Stiglitz on Adam Smith & democratic socialism
Joe Stiglitz in the Washington Post:
Adam Smith, the founder of modern economics, recognized how, if unregulated, businesses would conspire against the public interest by raising prices and suppressing wages. Yet he also suggested that at times markets would lead, as if by an invisible hand, to the well-being of society. Now we understand why markets often fail to deliver on their promise and why Smith’s invisible hand often seems invisible: because it simply isn’t there. Modern theories of industrial organization have taught us how firms construct barriers to entry to enhance their market power. Twenty years into this new century, the empirical evidence is overwhelming: There is increasing market concentration in sector after sector, with increasing profits and increasing markups in prices….
A key component to the democratic socialist agenda is democracy. Democracy is more than having elections every four years. It includes systems of checks and balances — ensuring that no one, not even a president, has unbridled power — and a deep belief that no one can be above the law. It also includes protections of the rights of minorities, and a Congress and a healthy news media holding everyone to account. But it also embraces fair representation, because a system of voter suppression, gerrymandering and money-dominated politics, where the views of the minority can dominate the majority, is antidemocratic.
Read more here.
The Trumpbeat of inequality
Nobel laureate Joe Stiglitz writes:
Where the trade agreements failed, it was not because the US was outsmarted by its trading partners; it was because the US trade agenda was shaped by corporate interests….
We need to rewrite the rules of the economy once again, this time to ensure that ordinary citizens benefit. Politicians in the US and elsewhere who ignore this lesson will be held accountable. Change entails risk. But the Trump phenomenon – and more than a few similar political developments in Europe – has revealed the far greater risks entailed by failing to heed this message: societies divided, democracies undermined, and economies weakened.
Read more here.
Inequality of opportunity
Nobel laureate Joseph Stiglitz writes:
A rich country with millions of poor people. A country that prides itself on being the land of opportunity, but in which a child’s prospects are more dependent on the income and education of his or her parents than in other advanced countries. A country that believes in fair play, but in which the richest often pay a smaller percentage of their income in taxes than those less well off. A country in which children every day pledge allegiance to the flag, asserting that there is “justice for all,” but in which, increasingly, there is only justice for those who can afford it. These are the contradictions that the United States is gradually and painfully struggling to come to terms with as it begins to comprehend the enormity of the inequalities that mark its society.
Read more here.
The trust deficit
Joe Stiglitz points out another casualty of widening inequality:
Trust is what makes contracts, plans and everyday transactions possible; it facilitates the democratic process, from voting to law creation, and is necessary for social stability. It is essential for our lives. It is trust, more than money, that makes the world go round….
Inequality in America is degrading our trust. For our own sake, and for the sake of future generations, it’s time to start rebuilding it.
Read more here.
The tilted playing field
For many Americans, Nobel laureate Joe Stiglitz writes, the dream of upward mobility is being subverted by the reality of unequal opportunity:
Probably the most important reason for lack of equality of opportunity is education: both its quantity and quality. After World War II, Europe made a major effort to democratize its education systems. We did, too, with the G.I. Bill, which extended higher education to Americans across the economic spectrum. But then we changed, in several ways. While racial segregation decreased, economic segregation increased. After 1980, the poor grew poorer, the middle stagnated, and the top did better and better. Disparities widened between those living in poor localities and those living in rich suburbs — or rich enough to send their kids to private schools. A result was a widening gap in educational performance…
In some cases it seems as if policy has actually been designed to reduce opportunity: government support for many state schools has been steadily gutted over the last few decades — and especially in the last few years. Meanwhile, students are crushed by giant student loan debts that are almost impossible to discharge, even in bankruptcy. This is happening at the same time that a college education is more important than ever for getting a good job.
A level playing field is a key element of Econ4’s vision of how an economy that works for people, the planet and the future.
The student debt trap and inequality in America
Nobel laureate Joe Stiglitz writes:
In 2010, student debt, now $1 trillion, exceeded credit-card debt for the first time.
Student debt can almost never be wiped out, even in bankruptcy. A parent who co-signs a loan can’t necessarily have the debt discharged even if his child dies. The debt can’t be discharged even if the school — operated for profit and owned by exploitative financiers — provided an inadequate education, enticed the student with misleading promises, and failed to get her a decent job.
Instead of pouring money into the banks, we could have tried rebuilding the economy from the bottom up…. We could have recognized that when young people are jobless, their skills atrophy. We could have made sure that every young person was either in school, in a training program or on a job. Instead, we let youth unemployment rise to twice the national average. The children of the rich can stay in college or attend graduate school, without accumulating enormous debt, or take unpaid internships to beef up their résumés. Not so for those in the middle and bottom. We are sowing the seeds of ever more inequality in the coming years.
Read his dissection of how economic and political inequality are poisoning opportunity in America here.
“One dollar, one vote”
Nobel laureate Joe Stiglitz writes on revealed preference in our political system:
President George W. Bush claimed that we did not have enough money for health insurance for poor American children, costing a few billion dollars a year. But all of a sudden we had $150 billion to bail out AIG, the insurance company. That shows that something is wrong with our political system. It is more akin to “one dollar, one vote” than to “one person, one vote.”
Read the whole interview here.
Justice for all who can pay for it
Reviewing Joe Stiglitz’s new book, The Price of Inequality, Thomas Edsall pulls this quote:
America has become a country not ‘with justice for all,’ but rather with favoritism for the rich and justice for those who can afford it — so evident in the foreclosure crisis.
Read his review here.
Rent-seeking in America
Nobel laureate Joe Stiglitz defines rent-seeking as “using political and economic power to get a larger share of the national pie, rather than to grow the national pie” – and he says that America today has become a rent-seeking society. Hear him interviewed here (the 7:40-8:55 interval for the rent-seeking passage), discussing on his new book, The Price of Inequality.
Globalization of protest
From Nobel laureate Joseph Stiglitz:
The best government that money can buy is no longer good enough.
Read his piece here.
