America has traditionally been known as the land of equal opportunity where the common man can rise to the top of society. Stiglitz offers powerful reasons why America is “no longer the land of opportunity” and that “the ‘American dream’ is a myth.”
Born February 9, 1943, Joseph Eugene Stiglitz is an American economist and a distinguished writer. He was awarded the Nobel Memorial Prize in Economic Sciences (2001) and the John Bates Clark Medal (1979).
Formerly, he was the senior vice president and chief economist of the World Bank. Stiglitz is an outspoken critic of the management of globalisation, free market economists (whom he refers to as “free market fundamentalists”) and international institutions such as the International Monetary Fund and the World Bank.
In The Price of Inequality, Stiglitz convincingly puts forward his argument that unrestrained power and uncontrollable avarice are writing an epitaph for the American dream. More so, the idea of the US being the land of opportunity has been dismantled by the contemporary tyrants - the one per cent.
The top one per cent of Americans control 40 per cent of the nation’s wealth. And, as Stiglitz explains, while those at the top enjoy the best health care, education, and benefits of wealth, they fail to realise that “their fate is bound up with how the other 99 per cent live.”
Recent global events have emphasised the anger embroiling in sections of the 99 per cent. This incipient global anger, as seen in Occupy Wall Street and Spain’s Los Indignados, is given shape, fluency, substance and authority by Stiglitz.
His intensions are not directed toward revolution, although he tells the one per cent that their time may well come. But, he believes that capitalism should be snatched back from free market fundamentalism and put to the service of many, not the few.
“A table, a chair, a bowl of fruit and a violin; what else does a man need to be happy?” This was Albert Einstein’s definition of happiness. It should have been a prosperous time for all after World War II. Indeed, it was if you were part of the one per cent. For three decades after the World War II, the one per cent enjoyed a healthy share of the US purse.
However, in the five years leading up to 2007, the top one per cent appropriated more than 65 per cent of the gain in US national income. In 2010, their share was 93 per cent. This did not create greater prosperity for all. On the contrary, much of this gain was “rent seeking”, not creating new wealth but taking it from others - a modern wild west.
In the last 30 years, the bottom 90 per cent of the US (figures that resonate in the UK) have had a growth of 15 per cent in their wages, whilst the one per cent have enjoyed the privileges of a 150 per cent wage increase.
It is widely believed that hyperbolic salaries are necessary to retain high achievers. Except, as Stiglitz points out, the rewards are more often for failure. The inequality gap is becoming a chasm. Stiglitz explains how, in the US, those born poor will stay poor. Yet, nearly seven in ten Americans still believe the ladder of opportunity still exists.
Stiglitz is one of a growing group of academics and economists, among them Paul Krugman, Micheal J Sandel (What Money Can’t Buy) and Raghuram Rajan, who are trying to inject morality back into capitalism. He argues that we are reaching a level of inequality that is “intolerable”.
Rent-seekers include top-flight lawyers, monopolists (Stiglitz refers to the illusion of competition: the US has hundreds of banks but the big four share half of the whole sector), financiers and many of those supposed to be regulating the system, but who have been seduced and neutered by lobbyists and their own avarice.
GDP is an unsatisfactory measure of progress, he believes. Stiglitz wants to see metrics that include the cost of inappropriate use of resources. He illustrates the price of immiseration and unfairness. The management of Firestone Tires demanded much longer hours and a 30 per cent wage cut.
The demand created conditions that led to the production of many defective tyres. Defective tyres were related to more than 1,000 deaths and injuries and the recall of Firestone tyres in 2000. Unfairness affects lives, productivity and the security of the one per cent, according to Stiglitz.
The Price of Inequality is a big eye-opener into the destruction of the common man’s dream. Stiglitz writes: “Paying attention to everyone else’s self-interest - in other words to the common welfare - is in fact a precondition for one’s own ultimate wellbeing… it isn’t just good for the soul; it’s good for business.” Unfortunately, that’s what those with hubris and pleonexia have never understood. We are all paying the price.
Lachlan Munro Murray is a Scottish writer living in Salalah.