness, not much will change" (p. 217).

On a slightly more positive note: "Policies that would work toward shifting this long-term equalization include (1) high inheritance taxes (as Piketty calls for), which would keep parents from being able to transfer large assets to their children, (2) corporate tax policies that would stimulate companies to distribute shares to workers (moving toward a system of limited workers' capitalism), and (3) tax and administrative policies trhat would enable the poor and the middle classes to have and hold financial assets. Also fitting with this proposal is de Soto's (1989) call for much broader ownership of assets the poor already possess, such as properties that in many countries are held without legal title and so cannot be used as collateral for loans. But these policies would not be sufficient" (p. 221).

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Infections and Inequalities

An essential read, whether you are in development studies, anthropology or medicine, is Paul Farmer's Infections and Inequalities (1999). "This book examines inequalities in the distribution and outcome of infectious diseases. It asks why people like Annette Jean and her siblings are likely to die of infections such as tuberculosis and AIDS and malaria, while others are spared this risk. It explores the creation and maintenance of such disparities, which are biological in their expression but are largely socially determined" (p. 4). Parts of the book reflect the moment(s) in which it was written, much of it offers insight that will apply well beyond the specifics of drug resistant TB and HIV treatment in the 1990s. In re-reading this book I am struck by the passion that comes through the pages, a powerful voice driven by a strong sense of social justice. He writes: "Our challenge, therefore, is not merely to draw attention to the widening income gap, but also to attack it, to dissect it, and to work with all our capacity to reduce this gap" (p. xxvi) and that only "by struggling for higher standards for the destitute sick will we avoid another unappealing role – that of academic Cassandras who prophesy the coming plagues, but do little to avert them" (p. xxviii).

Opposition to offering high-cost treatment in developing countries, Farmer argues, "may be justified as 'sensible' or 'pragmatic,' but as a policy it is tantamount to the differential valuation of human life, for those who advocate such a policy, regardless of their nationality, would never accept such a death sentence themselves" - it is only because the "victims tends to be poor, and thus less valuable, that such policies appear reasonable" (p. 278). He writes, "it slowly became clear to me that I'd been taken in by some of the pieties of development work. Talk of "appropriate technology" and "sustainability" had sounded good to me, at least initially. The problem was that these sounded silly, even sinister, to the landless peasants with whom I worked" (p. 21).

"Market utilitarianism" Farmer writes, "is a strange beast, since it seems to permit all sorts of inefficiencies as long as they benefit the right people – namely the privileged… confident claims about what is cost effective and what is not should be viewed with some suspicion" (p. xxiv). Another of the justifications is not imposing "standards of care" upon others, the "irony of which will not be lost on those whose experiences are described in this book. Americans may impose – through the World Bank or the International Monetary Fund, say, or through foreign policy writ large – social and economic policies that drive up inequalities, leaving the destitute sick out of the frame of analysis. But heaven forfend that we should require that the Third World poor be subjected to "culturally inappropriate" medical standards" (p. 35). Throughout the book Farmer deconstructs this discourse as illogical and "morally unsound" (p. 278).

Farmer wages a critique against the emphasis upon individual agency, one which remains valid in 2016: "In each of the sociomedical studies I have critiqued, a well-intentioned effort to incorporate the patients points' of view has served, paradoxically, to shift the blame onto the sick-poor by exaggerating their agency" (p. 254). In doing so, programs offer 'culturally sensitive education' and through "this cognitivist legerdemain, we have expediently moved the locus of the problem – and this the focus of the interventions – away from certain features of an inegalitarian society toward the women deemed "at risk"" (p. 86).

On the gendered experience:

  • "Among the myriad mystifications that obscure the nature of women's risk, three are recurrent and important. One is the focus on local factors and local actors to the exclusion of broader analyses that would implicate powerful forces and powerful actors outside the field of view. A second is the conflation of structural violence and cultural difference. A third, centrally related to the others, is the absence of series consideration of social class" (p. 84-85).

