Economics

Het tijdperk van de kwetsbaarheid

Oct 13, 2014 Joseph E. Stiglitz

NEW YORK – Twee nieuwe studies laten weer eens de omvang van het ongelijkheidsprobleem dat de Verenigde Staten plaagt zien. De eerste, het jaarlijkse inkomens- en armoederapport van het US Census Bureau, laat zien dat, ondanks het vooronderstelde herstel van de economie uit de recessie, de inkomens van gewone Amerikanen blijven stagneren. Het gemiddelde inkomen van huishoudens, aangepast aan de inflatie, blijft beneden het niveau van 25 jaar geleden.

Men dacht vroeger dat de grootste Amerikaanse kracht niet zijn militaire macht was, maar een economisch systeem waar de hele wereld jaloers op was. Maar waarom zouden anderen proberen een economisch model te evenaren waarin een groot deel van de bevolking (een meerderheid zelfs) zijn inkomen heeft zien stagneren terwijl de inkomens aan de top naar boven geschoten zijn?

Een tweede studie, het Human Development Report 2014 van het Verenigde Naties-Ontwikkelingsprogramma (UNDP) bevestigt deze uitkomsten. Elk jaar publiceert het UNDP een ranglijst van landen op basis van hun Human Development Index (HDI), die behalve inkomen andere dimensies van welvaart meeneemt, waaronder gezondheid en onderwijs.

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Joseph E. Stiglitz

Writing for PS since 2001
322 Commentaries

Joseph E. Stiglitz, a Nobel laureate in economics and University Professor at Columbia University, is a former chief economist of the World Bank (1997-2000), chair of the US President’s Council of Economic Advisers, and co-chair of the High-Level Commission on Carbon Prices. He is a member of the Independent Commission for the Reform of International Corporate Taxation and was lead author of the 1995 IPCC Climate Assessment.

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0 Comments on this paragraph, 38 Comments on this article

Per Kurowski Oct 19, 2014

The most important frontline in the fight against inequality, lies not in the redistribution of wealth but in the assurance of equal opportunities... especially since that also helps to create more wealth than can later be distributed.

And one of the real killers of equal opportunities, and of the economy, are current capital (equity) requirements for banks which, by means of their credit-risk weighting, impedes the fair access to bank credit of those perceived as “risky”, like small new businesses.

We have entered the age of silly and dangerous risk aversion.

http://subprimeregulations.blogspot.fr/2014/10/janet-yellen-are-you-really-so-unaware.html
- Ashok Meena Oct 20, 2014
  
  I agree that providing "equal opportunities" is the most important of the responses that the world should be considering. However, it is very difficult to ensure that equal opportunities are available to each individual when he has to transact his daily life with other individuals, who basically are all unequal!
  
  Providing the economic opportunities to all through financial institutions is a very good idea, but, given the fact that they have to function within existing norms of risk-reward structure, we cannot expect them to take the plunge without action from Political leadership. Such action from Political leadership in today's environment does not appear to be available.
  
  Just a couple of thoughts, that I wanted to share....
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flip doubt Oct 17, 2014

My opinion is that this is directly related to Corporations having personhood status. The decline of Unions is a great example. The middle class came into existence largely because of unions. To fix the present nightmare will not be easy and that is the great thing about unions is the power of many.
One more thought : I feel that the U.N. is a joke as a whole. We should have nothing to do with it unless it emulates our system of elected officials and juried courts as opposed to arbitration and unelected officials. No country should lose any rights in order to join the U.N.and should grow rights for its members. We are brainwashed into acceptance of this nightmare as if it is the only choice. We accept the illegal spying or the thug policeman will put us in prison. We have legal slavery by way of the prison industries. We have given the government incentive to lock us up in the form of private prison quotas and companies paying a dollar an hour to prisoners. Prior to 1953 all prisons in america were self sufficient and cost to house a prisoner was pratically nothing.
End the spy agencies and turn the cameras around on the public servants that run our government for us.
Snowden should be treated as a hero.
We do not have to accept a government that is predatory and its thug police. Imagine if everyone that makes less than 100,000 a year paid no income tax .
That would do more to stimulate the economy than they would ever admit.One world government is a slave world with a race to the bottom for any country stupid enogh to play along.
IMF U.N. NSA FED+ corporate personhood= slavery
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David Martin Oct 17, 2014

