Joseph Stiglitz, Nobel laureate, says economic inequality is a choice
'The rules of the market economy had been written to serve the interests of the one per cent,' says Stiglitz
You're probably familiar with the phrase 'the one per cent,' which became forever associated — alongside 'the 99 per cent' — with Occupy Wall Street's protests against economic inequality in fall 2011.
But did you know 'the one per cent' first appeared in a Vanity Fair article written by Nobel-prize winner, Joseph Stiglitz, earlier that summer?
An economic system that doesn't deliver for the vast majority of... citizens is, in my mind, a failed economy.- Joseph Stiglitz , Nobel laureate
That article was based on Stiglitz's PhD thesis on economic inequality in the U.S., which has shaped much of his academic work. His latest book is called Rewriting the Rules of the American Economy: An Agenda for Growth and Shared Prosperity.
Stiglitz, who teaches at Columbia University, is currently in Vancouver to give the keynote address Friday at the University of British Columbia for the Lind Initiative program.
He sat down with Rick Cluff on CBC Radio One's The Early Edition to discuss what people can do about economic inequality.
How do you rationalize the fact we have bank executives getting paid tens of millions of dollars annually, while some people live on the streets?
You can't. That was one of the points of writing this book, Rewriting the Rules. What I try to show here is it's not the outcome of normal economic forces. It wasn't the laws of supply and demand that had suddenly changed to result in this increase in inequality.
What happened was, in the United States, and then other countries, the rules of the market economy had been written to serve the interests of the 'one per cent.' So they were changing the rules of corporate governance, the way we enforce antitrust laws.
There were some changes in the economy as well: globalization, network effects, association with new technologies. So there were both changes in our world, but most important, changes in the rules of the game.
You argue that inequality is a choice, not an unexpected outcome. What do you mean by that?
The underlying forces in terms of globalization, technology, are similar in all the advanced countries. But then you look around, you see how much more unequal things are in the United States than, for instance, in Scandinavia, with Canada somewhere in between. That tells you, it's not just the laws of economics — it's how our societies shape those rules.
Is it a choice of individuals, governments, or institutions?
It's a choice of our society, and therefore of our political institutions above all else. They pass the laws. They pass the rules that lead to these outcomes.
Let me give you an example. We tax people who speculate on land about half the rate people who work hard for a living. What does that do?
That encourages that kind of speculation but it also means those who are the land speculators, wind up wealthier and wealthier.
What we've seen is that the tax system, which is passed by our congress, parliaments, is a contributor to the inequality. At the same time, it's distorting our economy, leading to a less efficient economy.
I was lucky. I grew up in this period after World War II where there was this sense of solidarity.- Joseph Stiglitz, Nobel Laureate
Looking historically, the period of the United States where we grew the fastest, was the period after World War II, where every part of our society gained. Those at the bottom gained more than those at the top. But even the top benefited from this shared prosperity.
Now, what's happened since 1980 roughly, is that the top has done reasonably well, but not as well as they would have if we had shared prosperity. The bottom 80 per cent has had stagnant incomes over a third of a century.
An economic system that doesn't deliver for the vast majority of the other citizens is, in mind, a failed economy.
How feasible is it for an average person to change the mechanisms, the policies, that have supported this inequality for so long?
This is where citizen engagement is absolutely necessary.
Let me give you an example. Your previous government, along with the United States and others, negotiated the TPP [Trans-Pacific Partnership] in secrecy. So no one knew what was in the agreement.
As we begin to see the details of what those guys did in secret, we see the role that the corporate CEOs and the corporate lobbies had in shaping that deal.
It's not a deal designed to benefit ordinary citizens in Canada, the United States, the middle class. It's designed to actually increase the inequality in our society.
Are things getting better or worse?
Unambiguously, they're getting worse.
I was lucky. I grew up in this period after World War II where there was this sense of solidarity. Our country had fought a war, everybody pitched in. There was that moment, in the United States, in Europe, in Canada, where people felt together as a nation having fought this battle for their survival.
Today, it's so much, every person for themselves. They talk about excessively high tax rates. At that point, our tax rates were well over 80 per cent and no one was complaining. At that time, we had the G.I. bill that said every American that had fought in the war, which is basically every young American, could get as much education as they qualified for.
We are a so much richer country today than we were. If we could afford it then, we could afford it now.
Today, we're making other choices to make sure our corporations do better, that profits go to the top, that one per cent is doing very well. The 99 per cent is not.
This interview has been condensed and edited. To hear the full interview, click the link labelled: Economist Joseph Stiglitz on income inequality.