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Forum Post: The World's 99% Knows Capitalism Is Failing and Believes That Change Is Possible

Posted 5 years ago on June 22, 2012, 12:09 a.m. EST by PeterKropotkin (1050) from Oakland, CA
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By Joseph Stigliz

There are moments in history when people all over the world seem to rise up, to say that something is wrong, to ask for change. This is what happened in the tumultuous years 1848 and 1968. Each of these years of upheaval marked the beginning of a new era. The year 2011 may prove to be another such moment.

A youth uprising that began in Tunisia, a little country on the coast of North Africa, spread to nearby Egypt, then to other countries of the Middle East. In some cases, the spark of protest seemed at least temporarily doused. In others, though, small protests precipitated cataclysmic societal change, taking down long-established dictators such as Egypt's Hosni Mubarak and Libya's Muammar Qaddafi. Soon the people of Spain and Greece, the United Kingdom, and the United States, and other countries around the world, had their own reasons to be in the streets.

Throughout 2011, I gladly accepted invitations to Egypt, Spain, and Tunisia and met with protesters in Madrid's Buen Retiro Park, at Zuccotti Park in New York, and in Cairo, where I spoke with young men and women who had been at Tahrir Square.

As we talked, it was clear to me that while specific grievances varied from country to country and, in particular, that the political grievances in the Middle East were very different from those in the West, there were some shared themes. There was a common understanding that in many ways the economic and political system had failed and that both were fundamentally unfair.

The protesters were right that something was wrong. The gap between what our economic and political systems are supposed to do - what we were told they did do - and what they actually do became too large to be ignored. Governments around the world were not addressing key economic problems, including that of persistent unemployment; and as universal values of fairness became sacrificed to the greed of a few, in spite of rhetoric to the contrary, the feeling of unfairness became a feeling of betrayal. That the young would rise up against the dictatorships of Tunisia and Egypt was understandable. The youth were tired of aging, sclerotic leaders who protected their own interests at the expense of the rest of society. They had no opportunities to call for change through democratic processes. But electoral politics had also failed in Western democracies. U.S. president Barack Obama had promised "change you can believe in," but he subsequently delivered economic policies that, to many Americans, seemed like more of the same. And yet in the United States and elsewhere, there were signs of hope in these youthful protesters, joined by their parents, grandparents, and teachers. They were not revolutionaries or anarchists. They were not trying to overthrow the system. They still believed that the electoral process might work, if only governments remembered that they are accountable to the people. The protesters took to the streets in order to push the system to change.

The name chosen by the young Spanish protesters in their movement that began on May 15 was "los indignados," the indignant or outraged. They were outraged that so many would suffer so much - exemplified by a youth unemployment rate in excess of 40 percent since the beginning of the crisis in 2008 - as a result of the misdeeds of those in the financial sector. In the United States the "Occupy Wall Street" movement echoed the same refrain. The unfairness of a situation in which so many lost their homes and their jobs while the bankers enjoyed large bonuses was grating.

But the U.S. protests soon went beyond a focus on Wall Street to the broader inequities in American society. Their slogan became "the 99 percent." The protesters who took this slogan echoed the title of an article I wrote for the magazine Vanity Fair, "Of the 1%, for the 1%, by the 1%," which described the enormous increase in inequality in the United States and a political system that seemed to give disproportionate voice to those at the top.

Three themes resonated around the world: that markets weren't working the way they were supposed to, for they were obviously neither efficient nor stable; that the political system hadn't corrected the market failures; and that the economic and political systems are fundamentally unfair. While this book focuses on the excessive inequality that marks the United States and some other advanced industrial countries today, it explains how the three themes are intimately interlinked: the inequality is cause and consequence of the failure of the political system, and it contributes to the instability of our economic system, which in turn contributes to increased inequality—a vicious downward spiral into which we have descended, and from which we can emerge only through concerted policies that I describe below. Before centering our attention on inequality, I want to set the scene, by describing the broader failures of our economic system.

