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Forum Post: "The Price of Inequality and the Myth of Opportunity", by Joseph Stiglitz

Posted 1 year ago on June 7, 2012, 8:45 p.m. EST by shadz66 (18005)
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"The Price of Inequality and the Myth of Opportunity"

by Joseph Stiglitz.

America likes to think of itself as a land of opportunity, and others view it in much the same light. But, while we can all think of examples of Americans who rose to the top on their own, what really matters are the statistics: to what extent do an individual’s life chances depend on the income and education of his or her parents?

Nowadays, these numbers show that the American dream is a myth. There is less equality of opportunity in the United States today than there is in Europe – or, indeed, in any advanced industrial country for which there are data.

This is one of the reasons that America has the highest level of inequality of any of the advanced countries – and its gap with the rest has been widening. In the “recovery” of 2009-2010, the top 1% of US income earners captured 93% of the income growth. Other inequality indicators – like wealth, health, and life expectancy – are as bad or even worse. The clear trend is one of concentration of income and wealth at the top, the hollowing out of the middle, and increasing poverty at the bottom.

It would be one thing if the high incomes of those at the top were the result of greater contributions to society, but the Great Recession showed otherwise: even bankers who had led the global economy, as well as their own firms, to the brink of ruin, received outsize bonuses.

A closer look at those at the top reveals a disproportionate role for rent-seeking: some have obtained their wealth by exercising monopoly power; others are CEOs who have taken advantage of deficiencies in corporate governance to extract for themselves an excessive share of corporate earnings; and still others have used political connections to benefit from government munificence – either excessively high prices for what the government buys (drugs), or excessively low prices for what the government sells (mineral rights).

Likewise, part of the wealth of those in finance comes from exploiting the poor, through predatory lending and abusive credit-card practices. Those at the top, in such cases, are enriched at the direct expense of those at the bottom.

It might not be so bad if there were even a grain of truth to trickle-down economics – the quaint notion that everyone benefits from enriching those at the top. But most Americans today are worse off – with lower real (inflation-adjusted) incomes – than they were in 1997, a decade and a half ago. All of the benefits of growth have gone to the top.

Defenders of America’s inequality argue that the poor and those in the middle shouldn’t complain. While they may be getting a smaller share of the pie than they did in the past, the pie is growing so much, thanks to the contributions of the rich and superrich, that the size of their slice is actually larger. The evidence, again, flatly contradicts this. Indeed, America grew far faster in the decades after World War II, when it was growing together, than it has since 1980, when it began growing apart.

This shouldn’t come as a surprise, once one understands the sources of inequality. Rent-seeking distorts the economy. Market forces, of course, play a role, too, but markets are shaped by politics; and, in America, with its quasi-corrupt system of campaign finance and its revolving doors between government and industry, politics is shaped by money.

For example, a bankruptcy law that privileges derivatives over all else, but does not allow the discharge of student debt, no matter how inadequate the education provided, enriches bankers and impoverishes many at the bottom. In a country where money trumps democracy, such legislation has become predictably frequent.

But growing inequality is not inevitable. There are market economies that are doing better, both in terms of both GDP growth and rising living standards for most citizens. Some are even reducing inequalities.

America is paying a high price for continuing in the opposite direction. Inequality leads to lower growth and less efficiency. Lack of opportunity means that its most valuable asset – its people – is not being fully used. Many at the bottom, or even in the middle, are not living up to their potential, because the rich, needing few public services and worried that a strong government might redistribute income, use their political influence to cut taxes and curtail government spending. This leads to underinvestment in infrastructure, education, and technology, impeding the engines of growth.

The Great Recession has exacerbated inequality, with cutbacks in basic social expenditures and with high unemployment putting downward pressure on wages. Moreover, the United Nations Commission of Experts on Reforms of the International Monetary and Financial System, investigating the causes of the Great Recession, and the International Monetary Fund have both warned that inequality leads to economic instability.

But, most importantly, America’s inequality is undermining its values and identity. With inequality reaching such extremes, it is not surprising that its effects are manifest in every public decision, from the conduct of monetary policy to budgetary allocations. 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, in which the big banks believed that they were too big not only to fail, but also to be held accountable.

America can no longer regard itself as the land of opportunity that it once was. But it does not have to be this way : it is not too late for the American dream to be restored.

~

per aspera ad astra ...

~

Joseph E. Stiglitz, a Nobel laureate in economics, has pioneered pathbreaking theories in the fields of economic information, taxation, development, trade, and technical change.

This this article was first published at Project Syndicate ( http://www.project-syndicate.org/commentary/the-price-of-inequality ) & is here copied under "Fair Use".

