I wasn't planning on another posting until I finished reading Joseph Stiglitz's THE PRICE OF INEQUALITY: How Today's Divided Society Endangers Our Future. I am not finished with the book, and although I usually read from front to back, I skipped to the back when half way through and decided it important to share with those of you who have not yet read the book (it came out last year) the author's predictions for America.
First, Rolling Stone's Jared Bernstein's comments about the book: "The top 1 percent of Americans control some 40 percent of the nation's wealth. But as Joseph E. Stiglitz explains in this best-selling critique of the economic status quo, this level of inequality is not inevitable. Rather, in recent years well-heeled interests have compounded their wealth by stifling true, dynamic capitalism and making America no longer the land of opportunity that it once was. They have made America the most unequal advanced industrial country while crippling growth, distorting key policy debates, and fomenting a divided society. Stiglitz not only shows how and why America's inequality is bad for our economy but also exposes the effects of inequality on our democracy and on our system of justice while examining how monetary policy, budgetary policy, and globalization have contributed to its growth. With characteristic insight, he diagnoses our weakened state while offering a vision for a more just and prosperous future."
What follows is Stiglitz's vision and predictions for our future (taken from the last two pages of his book):
Is There Hope: The political and economic reform agenda in this chapter assumes that while market forces play some role in t he creation of our current level of inequality, market forces are ultimately shaped by politics. We can reshape these market forces in ways that promote more equality. We can make markets work, or at least work better. The Great Recession did not create the country's inequality, but it made it much worse, so uch so that it made it hard to ignore, and it further limited a large segment of the population's access to opportunity. With the right policies, we can make things better. It's not a matter of eliminating inequality or creating full equality of opportunity. It's just a matter of reducing the level of inequality and increasing the extent of equality of opportunity. The question is, can we get there?
Our democracy, tilted as it may be, provides two routes by which reform might happen. Those in the 99 percent could come to realize that they have been duped by the 1 percent: that what is in the interest of the 1 percent is not in their interests. The 1 percent has worked hard to convince the rest that an alternative world is not possible; that doing anything that the 1 percent doesn't want will inevitably harm the 99 percent. Much of this book has been devoted to destroying this myth and to arguing that we could actually have a more dynamic and more efficient economy and a fairer society.
The 1 percent could realize that what has been happening in the United Stat es (and in other countries) is not only consistent with our values but not even in the 1 percent's own interest. Alexis de Tocqueville once described what he saw as a chief element of the peculiar genius of American society, something he called "self-interest properly understood". The law two words were key. Everyone possesses self-interest in a narrow sense. Self-interest "properly understood" is different. It means appreciating that paying attention to everyone else's self-interest - in other words, to the common welfare - is in fact a precondition for one's own ultimate well-being. Toqueville was not suggesting that there was anything noble or idealistic about this outlook. Rather, he was suggesting the opposite: it was a mark of American pragmatism. Those canny Americans understood a basic fact: looking out for the other guy isn't just good for the soul; it's good for business.
The top 1 percent have the best houses, the best educations, the best doctors, and the best lifestyles, but there is one thing that money doesn't seem to have bought: an understanding that their fate is bound up with how the other 99 percent live. Throughout history, this has been something that the top 1 percent eventually do learn. Often, however, they learn it too late.
We have seen that politics and economics are inseparable, and that if we are to preserve a system of one person one vote - rat her than one dollar one vote - reforms in our political system will be required, but we are unlikely to achieve a fair and responsive political system within an economic system that is characterized by the degree of inequality that marks ours. We have seen most recently that our political system can't work if there isn't a deeper sense of community; but how can we have such a sense of community if our country is so divided? And seeing the increasing divide in our economy, we can only ask, What will it portend for the future of our politics?
There are two visions for America a half century from now. One is of a society more divided between the haves and the have-nots, a country in which the rich live in gated communities, send their children to expensive schools, and have access to first-rate medical care. Meanwhile, the rest of us live in a world marked by insecurity, at best mediocre education, and in effect rationed health care--they hope and pray they don't get seriously sick. At the bottom are millions of young people alienated and without hope. I have seen this picture in many developing countries; economists have even given it a name, a dual economy; two societies living side by side, but hardly knowing each other, hardly imagining what life is like for the other. Whether we will fall to the depth of some countries, where the gates grow higher and the societies split farther and farther apart, I do not know. It is, however, the nightmare toward which we are slowly marching.