The only way to revise the tax code is to change the majority in the House of Representatives. To continue with a Republican majority, is to continue with this legislation by blackmail, as we acquiesce and allow them to legislate more economic stimulus to the wealthy and corporations, at the expense of middle class and lower economic class Americans. This continuation will truly lead to our accelerated demise, unless Americans wake up and see the divisive tactics used to keep malfeasant Congressional Representatives in office, for what they are; tools to do the bidding of the wealthiest and not the voters that put them in office, and regardless of the destruction to world markets their acts will bring.
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David Martin Oct 17, 2014

Quick Fix: Forced Taxation for the million and billionaires, without loopholes. Inequality in taxation is a major contributor to economic inequality. Also, a monetary limit on wealth inheritance, or a large taxing. They broke it, now pay the choir. It's time the middle and lower classes stop carrying the full load.
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David Martin Oct 17, 2014

Correction below, "...loud commercials in our homes on our TVs, regardless of the outcry from consumers to tone it down, loud noisy vehicles that guzzle gas, in poorer neighborhoods..."
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David Martin Oct 17, 2014

I think this has been in the making since Ronald Reagan was President. A New World Order was covertly ushered in, in which a select wealthy minority of mostly Conservative Republicans and some Conservative Democrats, orchestrated a 30-year plan to slowly take control of every branch of government, within the United States, so that they could eventually wield away at our Constitutional Rights, by manufacturing fear campaigns to persuade Americans to willingly give away their rights and hand them over to this group, disguised as our public officials, but who actually are wealthy civilians, whose whole purpose was to sour our belief in government, hand power over to them, and forever monopolize power and resources. We are then doomed to live in a cast system that will eventually crash, because of this impractical distribution of wealth, leading to unrealized growth, because no one, but the wealthy have the money to buy the products, or the jobs to keep the wheels of society turning. It’s as if we have been taken over by absolute morons who have a fetish for causing pain and self-destruction.

They have overloaded our minds with various visual stimulations, so we that we have been conditioned into becoming morally corrupt (Apathy toward our fellow man,) our priorities have been confused (immediate self-gratification rather that long-term-gratification working toward a goal that includes all of our interests,) noise pollution so we cannot think (load commercials, load noisy automobiles in poorer neighborhoods and in public spaces, while wealthy areas are much quieter and larger, and while the wealthy have succeeded in taking ownership of most of the resources, we have been constantly been the victims of divisive propaganda, continually sparing with each other for the left-over scraps, by the same line-up of political representatives to choose from, cycle after cycle.

It’s so simple for me to see, but my voice is never heard, or when it is, it is then quickly silenced by the conditioned masses, conditioned to self-police each other to keep us divided. Our society has become a joke.
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ERISA Nation Oct 16, 2014

Like most Americans I eschew any party affiliation. The lack of a public option dooms Obamacare and that failure lies at the alter of political expediency. The Dems controlled all branches but couldn't get this, or mandate states to participate.
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Adrian Lucas Oct 16, 2014

The mystery is that it takes political entities (United States; EU), the political parties of those entities and registered voters (for US President, US Congress, European Parliament) so long to turn facts, and the analysis of those facts, into political actions in the form of policy proposals, the going-to-market of those policy proposals, and the mobilization of voters to vote for the political parties sponsoring those policy proposals. Will we all be dead, or just bankrupt, before political parties have woken up? But at least Joseph Stiglitz is putting facts on the table, and providing analyses of those facts, and until someone produces counteranalyses of those facts, and/or counterfacts, the analyses of Stiglitz remain the highest-quality raw material for inventing new policy proposals.
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Enrique Massot Oct 15, 2014

