Inequality is a Choice - Joseph Stiglitz

This is an interesting article by Joseph Stiglitz.

http://opinionator.blogs.nytimes.com/2013/10/13/inequality-is-a-choice/?ref=opinion&_r=0

If you are not familiar with the author, he is a world renowned economist –  Noble prize winner, and one of the founders of the approach called “behavioral economics”.
 https://en.wikipedia.org/wiki/Joseph_Stiglitz
My point, he is a wise and learned fellow among economists, and we would do well to pay attention to what he says.

I have been reading a bit in economics of late. If you have been following along here at all, you would know that I tend to think that economic disparity is the result of our cultural mindset – our world view. Dr. Stiglitz differs on that. In this little piece, he makes it clear that a large part of our economic disparity comes from the actions of our government. Given that our form of government is drawn from our cultural world view – that makes some sense. But  . . . the problem is that the once champion world view that dominates the US culture, seems to have led us to a situation where our government is now inhibiting wealth creation, and fostering rent seeking. Our sense of “individualism” has finally triumphed over our “commonality”, and we are heading down the path to increased poverty comparable to that of many developing nations.

I have despaired of changing world views, but there is no reason we can’t change our government. We have to get back to the sense of commonality, the common good. And let go of this protection of the richest and most powerful.

As he points out in this article, although income inequality had been falling around the globe and in the US, that trend has stopped and reversed. The US, in particular, is leading a new wave of greater and greater income inequality. In virtually all developed nations – there are a few exceptions – income inequality has grown enormously, with the top 10% benefiting immensely, and the bottom 10% become even worse off. Global poverty and US poverty is growing.

Some would argue that the trend is automatic. They would say it is the result of globalization and free movement of capital and services. But Stiglitz points out that it is the result of conscious choices of our government. In the US, it is the result of tax breaks for the rich, easing of regulations on the financial sector, and the lack of adequate investment in our education and health care infrastructure. This inequality is eroding our democratic system. It is the root cause of our “recession” – the lack of investment, and the lack of disposable income in our middle class. And the touted “austerity” programs are only making the problem worse.

American “rent seeking” has gone global. That is where those who can seek to benefit by manipulating the system, by getting a larger share, not by making the system work better, or the pie larger – truly growing wealth. Avoiding taxes is one modest example – as even the best and brightest do in major ways. Apple’s tax avoidance is legendary. While they benefit enormously from government programs which create the technology they use, they pay as little as possible in taxes, using all the tax avoidance schemes created by our fearless leaders.

The worst outcome is the poverty of our children. In the US, 1 in 4 children live in poverty. In Spain and Greece, it is 1 in 6. In Australia, Britain and Canada, 1 in 10. We are a disgrace among developed nations!

Bottom line – we have chosen this path, and the outcome will not be a place where any of us want to live – even those at the top. As Red Green says, we are all in this together. If we do not increase our investment in ourselves, the few rich at the top will have to find someplace else to live. They won’t like it here anymore than the rest of us.