“One might feel better about inequality if there were a grain of truth in trickle-down economics.”
recent poll found that about 60% of all Americans think (falsely) that no matter who sits in the White’s House next January 21st, it won’t matter a whit to the economy or unemployment.
While it clearly will matter whether Romney-Ryan budget thinking prevails in November, perhaps there is at least a partially rational explanation for such public despair. Economist Joseph Stiglitz wrote, in a piece disturbingly titled, “America is no longer a land of opportunity,” the following:
US inequality is at its highest point for nearly a century. Those at the top – no matter how you slice it – are enjoying a larger share of the national pie; the number below the poverty level is growing. The gap between those with the median income and those at the top is growing, too. The US used to think of itself as a middle-class country – but this is no longer true.
Now, admittedly, I have been saying such things for years, but I don’t have a Nobel Prize in Economics. Stiglitz does and he adds:
…the median income of Americans today is lower than it was a decade and a half ago; and the median income of a full-time male worker is lower than it was more than four decades ago. Meanwhile, those at the top have never had it so good.
Here’s how it all happened:
Markets are shaped by the rules of the game. Our political system has written rules that benefit the rich at the expense of others. Financial regulations allow predatory lending and abusive credit-card practices that transfer money from the bottom to the top. So do bankruptcy laws that provide priority for derivatives. The rules of globalisation – where capital is freely mobile but workers are not – enhance an already large asymmetry of bargaining: businesses threaten to leave the country unless workers make strong concessions.
Stiglitz points out that the conservative argument that “increased inequality is an inevitable byproduct of the market” is demonstrably false:
Textbooks teach us that we can have a more egalitarian society only if we give up growth or efficiency. However, closer analysis shows that we are paying a high price for inequality: it contributes to social, economic and political instability, and to lower growth. Western countries with the healthiest economies (for example those in Scandinavia) are also the countries with the highest degree of equality.
The US grew far faster in the decades after the second world war, when inequality was lower, than it did after 1980, since when the gains have gone disproportionately to the top. There is growing evidence looking across countries over time that suggests a link between equality, growth and stability.
Mentioning that there is a real difference between Obama and Romney, in terms of whether America will “once again become a land of opportunity,” Stiglitz ends with a theme I find fascinating and have thought about frequently these days:
The country will have to make a choice: if it continues as it has in recent decades, the lack of opportunity will mean a more divided society, marked by lower growth and higher social, political and economic instability. Or it can recognise that the economy has lost its balance. The gilded age led to the progressive era, the excesses of the Roaring Twenties led to the Depression, which in turn led to the New Deal. Each time, the country saw the extremes to which it was going and pulled back. The question is, will it do so once again?
Are we yet to the point where a “new progressive” era or a “new New Deal era” can be born? Or will it be a President Mitt Romney—a genuine Gilded Ager— who finally impregnates America with enough despair and disgust and determination to produce one?