The essence of this book can be summed up in three key facts. First, the very rich are getting richer faster than the rest of society (thus inequality is growing). Second, money talks. Third, the very rich generally use that money to look after the very rich. Stiglitz is a Nobel Prize winning economist who tackles the causes and consequences of income and wealth inequality in the United States. Although the US is the worst, the story has much to say for most industrialized countries, including Canada. The book has many chapters that explore the issue in depth, often covering the same ground due to the interrelated nature of the topics (e.g., macroeconomics is related to politics, both are related to laws, all are related to markets and money, etc.). I'll list a few of his arguments to give a flavor of what the book is about.
First is the fact that the system is geared by the rich for the rich- particularly bankers/financial workers. The market crashes of the last few decades have made this clear. The creation of super packs in the US has allowed money to have an unprecedented and unfettered access to US politics. In the UK, one can witness Rupert Murdoch's blatant manipulation of news through his media empire in order to influence the election of pro-rich governments. In Canada, Harper killed the public subsidy for political parties, placing a greater emphasis on private donations that naturally favors parties who cater to the rich. The new TFSAs in Canada are great investment vehicles, but most Canadians can't afford to top them up on top of RRSPs, so their biggest benefits are reserved for the wealthy who don't need those benefits. I should point out that Stiglitz attacks Obama and his administration repeatedly, as they clearly have often put bankers ahead of citizens. But it is true that the most pro-rich politicians are on the Right, and it is these politicians who get (deservedly) the majority of Stiglitz's blame.
Second is that inequality is bad for everyone, including the very rich (in the long run). Because it is highly inefficient. Trickle down economics is clearly a failure. Both the Reagan and the Bush tax cuts for the wealthy did nothing other than create toxic bubbles and wealth for the wealthy. The reasoning is quite clear- the rich can't spend all their money on the normal economy. One very rich person can only spend so much on food, electricity, gas, etc. Whereas those who aren't very rich tend to spend most, if not all, of their money, thereby stimulating the economy. The very rich invest it in risky, speculative investments for which they reap the gains and the public pays the costs. The similarities between 2007-8 and the Great Depression of the 30s is shockingly clear. By having more equal wealth, more money goes into a healthy, productive economy that produces goods and services rather than moves money around to create more wealth for the wealthy.
Third is that the game is not equal. This isn't about being jealous of the wealthy. I'm much wealthier than the average Canadian. I don't begrudge other people being wealthier. But, the system should be fair to all. It isn't. What is the best predictor of becoming a doctor? Good grades? Effort? Caring? None of the above- it's parental income. Who can afford being an intern with little or no pay for two years just to get valuable job experience? Who can afford increasing tuition? Who gets access to media figures and politicians? The wealthy. The system is clearly geared towards favoring the wealthy, which is a disturbing and self-reinforcing problem. Economic mobility (the ability to move up or down the wealth ladder) is lower in the US than in virtually all other developed countries whereas it is highest in countries with relatively socialist policies (i.e., policies that emphasize equality).
Fourth is that the supposedly free market isn't free and supposedly efficient markets aren't efficient. They are manipulated and tampered with by the rich. The fact that banks became Too Big To Fail illustrates this perfectly. As did the huge tech and housing bubbles- bubbles shouldn't exist in an efficient market with a free flow of information. But the information wasn't free, it was controlled, hidden, and manipulated by bankers and their allies. Milton Friedman's Chicago-style theory of economics have been tested and found to be false. At least in Canada we had the good sense not to deregulate the banking industry which is largely why we have been spared the fate of the US and much of Europe.
Fortunately, Stiglitz proposes a host of solutions that can address each of these concerns, as well as others. Raising taxes on the rich (including estate, dividend, and capital gains taxes that primarily benefit the rich), reducing "rents" given by the government to corporations (e.g., selling public goods off for much less than their actual worth), increasing public investment (particularly education), enforcing and creating strong laws and regulations, and using economic theories aimed at controlling employment rates, rather than inflation, are just some examples.
As you can tell from this review, there's a lot of meat in this book. Even if you for some reason I can't fathom don't agree with the book, it is packed with enough information to allow anyone to critically evaluate their thoughts with current data and theory. The repetitiveness comes from the fact that so many of the topics are related to each other, which isn't a fault of the author, other than perhaps he could have been more succinct. But perhaps it's worth reading more than once why the US, Italy, Greece, Spain, Ireland, the UK, and others have found themselves in economic dumps. It didn't happen by accident. It happened because the very rich deliberately used their growing power to tilt the system in their favor at the expense of everyone else. No one is arguing that everyone should be equal, or that there shouldn't be anyone wealthier than anyone else. Only that the system be fair, open, and aimed at helping everyone equally. What individuals do with that help is up to them, and should determine their wealth. That kind of fair shake is something I think everyone can agree with, which makes this book an easy book to recommend.
on September 21, 2012
This man is not just academically qualified and politically experienced but very highly motivated on a social, public interest level. A while back he wrote a piece in, I think, the New Yorker, in the same vein as the book, and a critic commented that the article was just a set of unsubstantiated opinions, worthless. On the contrary, consider that this book of 400-odd pages contains about 100 pages of back-up, fine-font notes, consisting not only of his own writings but cross-references to studies, litigation and authoritative articles from all manner of sources. In my view it's a well-balanced approach to a very difficult, controversial subject which should be read and digested by anyone who makes any pretense of addressing the current US presidential election thoughtfully and intelligently, with a true national interest, call it the common good, in mind.