The other vision is of a society where the gap between the haves and the have-nots has been narrowed, where there is a sense of shared destiny, a common commitment to opportunity and fairness, where the words "liberty and justice for all" actually mean what they seem to mean, where we take seriously the Universal Declaration of Human Rights, which emphasizes the importance not just of civil rights but of economic rights, and not just the rights of property but the economic rights of ordinary citizens. In this vision, we have an increasingly vibrant political system far different from the one in which 80 percent of the young are so alienated that they don't even bother to vote.
I believe that this second vision is the only one that is consistent with our heritage and our values. In it the well-being of our citizens - and even our economic growth, especially if properly measured - will be much higher than what we can achieve if our society remains deeply divided. I believe it is still not too late for this country to change course, and to recover the fundamental principles of fairness and opportunity on which it was founded. Time, however, may be running out. Four years ago there was a moment where most Americans had the audacity to hope. Trends more than a quarter of the century in the making might have been reversed. Instead, they have worsened. Today that hope is flickering.
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NOTE: I agree with 99.9 percent of what the author had to say except for his suggestion on how to remedy the underwater homeowner situation. He suggests a "write-down of the principal, perhaps with a debt-to-equity conversion that gives the lender a share in the capital gain when the house is sold." There are lots of problems with that, which I will elaborate on in my next post (probably around Labor Day).
AN IDIOT'S GUIDE TO INEQUALITY
New York Times syndicated columnist Nicholas D. Kristof wrote his own "Idiot's Guide to Inequality." Here are his five points - published in The Seattle Times on July 26, 2014:
1. Economic inequality has worsened significantly in the U.S. and some other countries. The richest 1 percent in the U.S. now own more wealth than the bottom 90 percent. Oxfam estimates that the richest 85 people in the world own half of all wealth. The situation might be tolerable if a rising tide were lifting all boats, but it's lifting mostly the yachts. In 2010, 93 percent of the additional income created in America went to the top 1 percent.
2. Second, inequality in America is destabilizing. Some inequality is essential to create incentives, but we seem to have reached the point where inequality actually becomes an impediment to economic growth.
3. Disparities reflect not just the invisible hand of the market but also manipulation of markets. [Quoting Joseph Stigletz] "Much of America's inequality is the result of market distortions, with incentives directed not at creating new wealth but at taking it from others." For example, financiers are wealthy partly because they're highly educated and hardworking - and also because they've successfully lobbied for the carried interest tax loophole that lets their pay be taxed at much lower rates than other people's.
4. Inequality doesn't necessarily benefit the rich as much as we think. At some point, extra incomes don't go to sate desires but to attempt to buy status through "positional goods" - like the hottest car on the block. The problem is that there can be only one hottest car . . . so the lawyer who buys a Porsche is foiled by the CEO who buys a Ferrari.
5. Progressives probably talk to much about "inequality" and not enough about "opportunity." Some voters are turned off by tirades about equality because they say it connotes envy of the rich; there is more consensus on bringing everyone to the same starting line.
Kristof goes on to say, "Unfortunately, equal opportunity is now a mirage. Indeed, researchers find there is less economic mobility in America than in class-conscious Europe. But the U.S. is one of the few advancing countries that spends less educating the average poor child than the average rich one. As an escalator of mobility, the U.S. education system is broken.
[Note: For an excellent article on our education system, see Peter Dreier's blog on our elitist education system, July 25, 2014, at www.huffingtonpost.com/peter-dreier/americas-rigged-education-system_b_5621332.html, or follow on www.twitter.com/peterdreier.]
"Inequality and lack of opportunity today constitute a national infirmity and vulnerability - and there are policy tools that can make a difference."
This blogger would like to add: Yes, the right policies can help a lot, but in a Congress that is divided what are the chances?
Think about what you just read and how you might begin to put Stiglitz' and Kristof's suggestions (and Dreier's and Krugman's, and others) to work. In the meantime, I will finish my scheduled reading and take care of other business (job-hunting, conducting further research, managing my own small business, maybe squeezing in some volunteer work (political advocacy, for one) and, in general, just trying to keep body and soul together during these stressful times).