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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Logan Cochrane

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