Stiglitz: The Price of Inequality
Tuesday, June 05, 2012
Joe Stiglitz:
The Price of Inequality, by Joseph Stiglitz, Commentary, Project Syndicate: ...There is less equality of opportunity in the United States today than there is in Europe – or, indeed, in any advanced industrial country... This is one of the reasons that America has the highest level of inequality...
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 ... 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. ...
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 ... than they were ...a decade and a half ago. ...
Rent-seeking distorts the economy. ... 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...
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 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.
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