This may indeed part of the so many times predicted fall of the empire. A very clear way of presenting what many see in everyday's reality in the U.S.
The obstacles to implement a health care that protects all citizens independently of how well insured or how much money they have in the bank is a blatant example of a country that has failed to grasp the concept of social solidarity.
The United States' health system, in addition, is incredibly expensive in terms of administration costs. Paperwork is nightmarish.
None of this is known just north of the 49th parallel. Canada has a universal health care into which everybody puts a bit and the sick get the care they need, independently of their economic standing. While not perfect (some wait lists for elective surgery are long) , it is incredibly simple. But I guess this would be dismissed as Socialist or worse by the makers of public opinion. The Communist scarecrow was the genial invention the upper classes created to keep the poor down.
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Rodrigo san Jorge Oct 15, 2014

Joseph is - hands down - my favourite and arguably most knowledgeable economists on the planet, so far be it from me to presume I know anything about economics that he doesn't. However, I might know something about human behaviour that could shed some light for him on the question of why, "others seek to emulate an economic model by which a large proportion – even a majority – of the population has seen their income stagnate while incomes at the top have soared?" Again, he will already know this, but the simple reason is, humans are greedy and they are greedy because of their fear of being in a position of need. Those that propagate the economic models Joseph speaks of are those at the top, the policy-makers. The vast majority of them care very little if those at the bottom starve, as long as the top is well-nourished. Historically, however, this disparity has always led to self-destruction. Rarely has it self-destructed as quickly as the American model.
- Arda Ohannessian Oct 23, 2014
  
  Also, the mainstream media go to the political and economic leadership not only for the economic 'news' but also for the comment on the economic 'news', thus giving us a slanted version which is basically policies for the benefit of the very few but presented as general truths for the many.
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ROBERT BAESEMANN Oct 15, 2014

Texas leads opposition to the ACA and has refused Medicaid expansion. These programs shift the burden of providing health care to the uninsured by diverting the uninsured from emergency rooms to other points of access to health care. So the overcrowding of Texas ER capacity continues unabated. While Texas complains about the support it receives from the CDC, Texas has very willfully undermined attempts to improve public health in the State. All of this despite the fact that the ACA and Medicaid only shift the burden of paying for health care to all tax payers and limit the burden on hospitals and doctors who now are forced to provide services for free too to the uninsured.
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Procyon Mukherjee Oct 15, 2014

The article hinges on a very central point: the issue of downward mobility and vulnerability of some cohorts to move from subsistence to destitution when faced with major illness in the family. It is a very valid point that given the numbers on median income we are yet to see net mobility numbers above this threshold to move in the positive direction as student debt and other credit card debts have continued in the trajectory only very steeply.
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Wayne Davidson Oct 14, 2014

The house of public.
Cut from caste's corpulent cloth they stink of sloth and wallow in their wanton ineptitude, these intuitive mortals, driven to the darker edges of destiny and sacrificed to the vanity of the sybarites. RW
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Eugene Devany Oct 14, 2014

"median wealth fell more than 40% from 2007 to 2013."
Piketty uses a comparison of the top 10%, the next 40% (approximating the middle class) and the bottom 50%. The "median" is not very meaningful when the spread is so wide.
Between 1995 and 2010 the top ganed a 75% share of wealth, the middle class had a 24% share (down 8%) and the poorer half of the population now share just 1% of the wealth (down 70%). See http://www.taxnetwealth.com/01_The_Wealth_Gap.aspx

The G.D.P. is deceptive particularly when one considers that individual wealth increased by almost 50% in just the last 6 years going from $56 trillion to $82 trillion. Most of this was untaxed returns to capital fueled by increases in asset prices (i.e. the stock market).
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Steve Rodriguez Oct 14, 2014

