Joseph Stiglitz on the widening wealth disparity in America

In the current issue of Vanity Fair, Nobel Prize winning economist Joseph Stiglitz has an article on the detrimental effects of the widening wealth disparity in America. Here’s a clip:

…It’s no use pretending that what has obviously happened has not in fact happened. The upper 1 percent of Americans are now taking in nearly a quarter of the nation’s income every year. In terms of wealth rather than income, the top 1 percent control 40 percent. Their lot in life has improved considerably. Twenty-five years ago, the corresponding figures were 12 percent and 33 percent. One response might be to celebrate the ingenuity and drive that brought good fortune to these people, and to contend that a rising tide lifts all boats. That response would be misguided. While the top 1 percent have seen their incomes rise 18 percent over the past decade, those in the middle have actually seen their incomes fall. For men with only high-school degrees, the decline has been precipitous—12 percent in the last quarter-century alone. All the growth in recent decades—and more—has gone to those at the top. In terms of income equality, America lags behind any country in the old, ossified Europe that President George W. Bush used to deride. Among our closest counterparts are Russia with its oligarchs and Iran. While many of the old centers of inequality in Latin America, such as Brazil, have been striving in recent years, rather successfully, to improve the plight of the poor and reduce gaps in income, America has allowed inequality to grow….

An economy in which most citizens are doing worse year after year—an economy like America’s—is not likely to do well over the long haul. There are several reasons for this.

First, growing inequality is the flip side of something else: shrinking opportunity. Whenever we diminish equality of opportunity, it means that we are not using some of our most valuable assets—our people—in the most productive way possible. Second, many of the distortions that lead to inequality—such as those associated with monopoly power and preferential tax treatment for special interests—undermine the efficiency of the economy. This new inequality goes on to create new distortions, undermining efficiency even further. To give just one example, far too many of our most talented young people, seeing the astronomical rewards, have gone into finance rather than into fields that would lead to a more productive and healthy economy.

Third, and perhaps most important, a modern economy requires “collective action”—it needs government to invest in infrastructure, education, and technology. The United States and the world have benefited greatly from government-sponsored research that led to the Internet, to advances in public health, and so on. But America has long suffered from an under-investment in infrastructure (look at the condition of our highways and bridges, our railroads and airports), in basic research, and in education at all levels. Further cutbacks in these areas lie ahead.

None of this should come as a surprise—it is simply what happens when a society’s wealth distribution becomes lopsided. The more divided a society becomes in terms of wealth, the more reluctant the wealthy become to spend money on common needs. The rich don’t need to rely on government for parks or education or medical care or personal security—they can buy all these things for themselves. In the process, they become more distant from ordinary people, losing whatever empathy they may once have had. They also worry about strong government—one that could use its powers to adjust the balance, take some of their wealth, and invest it for the common good. The top 1 percent may complain about the kind of government we have in America, but in truth they like it just fine: too gridlocked to re-distribute, too divided to do anything but lower taxes….

The top 1 percent have the best houses, the best educations, the best doctors, and the best lifestyles, but there is one thing that money doesn’t seem to have bought: an understanding that their fate is bound up with how the other 99 percent live. Throughout history, this is something that the top 1 percent eventually do learn. Too late.

And that’s the thing that I don’t get. I can appreciate the fact that the wealthy in this country want to keep amassing wealth, but it would seem to me that, at some point, they’d realize that they have to pull back a little or risk instability. But maybe multi-millionaires don’t think that way. Maybe they can’t stop at a billion dollars, when their neighbor has 1.1. I would think, at some point, though, you’d have to realize that what you’re doing is changing the world outside your gated community, and that, even with your private security and exclusive clubs, you’re eventually going to come into contact with what you’ve helped to create. Personally, I’d rather stop at a ten million dollars, and live in a functioning city, surrounded by happy, well-educated people. I think Bill Gates and Warren Buffet get that, and that’s why they’re lobbying to have taxes on the top %1 raised, but they’re very much in the minority. The rest either can’t see it, or think that they can somehow avoid the realities of this polluted ecosystem that they’re helping to create.

Oh, and here’s something for those of you who can’t read — video of Stiglitz stirring up the American-hating hippies at Democracy Now.

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18 Comments

  1. Posted April 7, 2011 at 9:01 pm | Permalink

    And we aspired to be rich even tho we could hardly be.

  2. Pale Pocka
    Posted April 7, 2011 at 9:56 pm | Permalink

    Twenty years ago, I was earning $17 per hour pouring wine and delivering entrees at a banquet hall. Since my parents couldn’t afford it, that job paid for my college education.

    Today, two degrees and many years of exceptional job performance reviews later, I earn $13 per hour teaching university courses at a local institution.

    One part of me says “make the best of what you have.” Another part says, “cut people’s throats.”

    Those parts are still debating one another. But one part is finding strange affinity with Bahrain, Egypt and Libya. Forks and knives.

    I think it’s time for a nationwide strike.

