But these decisions bring with them consequences, some of which have painful effects on large segments of society. But as Joseph E. Stiglitz explains in this best-selling critique of the economic status quo, this level of inequality is not inevitable. Joseph E. Stiglitz is a Nobel Prize–winning economist and the best-selling author of Globalization and Its Discontents Revisited: Anti- Globalization in the Age of Trump, The Price of Inequality, and Freefall. If their goal is to raise at least $115, how many pastries must they sell at … Introduction to Poverty and Economic Inequality; 14.1 Drawing the Poverty Line; 14.2 The Poverty Trap; 14.3 The Safety Net; 14.4 Income Inequality: Measurement and Causes; 14.5 Government Policies to Reduce Income Inequality; Chapter 15. He shows how each of these trends in turn increased further the amount of inequality throughout American society. Corporations, banks, politicians, lawyers, have all experienced sharply decreasing levels of public trust over recent years. Terrific book to learn about how economy works not only in US but Europe too. Tax reductions for the wealthy were part of this plan, but the wealthy do not spend nearly the proportion of their incomes on ordinary goods and services that average wage earners spend. They constitute, in Stiglitz’s phrase, “sustainable monopolies.”. 2012. [JR] J. J. Rousseau, A Discourse on Inequality: Part 1 [AS] A. Sen in C. M. Henry (ed), Race, Poverty and Domestic Policy: “From Income Inequality to Economic Inequality” [JS] J. Stiglitz, The Price of Inequality: Chapter 3, “Markets and In-equality” and Chapter 5, “A Democracy in Peril” INTERNET RESOURCES …There is an alternative set of policies and institutional arrangements that holds out the promise of not only better and more stable growth, but also of a more equitable sharing of the benefits of that growth. Chapter 7 Justice for All? In 2007, prior to the financial crisis of 2008-2009, the wealthiest one-tenth of 1 percent (one for every one-thousand Americans) together possessed more than one-third of all American wealth. But “rents” can take very subtle and indirect forms too. Stiglitz turns next to consider how high inequality, and the perceived injustices created thereby, negatively affect the motivation and behaviour of employees and their families. In it, Stiglitz addresses the question of how, in a democracy that intends to give each citizen one vote, the richest 1 percent of that country could so successfully shape the government and economy to serve primarily its own interests. At this point in The Price of Inequality Stiglitz is all but finished with his descriptions of the nature and “costs” of excessive inequality in America. The Price of Inequality: How Today's Divided Society Endangers Our Future, Normally a supporter of free markets I found myself mostly agreeing with the author. Chapter 4 Why It Matters 83. Stiglitz begins his fourth chapter with the following observations: Widely unequal societies do not function efficiently, and their economies are neither stable nor sustainable in the long term. Recently, corporate investments in basic research have fallen far short of what is needed to restore employment and market demand. Stiglitz then lists some of the reforms that could restore electoral fairness. For some, these sensitivities are conscious and troubling. 146]. z + 27 < 16. He describes, …a process of disempowerment, disillusionment, and disenfranchisement that produces low voter turnout, a system in which electoral success requires heavy investments, and in which those with money have made political investments that have reaped large rewards—often greater than the returns they have reaped on their other investments. when only certain companies are capable of supplying what is wanted, or only a few are allowed to supply it) then governments end up paying “rent” to the owners of their necessary supply chains, “rent” that comes in the form of the inflated prices that those suppliers can and do command. The effects on worker motivation in exploitive working situations are neatly summarized by an old Russian adage: “They pretended to pay us, and we pretended to work.” Research has shown that workers paid a fair and livable wage are much more productive than those paid less. The simple thesis of this chapter is that even though market forces help shape the degree of inequality, government policies shape those market forces. It overestimates the importance of financial incentives. By extension, every monopoly, every government subsidy, every trade restriction that reduces competition, every advantage you might enjoy by virtue of special ownership or special position, yields a form of “rent-seeking” income. In 1887 England’s Lord Acton wrote: “power tends to corrupt, and absolute power corrupts absolutely.” Leopold Kohr, in his 1957 book The Breakdown of Nations, demonstrated that history has repeatedly confirmed the psychological, the commercial, and the political truth of Lord Acton’s dictum. Large portions of society are denied easy access to better-paying jobs, often including women, immigrants, those who are “under-educated” and members of racial minorities. Laws like the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 were meant to stave off another Great Recession but did not “far enough,” as federal regulators did not ever fully punish the banks for their fraudulent (and sometimes criminal) … In the spirit of a grand-scale New Year’s resolution, it was a time for lofty aspirations and dreams of changing the world. So consumer demand and jobs remained abnormally low. It is the Central Bank (the “Fed”) that administers the policy decisions designed to achieve these goals. Here particularly, the wealthy can prevent unwanted candidates from appearing on the ballot. ... should result in a lower equilibrium wage for high-skilled labor. Stiglitz concludes: Our hypothesis is that market forces are real, but that they are shaped by political processes. The “Joneses” keep falling behind the Joneses with whom they compare themselves. Average middle-class incomes continued to stagnate, measured in constant dollars (i.e. Similarly, if a government gives you the sole license to import sugar at a price below the domestic price, and if you sell that sugar at the domestic price for a profit, that profit is called rental income. Stiglitz writes: …globalization, if managed for the 1 percent, provides a mechanism that simultaneously facilitates tax avoidance and imposes pressures that give the 1 percent the upper hand, not only in bargaining . Much of the inequality that exists today is a result of government policy, both what the government does, and what it does not do. A chimera, but trickle-down [ consumerism ] is very different from current. With data drawn from recent economic history of ambitious goals set by UN nations. “ austerity ” policies, with less diversity among students and their to... Stiglitz sets the stage for what will become his recipes for reducing inequality economic history here particularly the... 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