Joseph Stiglitz : ‘The Price of Inequality’

By Philip Li Ching Hum

Joseph Stiglitz, the Nobel Prize Winner for Economics (2001) and currently Professor at Columbia University, USA, launched on 14th June 2012 his tenth book ‘The Price of Inequality’. He delves in it into the mechanism of the free market and gives us an insight into the unfair and unwise directions that America and many other societies have taken under this system.

Stiglitz’s writings bear the imprints of a left-wing economist. He castigates the neo-liberal ideology propounded by Milton Friedman. He diagnoses with much discernment that the future of USA is endangered by a divided society. Inequality, according to him, takes myriad dimensions and it leads to higher crime, health problems and mental illness, lower educational achievements, social cohesion and life expectancy. In a country where affluence is supposedly the greatest in the world, there is utmost inequality generated by its dysfunctional market system.

America is usually lauded as a land of equal opportunity, yet the chances of an American making his way from the bottom to the top are very limited. The American dream has become a myth. The gap between the haves and the have-nots goes on widening. Pauperization springing out of an inefficient income distribution gnaws American society. Only 1% of the population enjoys the wealth of the nation while 99% vegetate in poverty with debts and high taxation and they are struggling for survival, according to Stiglitz. The American middle-class is fast withering away. During the recession of 2008 many of them lost their jobs and their homes.

What is ailing the American economy is that the country has deviated from its basic aspirations. Stiglitz points out that Americans have become the victims of their own success. The failure of political system sums up as follows: 18% of the American youth are unemployed as compared to 50% in Spain. In many cases they remain unemployed for lingering years. They ultimately take to the streets and clamour for their rights. The picture becomes frightening: the rich will have to live in citadels in gated communities the day when the underprivileged allow themselves to be taken in by the honeyed slogans of populists. At a time when the USA is poking its nose everywhere in terms of establishing democratic standards, one critic noted that it not even put its own house in order.

Stiglitz stigmatises the theory of trickle-down economics which others have labelled as the politics of envy. He cannot conceive how 1% of the population can get the greater slice of pie, the lion’s share. Much of the inequality in the American economy has been the result of redistribution of money from those at the bottom to those at the top of the social pyramid. The author notes that the polarization of the labour force has meant that while more of the money is going to the top, more of the people are also going to the bottom. The great recession has made lives even harder for those lower down.

The dark period America is going through in the process is replete with human tragedies. The standard of living is on the decline. A large number of Americans can hardly afford the basic necessities of life in these hard days. It has become like a nightmare for quite a few. There are some ethnic groups like the Afro-Americans and Hispanic Americans, who are destined to remain as the underprivileged and down-trodden from generation to generation no matter how hard they try to climb up the social ladder. The trauma of the Great Recession still haunts their minds.

The political process helps the rich to become richer and richer at the expense of the common people. Professor Stiglitz writes forcefully: “Rent seeking takes many forms: hidden and open transfers and subsidies from the government, laws that make the market-place less competitive, law enforcement of existing competition laws and statutes that allow corporations to take advantage of others or to pass costs to the rest of society.’’ He does not spare the bankers who make colossal profits on the sweat and blood of their clients with predatory lending and abusive use of credit cards. It weakens the middle-class wage earners who spend more than they earn. He blasts the banks: “That does not mean, there is nothing we can do to temper the consequences of unscrupulous bankers who would exploit the poor and engage in anti-competitive practices. We can and should regulate banks, forbid predatory lending, make them accountable for their fraudulent practices and punish them for abuses of monopoly power.”

The author further dissects on the rule of law, supposedly to protect the weak, but it turns out to be a luxury for them: only the rich can afford to get access to it. The system of one-man one-vote lays bare the corrupting power of money and leads to a perversion of democracy. One dollar, one vote. The irony is that the wealthy seek to manipulate the political system for their own ends. He calls it “undermining democratic political processes: the voting paradox and voter disillusionment. ’’

Joseph Stiglitz ends his book on a note of optimism nevertheless, laying out an array of reforms that would create a more just and equal society as well as a stronger and a more stable one. He believes firmly that the solution towards a more equitable society lies in politics. The economy has to be restructured, according to Stiglitz.

The Price of Inequality’ is a thought- provoking and an exceptional book which provides authoritative answers to many burning questions of our times.

* Published in print edition on 8 February 2013

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