  3. Posted April 7, 2011 at 10:00 pm | Permalink

    Yup. Everyone thinks that wealth is just around the corner. Watch the video. Stiglitz talks about it. It’s an illusion. It’s less likely for a poor person to become wealthy now than at almost any point in our nation’s history. But the delusion persists.

  4. Taint
    Posted April 8, 2011 at 1:22 am | Permalink

    John Steinbeck: “socialism never took root in America because the poor see themselves not as an exploited proletariat but as temporarily embarrassed millionaires.”

  5. Posted April 8, 2011 at 7:05 am | Permalink

    Things are really bad.

  6. Edward
    Posted April 8, 2011 at 8:03 am | Permalink

    I remember reading somewhere, when the stuff in Egypt first started happening, that the division of wealth was greater here in the U.S. than it was there. I wouldn’t be at all surprised to see uprisings here in the next 10 years.

  7. Ez Marsay
    Posted April 8, 2011 at 8:17 am | Permalink

    I’ve grossed about 45k per year for . . . about ten years, though my business keeps growing.

    I have no savings, but I can have no savings, if that makes sense.

  8. TeacherPatti
    Posted April 8, 2011 at 8:28 am | Permalink

    Yup, people always think they are gonna be rich…I don’t know if it is all of the “rags to riches” stuff they here or what. The day I knew I was an adult was the day I realized that I wasn’t going to be rich & famous…it’s not a pleasant realization but a necessary one.

    And I agree with Pale Pocka…if the ones DOING the work (i.e. not the guys/gals in suits sitting in offices doing…what?) all went on strike, what would it look like?

  9. Posted April 8, 2011 at 8:54 am | Permalink

    Patti,

    I will become rich as soon as they fire you parasites, stop giving special ed to poor blind kids and stop taking my tax money.

    To me, at $24K, I’m already rich, though I make less in 2011 than I did in 1996 in both real and adjusted dollars. It’s still more than anyone in my family has ever made.

    Rich to me is simply having health insurance. The other stuff I don’t much care about. One can only own so much crap.

  10. Redleg
    Posted April 8, 2011 at 9:30 am | Permalink

    It’s been said here before: Getting close to pitchforks and torches time…. Just wish I was a little younger.

  11. TeacherPatti
    Posted April 8, 2011 at 12:08 pm | Permalink

    Pete, It will then pain you to know that we went to a tax funded art museum today (DIA) on a bus paid for by tax money to see art that the kids made (naturally, we don’t have an art teacher in our school so thankfully the DIA had this program). Seriously though, if anyone happens to be at the DIA, check out the art by visually impaired kids…really cool stuff :)

  12. Eel
    Posted April 8, 2011 at 12:20 pm | Permalink

    Kids don’t need art. They need jobs. They need mines and brothels that are willing to take them in and train them.

  13. Louis Crabini
    Posted April 8, 2011 at 12:26 pm | Permalink

    Stigletz sounds ethnic.

  14. Ypsiosaurus Wrecks
    Posted April 8, 2011 at 12:37 pm | Permalink

    A relative recently made the remark that “public hangings” are in order for corrupt bankers and others who have profitted from robbing the general public.

    I agree.

  15. Posted April 8, 2011 at 12:41 pm | Permalink

    Patti, you are clearly a communist. You should have taken them to the privately funded Creation Museum instead, using your own car with gas paid out of your own pocket. There, you can also see artwork done by blind people.

  16. Brainless
    Posted April 8, 2011 at 2:40 pm | Permalink

    @Taint: One simply cannot understand America without reading Steinbeck. (no sarcasm)

  17. Last Man Standing
    Posted October 10, 2011 at 6:34 am | Permalink

    I knew that I’d read about Stiglitz here before. Thanks.

  18. Eel
    Posted October 10, 2011 at 9:44 am | Permalink

    And that’s the thing that I don’t get. I can appreciate the fact that the wealthy in this country want to keep amassing wealth, but it would seem to me that, at some point, they’d realize that they have to pull back a little or risk instability. But maybe multi-millionaires don’t think that way. Maybe they can’t stop at a billion dollars, when their neighbor has 1.1. I would think, at some point, though, you’d have to realize that what you’re doing is changing the world outside your gated community, and that, even with your private security and exclusive clubs, you’re eventually going to come into contact with what you’ve helped to create. Personally, I’d rather stop at a ten million dollars, and live in a functioning city, surrounded by happy, well-educated people. I think Bill Gates and Warren Buffet get that, and that’s why they’re lobbying to have taxes on the top %1 raised, but they’re very much in the minority. The rest either can’t see it, or think that they can somehow avoid the realities of this polluted ecosystem that they’re helping to create.

    Amen.

One Trackback

  1. By Introducing the People’s Budget on April 11, 2011 at 9:32 pm

    […] the Democrats were able to shift the burden from the backs of poor and middle class Americans to the top 1% that we keep talking about. Here, with more on the deliberations, is economist Jeffrey Sachs, […]

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