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Joseph Stiglitz: The Price of Inequality

Influential economist Joseph Stiglitz explains why our economic system is failing most Americans.

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Given a political system that is so sensitive to moneyed interests, growing economic inequality leads to a growing imbalance of political power, a vicious nexus between politics and economics. And the two together shape, and are shaped by, societal forces—social mores and institutions—that help reinforce this growing inequality.

What the protesters are asking for, and what they are accomplishing

The protesters, perhaps more than most politicians, grasped what was going on. At one level, they are asking for so little: for a chance to use their skills, for the right to decent work at decent pay, for a fairer economy and society, one that treats them with dignity. In Europe and the United States, their requests are not revolutionary, but evolutionary. At another level, though, they are asking for a great deal: for a democracy where people, not dollars, matter; and for a market economy that delivers on what it is supposed to do. The two demands are related: unfettered markets do not work well, as we have seen. For markets to work the way markets are supposed to, there has to be appropriate government regulation. But for that to occur, we have to have a democracy that reflects the general interests—not the special interests or just those at the top.

The protesters have been criticized for not having an agenda, but such criticism misses the point of protest movements. They are an expression of frustration with the political system and even, in those countries where there are elections, with the electoral process. They sound an alarm.

In some ways the protesters have already accomplished a great deal: think tanks, government agencies, and the media have confirmed their allegations, the failures not just of the market system but of the high and unjustifiable level of inequality. The expression “we are the 99 percent” has entered into popular consciousness. No one can be sure where the movements will lead. But of this we can be sure: these young protesters have already altered public discourse and the consciousness of ordinary citizens and politicians alike.

Concluding Comments

In the weeks following the protest movements in Tunisia and Egypt, I wrote (in an early draft of my Vanity Fair article),

As we gaze out at the popular fervor in the streets, one question to ask ourselves is this: when will it come to America? In important ways, our own country has become like one of these distant, troubled places. In particular, there is the stranglehold exercised on almost everything by that tiny sliver of people at the top—the wealthiest 1 percent of the population.

It was to be but a few months before those protests reached the shores of this country.

This book attempts to fathom the depths of one aspect of what has happened in the United States—how we became a society that was so unequal, with opportunity so diminished, and what those consequences are likely to be.

The picture I paint today is bleak: we are only just beginning to grasp how far our country has deviated from our aspirations. But there is also a message of hope. There are alternative frameworks that will work better for the economy as a whole and, most importantly, for the vast majority of citizens. Part of this alternative framework entails a better balance between markets and the state—a perspective that is supported, as I shall explain, both by modern economic theory and by historical evidence. In these alternative frameworks, one of the roles that the government undertakes is to redistribute income, especially if the outcomes of market processes are too disparate.