It's funny, no one is on a plane to Norway, or Switzerland, when they contract Ebola. These studies are the same left-wing anti-American global groups from foreign countries who, like the Olympics, are either bribed for their countries position on the report or simply hate the US. They are meaningless. I concede the US has fallen in areas of education, and that inequality may be higher here than elsewhere, and I CERTAINLY believe that the rule of law and freedom has eroded under the current messiah occupation regime, but no one ever bets against the US and wins.....ever.
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Ed de Bruin Oct 14, 2014

When a society fails to put its great assets to work for the majority of its citizens, it will one day collapse. At best, the society may last until its great assets are depleted. The great assets of the United States of America are its democracy, its laws, the entrepreneurial freedom and spirit, its universities and its natural resources. THese assets have created abundant wealth, which has not been distributed amongst the majority of its citizens. That is puzzling. Many of these assets are free, available at relatively low cost, or publicly traded. Why don't the American citizens seek exposure to these assets? I don't know the answer. We Europeans are always struck by Amercia's consumption. We applaud it, because many services and products consumed are European.

To me, the inequality is a consequence of the individual freedom to choose between consumption today, and investment today for the consumption at a later stage of life, which is capitalism in its barest form: The freedom to choose between consumption today and investment today.

Why do American people prefer to consume, even borrow for consumption, instead of invest? That question needs to be studied by American economic philosophers.
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Robert REYNOLDS Oct 14, 2014

America is very fortunate to have economic commentators of the stature of Joseph Stiglitz who is brave enough to tell the American people the truth about the dangerous trend toward inequality and rampant exploitation that has been taking place in their economy, and as a consequence, in their society. It is unfortunate that more of his audience do not listen.

It bemuses me to read the views of those, and there are many of them, who still believe in free market, laissez-faire voodoo economics. In this simplistic fantasy world, which may work on Planet Zircon, everyone is equal and the only thing that holds people back is there innate indolence. Supporters of the free-market seem to imagine (and the key word here is ‘imagine’) themselves as god’s gift to society and that they and the super-rich are worthy of everything that comes their way.

Having said that, I would add that I would not begrudge a hard-working person an appropriate level of remuneration for a job well done. However I defy anyone to justify the hideously obscene levels of remuneration that many company executives pay themselves. Capitalism at this level is nothing more than a legalized extortion racket. At this level the rich are more likely to be deceitful, duplicitous, cunning and downright Machiavellian rather than hard-working.

Possibly it may be the case on Planet Zircon but here on Earth, the ‘we are all born equal’ model is totally flawed. We are simply not all born equal. For example, some people are born with, or perhaps develop conditions such as Bipolar Disorder, Schizophrenia or a host of other mental disorders ranging from mild to those that require institutionalization. As another example, I have heard of a person who appeared to be lazy and indolent but after a medical examination was found to be infected with blood born parasites.

My experience with many business and economic types is that they rarely have any scientific background. They have no understanding that as a result of the fact that we are sexually reproducing organisms, variation exists amongst the population. This is what makes evolution possible. Homo sapiens are simply not clones.

We have experienced other times in history when the rich and privileged treated the poor with contempt, for example in France in the 1780’s and in Russia in the early 20th century. The pathway to an unequal society is one that we tread at our peril.
- Robert REYNOLDS Oct 18, 2014
  
  Douglas, thank you for your response.
  
  No, unfortunately I am not the one who decides what an appropriate level of remuneration is. Without wishing to sound arrogant I would say though that I believe that life for millions would be better if I was.
  
  I have to say Douglas that I do not share your view that levels of pay should be ‘left to the market’. Over the millennia ‘the market’ has shown itself to be a vicious and unforgiving force which will allow the strong, cunning and devious to prevail.
  