© 2012 Project Syndicate

23 Comments

23 Comments


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[-] 3 points by Nevada1 (4024) 1 year ago

Thank you shadz for this post. Best Regards

[-] 2 points by shadz66 (18005) 1 year ago

Re. Stiglitz, a relevant item which I hope finds you hale and hearty :

  • "When the Rich Have 85 Percent of US Wealth, ‘Equality of Opportunity’ Can’t Exist - Democrats Are Not Progressives", by 'The Young Turks with Cenk Uygur & Economist and Nobel Prize winner Dr. Joseph Stiglitz --- “The United States is not only the country with the most inequality in outcomes, it’s the country with the least equality of opportunity,” Stiglitz says. “A kid’s life prospects are more dependent on the education and income of his parents than in any other advanced industrial countries.” : http://www.informationclearinghouse.info/article31615.htm .

fiat lux ...

[-] 2 points by Nevada1 (4024) 1 year ago

Thank you shadz. System keeps the unconnected, in their place.

[-] 1 points by shadz66 (18005) 1 year ago

Yes mate and one more for your consideration :

ad iudicium ...

[-] 2 points by shadz66 (18005) 1 year ago

You're welcome + 'FYI' : "Don’t 30 Million Workers Deserve 1968 Wages ?" by Ralph Nader : http://www.informationclearinghouse.info/article31530.htm .

fiat justitia ...

[-] 2 points by Nevada1 (4024) 1 year ago

good link

[-] 3 points by PeterKropotkin (1050) from Oakland, CA 1 year ago
[-] 2 points by Nevada1 (4024) 1 year ago

good article

[-] 2 points by April (3196) 1 year ago

Good post. On a scale of 1-5, I give it 5 popsicles.

[-] 2 points by shadz66 (18005) 1 year ago

Hmmm ... "5 popsicles" gets you : http://truth-out.org/news/item/9658-how-big-banks-run-the-world-at-your-expense by Gar Alperowitz !! radix omnium malorum est cupiditas ... (but don't get too febrile!)

[-] 2 points by beautifulworld (20509) 1 year ago

Great article! We need to get past the hubris and see what is really going on in this country if we care enough to fix it.

From the article: "Nowadays, these numbers show that the American dream is a myth. There is less equality of opportunity in the United States today than there is in Europe – or, indeed, in any advanced industrial country for which there are data.

[-] 1 points by shadz66 (18005) 1 year ago

From the outside looking in, Americans seem to be The Distillation, Concentration and Crystallisation of the best and the worst Human Karma and "as above so below" as someone once said about something, once !! ... Y'all can be a good and loving people who can scoop the tale of a comet, bring it back to This Good Earth (our beautiful, fragile and only hommme ~*~) & then analyse it -- which is truly an exquisite symphony of mathematics and the human imagination AND y'all can bring silent and instant death upon people all over the world from a base in Nevada in pursuit of hegemony, hubris and hate in Your Name !!!

Sometimes mere words aren't enough !

too sad for latin ...

[-] 1 points by beautifulworld (20509) 1 year ago

;-)

[-] 1 points by shadz66 (18005) 1 year ago

<sad-sigh-sound>~{:-(

[-] 1 points by beautifulworld (20509) 1 year ago

LOL! and :( at the same time.

[-] 1 points by shadz66 (18005) 1 year ago

Also 'fyi' - "This Next Generation Will Be Left Behind in the Land of No Opportunity", by Salvatore Babones : http://www.informationclearinghouse.info/article31582.htm .

fiat lux ...

[-] 2 points by MattLHolck (16833) from San Diego, CA 1 year ago

it's who ya know

not school not even income

[-] 1 points by shadz66 (18005) 1 year ago

You are edging closer to full sentences and I'm slowly developing a taste and grudging admiration for your total disregard for grammar and punctuation & sometimes even conjugation and syntax. Thanx.

pax, amor et lux ...

[-] 3 points by gnomunny (5689) from St Louis, MO 1 year ago

It's art(ful).

[-] 2 points by shadz66 (18005) 1 year ago

Two endearing trax by one of my favourite Irish bands, 'A House' on the matter :

"All dead but still alive" !!

ars gratia artis ...

[-] 2 points by gnomunny (5689) from St Louis, MO 1 year ago

YouTube videos! I'll roll those dice. ;-)

[-] 2 points by MattLHolck (16833) from San Diego, CA 1 year ago

golly

did I tell you to write in shorter sentences?

[-] 1 points by shadz66 (18005) 1 year ago

Nope, you didn't.