The Failure of Markets Markets have clearly not been working in the way that their boosters claim. Markets are supposed to be stable, but the global financial crisis showed that they could be very unstable, with devastating consequences. The bankers had taken bets that, without government assistance, would have brought them and the entire economy down. But a closer look at the system showed that this was not an accident; the bankers had incentives to behave this way.

The virtue of the market is supposed to be its efficiency. But the market obviously is not efficient. The most basic law of economics - necessary if the economy is to be efficient - is that demand equals supply. But we have a world in which there are huge unmet needs -investments to bring the poor out of poverty, to promote development in less developed countries in Africa and other continents around the world, to retrofit the global economy to face the challenges of global warming. At the same time, we have vast underutilized resources - workers and machines that are idle or are not producing up to their potential. Unemployment - the inability of the market to generate jobs for so many citizens - is the worst failure of the market, the greatest source of inefficiency, and a major cause of inequality.

As of March 2012, some 24 million Americans who would have liked a full-time job couldn't get one. In the United States, we are throwing millions out of their homes. We have empty homes and homeless people. But even before the crisis, the American economy had not been delivering what had been promised: although there was growth in GDP, most citizens were seeing their standards of living erode. As chapter 1 shows, for most American families, even before the onset of recession, incomes adjusted for inflation were lower than they had been a decade earlier. America had created a marvelous economic machine, but evidently one that worked only for those at the top.

So Much at Stake This book is about why our economic system is failing for most Americans, why inequality is growing to the extent it is, and what the consequences are. The underlying thesis is that we are paying a high price for our inequality - an economic system that is less stable and less efficient, with less growth, and a democracy that has been put into peril. But even more is at stake: as our economic system is seen to fail for most citizens, and as our political system seems to be captured by moneyed interests, confidence in our democracy and in our market economy will erode along with our global influence. As the reality sinks in that we are no longer a country of opportunity and that even our long-vaunted rule of law and system of justice have been compromised, even our sense of national identity may be put into jeopardy. In some countries the Occupy Wall Street movement has become closely allied with the antiglobalization movement. They do have some things in common: a belief not only that something is wrong but also that change is possible. The problem, however, is not that globalization is bad or wrong but that governments are managing it so poorly - largely for the benefit of special interests. The interconnectedness of peoples, countries, and economies around the globe is a development that can be used as effectively to promote prosperity as to spread greed and misery. The same is true for the market economy: the power of markets is enormous, but they have no inherent moral character. We have to decide how to manage them. At their best, markets have played a central role in the stunning increases in productivity and standards of living in the past two hundred years - increases that far exceeded those of the previous two millennia. But government has also played a major role in these advances, a fact that free-market advocates typically fail to acknowledge. On the other hand, markets can also concentrate wealth, pass environmental costs on to society, and abuse workers and consumers. For all these reasons, it is plain that markets must be tamed and tempered to make sure they work to the benefit of most citizens. And that has to be done repeatedly, to ensure that they continue to do so. That happened in the United States in the Progressive Era, when competition laws were passed for the first time. It happened in the New Deal, when Social Security, employment, and minimum-wage laws were passed. The message of Occupy Wall Street - and of so many other protesters around the world - is that markets once again must be tamed and tempered. The consequences of not doing so are serious: within a meaningful democracy, where the voices of ordinary citizens are heard, we cannot maintain an open and globalized market system, at least not in the form that we know it, if that system year after year makes those citizens worse-off. One or the other will have to give - either our politics or our economics.

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[-] 3 points by PeterKropotkin (1050) from Oakland, CA 5 years ago

It is time we start speaking in terms of solutions. We know that the capitalist system is the problem, and the 'left vs. right' dynamic is pure theatre meant to keep us from focusing on the real issues. At the core of our issues is the structure of the private commercial enterprise. As long as the enterprise is setup the way it is, a tiny group of people at the top (major shareholders and their handpicked corporate board), make all of the decisions and gather all of the gains of production to themselves, no matter what kind of mechanisms you place in front of them to even the playing field, they will systematically dismantle these efforts as we've seen with the New Deal and the Unions (and furthermore our representation in government). They have the incentive, and they have the means with which to realize their goals. We have to change this structure from the ground up by committing to and realizing worker owned and Democratically run workplaces. This is the path on which we regain our collective power, where we can then effect change in the political sphere.