  Implicit in your post is the suggestion that without the prospect of financial inducement people will not invent any ‘good stuff’, or that they will not be interested in working hard at all. With the greatest of respect Douglas, your paradigm does not ‘hold water’. Of course there will be some talented mercenary individuals who will not work or produce anything of value unless they are richly rewarded. However there are countless instances of others who are not motivated in this way. For example, there have been many extremely valuable scientific discoveries which were made by people working in quite poor circumstances. If you have any contact with those in the scientific community you would be well aware that the prime motivation for most of them is not money. If time and space permitted I could also talk about the contribution to society made by those who volunteer their services in many ways that are also very valuable to society.
  
  I do not mean to be offensive Douglas but I often find individuals whose only motivation for producing anything is financial reward, to be fairly hollow and superficial. Of course we all need to earn enough money to at least put food on the table, a roof over our heads and clothes on our back (something which an increasing number of Americans in your wonderful ‘free-market’ economy are finding it difficult to do). To suggest that without the hideously obscene levels of payment received by so many corporate CEO’s, that nothing of much value will be produced is disingenuous and naive.
  
  I must admit that I find it interesting how so many who are beguiled, captivated and mesmerized by this free-market ideology, embrace it with such religious fervor. I guess that it is a simplistic notion which is used in business propaganda and in sections of the capitalist media to justify the behavior of industrial robber barons.
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- Douglas Knauer Oct 18, 2014
  
  Robert, you give yourself away when you say you do not "begrudge...an appropriate level of remuneration" to some hard working soul. Are you the one who gets to decide 'appropriate'? I prefer letting the market, with all its faults, decide. If our benevolent government wants to tax all that away, that's within its scope. But then that hard working soul can make the decision to work ...or not to work, the latter bringing the risk that our society might miss out on some really good stuff because that hypothetical soul decided it was easier to take that monthly government check rather than invent something.
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- Robert REYNOLDS Oct 16, 2014
  
  Walter I fully endorse your remarks. It was remiss of me to overlook the points that you make.
  
  Best regards,
  
  Rob
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- Walter Gingery Oct 15, 2014
  
  I would go further and point out how innate differences are magnified by material and social advantages. A person born to a stable household with excellent educational and health services available, to name only a few, enjoys a distinct advantage over one who does not.
  
  We've all heard about our previous president who was "born on third base and thought he hit a triple."
  
  Bill Gates has been extraordinarily successful, but what is conveniently forgotten in accounting for his success is the extraordinary advantages he enjoyed. His mother was a timber heiress and at birth he received a trust worth $1 million. In addition, he went to an excellent private school (Lakeside School in Seattle) and had available a fine public school, the University of Washington.
  
  Don't insult our intelligence by claiming that his life would have been the same in their absence.
  
  And finally, the well-off enjoy the inestimable advantage of making the "rules of the game." Their wealth allows them to buy influence at every level. If your game is tennis, it helps to be one who decides what the court looks like.
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Ted Peters Oct 14, 2014

Tendentious and unworthy of a Nobel laureate. How about some creativity for a change... instead of the same old upper east side FDR era rehash?
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John A Werneken Oct 14, 2014

Phoey. It is PECISELY the outrageous laws and regulations enacted to allegedly reduce vulnerability that exaggerate both vulnerability and inequality.
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G. A. Pakela Oct 13, 2014

Upward mobility is more myth than reality? How did Stiglitz get to where he is today? There is a top 1% in every field of endeavor, including professional bowling, that individuals seek to attain. A successful university professor that attains tenured status and full professorship at a major university is surely in the top 1% and is compensated accordingly. I do not believe that there is any high level position that you can attain in the U.S. without demonstrating merit. Inequality is ubiquitous and has been for all time. Thankfully, that inequality in the U.S. is expressed in peaceful competition to achieve rather than how it is in most of the unfree world.
- Robert Snashall Oct 14, 2014
  
  Guys, you do realise how immensely cretinous your arguments are?
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- Vineet Jain Oct 14, 2014
  
