By GREGORY N. HEIRES
Joseph E. Stiglitz
The Price of Inequality
W.W. Norton & Co.
New York, 2012
Inequality is a top issue in this year’s presidential election thanks to Occupy Wall Street protestors
More recently, inequality won renewed focus because of the apparently secretly filmed video of a campaign fund-raiser at which Republican candidate Mitt Romney disdainfully referred to 47 percent of the voters who don’t pay federal income taxes and feel, he says, victimized and entitled to government entitlements.
Pulitzer Prize winning economist Joseph E. Stiglitz’s “The Price of Inequality” is a powerful economic and political analysis of how the growing divide in income and wealth is undermining our democracy. What’s more, he strongly makes the point that inequality is undermining our standard of living.
At the root of today’s inequality are three trends: inefficient and unstable markets; a political system that has failed to correct those market failures; and fundamentally unfair political and economic systems.
Conservatives like Romney are dismissive about inequality.
Some justify inequality from a Social Darwinist perspective—the rich deserve their money because they are superior to you. Or, they contend inequality doesn’t matter as long as it doesn’t hurt the living standards of others.
So, why care about inequality?
From an economic perspective, inequality undermines consumer spending, contributing to a lack of demand that causes unemployment. Public policies, such as tax cuts and the lowering of investment in public schools, fuel inequality.
Stiglitiz discusses economic policies that exacerbate inequality.
Deregulation helped the unproductive banking sector (and its overpaid workforce) reap a greater share of the economy’s profits and take advantage of minorities through predatory lending. The gutting of personal bankruptcy laws has made it more difficult for people to recover from economic setbacks. Private student loans have stuck college graduates with huge debts.
Stiglitz argues persuasively that inequality in the United States is becoming so great that our democracy is “in peril.” We have less faith in the fairness of our society as the income divide is at its lowest since the Great Depression. The proliferation of gated communities undermines our social cohesiveness. Trust in government is at a low. The Citizens United Supreme Court case that allows unlimited corporate spending on elections is a sign of the unfairness of our political system. Washington is now the political playground of the rich
Stiglitz says the fight over government spending at its heart is a battle over inequality. The preoccupation with deficits prevents government policies from being used to address inequality. Meeting the interests of bondholders—look at the case of Greece—takes precedence over helping the unemployed.
Stiglitz’s book can be tough going for readers unaccustomed to academic works.
But the author succeeds in presenting technical arguments lucidly and in the process succeeds in ripping apart conventional economic theories that rationalize inequality. He notes that little evidence exists to connect high executive pay with performance. He debunks the Right’s contention that the estate tax hurts small businesses, pointing out that the vast majority are to too small to be touched.
Reforming bankruptcy laws, improving corporate governance, making banks more transparent, controlling credit card abuses are steps that would help address inequality. Tax reform, tempering globalization and promoting full employment are other steps.
But ultimately, we need a new social compact to promote economic fairness.
www.thenewscossroads.com Posted on October 3, 2012