On anthropology and anthropologists, he writes:

  • "For many physicians and public health specialists, anthropologists are expected to "do the culture piece." We're expected to elicit the local beliefs and customs that hamstring sensible efforts to treat or prevent illness; we've supposed to reveal what it is that makes the natives tick… And very often, we have been willing to fill this restricted role, even if it means not talking about the forces and structures that ultimately determine tuberculosis outcomes" (p. 254)
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There is no such thing as a free gift ...

"No Such Thing as a Free Gift: The Gates Foundation and the Price of Philanthropy" by Linsey McGoey (2015) provides critical perspectives on the role of foundations, and more generally on philanthropy. However, the book makes a series of questionable linkages and claims, without which it would have been a much stronger book. Attempting to drive home a point with less-than-factual claims weakens the overall argument, which is unfortunate as the topic requires more critical discussion.

Contextualizing philanthropic action:

  • "…many philanthropists, both today and in the past, earned their fortunes through business strategies that greatly exacerbate the same social and economic inequalities that philanthropists purport to remedy. The great industrialists of the late nineteenth and early twentieth centuries were dubbed robber barons due to the widespread condemnation of their predatory business tactics.Today, some of the world's most celebrated philanthropists, from Gates to George Soros, earned billions through business tactics that have compounded financial instability, eroded labor protections, and entrenched global economic inequalities." (p. 9)
  • "Through his foundation, he's [Gates] spent hundreds of millions in tax-deductible grants to convey the public message that aid 'works.' Unfortunately, the belief that aid 'works' is a simplistic and, in many ways, misguided one. It's a notion that diverts attention away from the realities of misplaced research priorities by the world's most powerful pharmaceutical companies, blankets understanding of how trade laws infringe upon national manufacturing and importing capacity, and obscures the role that global financial markets play in creating worldwide food instability." (p. 27)

I did not set out to write a critique of this book, but as I read the examples of problematic claims stood out and I began to make note of them. As a result, this is not an exhaustive list, and focuses largely on the last ~75 pages, after which my note taking (frustration) began. Here are a few examples:

  • A Gates Foundation "partner" is a company the endowment has invested in (p. 173, p. 216). The author could certainly argue for a different meaning of partnership, but that is not the normative or legal sense of the word.
  • Some claims are not well thought out: For example, the author argues that if aid was working well, there would be no need for communications work to promote it (p. 203). This assumes that humanitarian activities in remote areas of places like Ethiopia or Myanmar are accessible and regular reading material of global audiences, and are presented in diverse ways to meet the needs of diverse audiences automatically. 
  • Research was presented about GMOs to show its harmfulness. However, (1) the research was not cited, and (2) the research was retracted by the publisher, which was not mentioned by the author.
  • A number of the claims made require details and evidence to support them, and broader perspectives to contextualize the extent, rather than relying upon assumption and hyperbole (p. 223).
  • Misused quotes (e.g. p. 227). For example, when Gates was talking about Coca-Cola, he was using a supply chain example, not supporting everything the company ever did. He was suggesting there are examples of successful ways to provide goods to all people, not endorsing every action, of all times, that the company has been involved in.
  • Misplacing blame: While the spending and practices of "Coca-Coca [sic] and Monsanto's"  is not usually affected by CSOs, the author has failed to speak about the role of national governments - which is crucial - and the interaction that CSOs have with their national governments, which are approving these companies to operate and setting regulations. Much more attention (and blame) must be given to governmental authorities. The author writes as if companies can do anything they want, and work anywhere they want, so long as they do not break a law, and in doing so has neglected governments entirely.
  • Odd statements: For example: "Perhaps they were well paid, perhaps they weren't" (p. 246). If it is important enough to include in the book, it is important enough to find out.

The author is making important arguments. And, I hope future work is strengthened so that these important works are not diluted with problematic claims. As it stands, I do not recommend the book.

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Logan Cochrane

logan.cochrane@gmail.com

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