  The point raised by Prof. Joesph E. Stiglitz is that median income has decreased over the years. The major cut of 40% in median wealth (adjusted with inflation) can be seen when current economy is compared to economy 6-7 years back. So, a large number of people have fewer surpluses in their hands to fight back if they are hit with a sudden expense like on illness, loss of job, and any other unforeseen expense. The austerity oriented policies of government are not favorable because considerable chunk of population stay vulnerable due to inefficiency of these policies. These flawed policies need to be revised so as to achieve higher degree of economic equality, social equality, and political equality.
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- Lawrence Fassio Oct 14, 2014
  
  While Professor Stiglitz is probably in the top 1% of earners, with an income of $388,905 needed to qualify for that exclusive bracket in 2011, there are obviously no other tenured full professors at major universities who can attain that level of income without some other source of additional income ( as is the case with Prof. Stiglitz).
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Zsolt Hermann Oct 13, 2014

I think one of the main problem is what we keep measuring.
The "growth", the "health" of each economy is measured by virtual numbers, and those statistics, numbers have long time been separated from the real life quality of the actual people.

And there is no difference in between the US or Europe, there might be small, superficial, cultural differences, but the constant quantitative growth, market performance pursued everywhere has nothing to do with how people live their lives, they are brainwashed to work and consume, chasing 'pleasures", "goods" they do not actually need.

We are living in a real life "Matrix", which is now exhausted since we have long left the natural foundations our real life is based on.
And it is mainly the "human resources" that are exhausted, symbolized by inequality, unemployment, intolerable debt burden, depression, strained societies, unrest, wars, etc.

Constant quantitative growth is unheard of in nature where dynamic equilibrium, homeostasis is the ruling principle.
even our human body stops growing after maturation, growth beyond that point is called cancer.

We have to change the whole paradigm our life is based on if we want a predictable and sustainable future.
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Marc Sargen Oct 13, 2014

Why do we so often here this rhetoric & description:
"Despite having academically & socially approved inclusive policies, Europe does not generation the utopian growth & society that is foretold. This is mostly do to politicians turning from the true faith & making austerity cuts"
Europe has overall decided to make social welfare a more significant social roll, OK. Like any social goal, it comes with costs & that cost has been lower growth & productivity. The reality is that these costs seem to make Europe LESS productive than other countries & many mean that Europe will have a more equal but slower growing/slightly declining standard of living.
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Gautam Shine Oct 13, 2014

Where was this "higher economic growth" in Europe prior to the crisis and austerity policies? The "good systems of social protection" (relative to US) have existed for several decades, no?
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Mr. Comment Oct 13, 2014

Typical slanted article. The author seems more interested in having America live equally poor than unequally rich. The question isn't what's the gini coefficient - its what's the median household income - which the US still exceed Europe. For the record US is No. 4, Greece is No. 27. We can all be equal and poor. Despite this useless academic focus on equality - most Americans intuitively understand that equality of opportunity is important while equality of outcome isn't.
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Michael Public Oct 13, 2014

To me, inequality is a symptom. The world is drowning and you are describing the water. I would be more interested in an article that tries to find the root causes and to suggest what could be done, even if they are a pipe dream. I am always reminded of that Einstein quote paraphrased here as "We will not solve the problems of today with the same thinking we used to create them."
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Simon Matthew Oct 13, 2014

It does not make any sense to say upward mobility is a myth while downward mobility is widespread. If there is downward mobility, there is upward mobility, by definition.
- Simon Matthew Oct 13, 2014
  
  @CURTIS. I don't think you understand what I'm saying. In any ranked distribution there must be downward mobility when there is upward mobility, and vice versa. This is an a priori truth, like 1 plus 1 equals 2.
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- Curtis Carpenter Oct 13, 2014
  
  That's a bit like saying that death proves the necessity of resurrection -- a nice thought, but not much evidence to verify it. Entropy happeneth to us all.
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- Jose araujo Oct 13, 2014
  
  I think the case was being made for the middle class.
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