[-] 1 points by agkaiser (2049) from Fredericksburg, TX 5 years ago

2PV = PV(1+i)**t t = log2/log(1+i

For the future value to be 10 times the present value, at 6% compounded daily, it takes 38 years, 138 days and 16 hours. From 1970 to 2010 the price of hamburger has gone from $0.39 per pound to at least $3.99: higher since then. A compact car was $2000 or less at the start of Nixon's second year. Today it's $30,000 for the same kind of compact. Wages have fallen way behind prices in the past forty years for at least ninety percent of us. In 1970 one income per family could afford the American dream of home, cars and kids in college. Today it takes at least two incomes to barely get by. Does anyone have another way to say that the profit of investors is the loss of everyone else? You can track concentration of wealth over the same period and see for yourself the dead end course we're on.

Derived from: How Does That Work? https://www.createspace.com/3852916

[-] 1 points by agkaiser (2049) from Fredericksburg, TX 5 years ago

Einstein called compound interest the most powerful force in the Universe. He didn't explain that is so because it causes the compression of the matter of wealth (and the money that represents it in the economic equation) into less and less space. He didn't say where he thought that might lead. The experience of science is with the compression of highly energetic physical matter.

A larger percentage of the economy is abstract and non productive each year. The process concentrates wealth and most people are compressed into the smaller economic spaces they can afford. Will there be a chain reaction?

How is the interest compounded on the money lenders' and other investments? The profit on last year's investment with a manufacturer was added to the cost of production and the price of the goods produced. Next years dividend reflects the cost of service to this years debt or capital financing. The interest or 'vigorish' becomes an exponentially increasing part of the cost of doing business. That is: compound interest to the lender/investor who finances the production and cost increases on the merchandise we must buy to live. The pattern of exponential growth of finance costs to the real economy must hold true for profits on all investment and trade, not just the banking and capitalization [non] industries. The damage investment must do to the real economy of production and consumption is minimized when the community finances its industries of by and for itself on a non profit basis.

Derived from: How Does That Work? https://www.createspace.com/3852916

[-] 1 points by HempTwister (667) from Little Rock, AR 5 years ago

What they all want is equal opportunity. But first you have to get the power to make that happen. Can not do it with the money in politics. Can not get the money out of politics as long as Corps have the rights of people and money is equal to speech. Move to Amend.

[-] 1 points by TitusMoans (2451) from Boulder City, NV 5 years ago

An echo of Karl Marx: people make history, not the other way around.

The "inequalities" are nothing more than capitalism in action. The ruling class will never willingly surrender power. The workers, however, will only accept the short end of the stick in our polarized society for so long then poof! Pandora's box has been opened, and nothing is ever the same.

We are the tools to effect change. Agitate, demonstrate, protest, but most importantly just talk to others; spread the word.

[-] 1 points by PeterKropotkin (1050) from Oakland, CA 5 years ago

Hey Titus hows it going? Stiglitz almost hits the nail on the head in this peice but alas he is no Richard Wolff.

[-] -2 points by shadzworth (-394) 5 years ago

Yeah,this all makes sense. We should start by empowering the government to nationalize ALL private sector businesses,declare a state of Marshall Law and suspend all aspects of the Constitution.. Institute a 99% across the board tax rate for everybody. We need to look seriously at the Cuban model and make sure we learn from their mistakes but follow Castro's vision as closely as possible. This is really the only way we can hope to save this great nation for our children and our grand children. This is the truly patriotic thing to do. Occupy should be instrumental in being the muscle and force on the ground in Washington to help this whole scenario begin.