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Rewriting the Rules of the American Economy: An Agenda for Growth and Shared Prosperity by [Stiglitz, Joseph E.]
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4.5 out of 5 stars 2 customer reviews

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Review

Stiglitz realizes that deepening inequality in our country is not an unlucky act of nature, but a consequence of the policies we have chosen. This lively book suggests a whole menu of policy changes to move us toward a more widely shared prosperity.--Robert Solow, winner of the Nobel Prize

The secret truth about economic inequality in America: once you look at the issue this way, it s hard to think of it any other way."

At a time when 25 hedge fund managers make more than all our nation s kindergarten teachers combined, it is clear that the rules are rigged in favor of the wealthy few. Joseph Stiglitz has proposed a bold plan to rewrite these rules by rebuilding our economy for the twenty-first century.--Randi Weingarten, president of the American Federation of Teachers"

An aggressive blueprint for rewriting 35 years of policies [that] have led to a vast concentration of wealth among the richest Americans and an increasingly squeezed middle class.

Product Description

It’s time to rewrite the rules—to curb the runaway flow of wealth to the top one percent, to restore security and opportunity for the middle class, and to foster stronger growth rooted in broadly shared prosperity.


Inequality is a choice.


The United States bills itself as the land of opportunity, a place where anyone can achieve success and a better life through hard work and determination. But the facts tell a different story—the U.S. today lags behind most other developed nations in measures of inequality and economic mobility. For decades, wages have stagnated for the majority of workers while economic gains have disproportionately gone to the top one percent. Education, housing, and health care—essential ingredients for individual success—are growing ever more expensive. Deeply rooted structural discrimination continues to hold down women and people of color, and more than one-fifth of all American children now live in poverty. These trends are on track to become even worse in the future.


Some economists claim that today’s bleak conditions are inevitable consequences of market outcomes, globalization, and technological progress. If we want greater equality, they argue, we have to sacrifice growth. This is simply not true. American inequality is the result of misguided structural rules that actually constrict economic growth. We have stripped away worker protections and family support systems, created a tax system that rewards short-term gains over long-term investment, offered a de facto public safety net to too-big-to-fail financial institutions, and chosen monetary and fiscal policies that promote wealth over full employment.


Product Details

  • Format: Kindle Edition
  • File Size: 1188 KB
  • Print Length: 246 pages
  • Publisher: W. W. Norton & Company; 1 edition (Nov. 2 2015)
  • Sold by: Amazon Digital Services LLC
  • Language: English
  • ASIN: B015774QVY
  • Text-to-Speech: Enabled
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  • Enhanced Typesetting: Enabled
  • Average Customer Review: 4.5 out of 5 stars 2 customer reviews
  • Amazon Bestsellers Rank: #44,260 Paid in Kindle Store (See Top 100 Paid in Kindle Store)
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Format: Hardcover Verified Purchase
Very concise and well documented analysis of the alarming situation of the American society after 25 years of neoliberalism. Followed with detailed proposals to reverse the trend and create an economy that will work for everyone and not mainly for the top 1%. Everybody should read this book to understand why equality and economic performance go hand in hand and not as opposing forces.
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Format: Paperback Verified Purchase
An attempt to advance understanding and policy options for the current economic dilemma.
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Amazon.com: 4.3 out of 5 stars 26 reviews
28 of 30 people found the following review helpful
5.0 out of 5 stars Must-read economic ideas for this generation Nov. 4 2015
By digsblues - Published on Amazon.com
Format: Kindle Edition Verified Purchase
This is a must read book for anyone interested in narrowing the gap between the top 1% and the rest of us Americans. I've wondered now for several years why economists can't figure out the growing disparity between the top and bottom classes and the demise of the middle class. It's seemed to me that economics should be more like science and be able to prove that the "trickle down" theory really works, the results of globalization on American jobs, and other things that most of us consider to be truths.

This book examines the problems in great detail, complete with statistics, charts and graphs. There is also an extensive appendix that gives sources so the claims can be checked. The author explains why the rules need to be rewritten, and redistributing the wealth will not work.

Half of the book gives suggestions on what to change, in very specific detail, so it's like a financial plan that could be adopted. I'll be frank and admit that I was rather shocked when I first looked at the suggestions, but later I started thinking "why not?"

One specific example that I believe is true is what we've been told about the brilliant 1% who are wildly successful. While it is correct that some are innovators increasing our quality of life, many others do nothing productive; they trade in futures, financial exchanges, and use the system design to make an obscene amount of money. They do not contribute anything of value, except to themselves. Many will think "move power to them" but this book shows how the odds were stacked in their favor, especially in the last 30 years.

Another example is the rule changes on repaying college loans. Making them immune to bankruptcy always seemed like a good idea to me. However, it does seem out of balance when a rich person can borrow money for a month long European vacation or yacht and have it all discharged by filing bankruptcy, then starting over.

The statistics on the number of full-time wage earners who have no retirement or even a day of sick leave were depressing, and it's becoming the norm for low wage earners who have begun competing with Chinese workers for jobs. The lack of regulations on imports made by child laborers, or with harsh environmental consequences was also eye-opening.

Anyone interested in our future, whether conservative or liberal should take a look at the ideas here. Many were refreshingly new to me.

Highly recommended. I would love to see opinions, especially by economists.
18 of 19 people found the following review helpful
3.0 out of 5 stars How do we get from here to there? Jan. 5 2016
By J. Edgar Mihelic, MBA - Published on Amazon.com
Format: Paperback
Two of the left’s leading lights in terms of economic thinking have books that came out recently. I’m not sure what the order was, but Robert Reich blew up my Facebook timeline promoting his new book “Saving Capitalism from the Capitalist”. Stiglitz hits many of the same points here in “Rewriting the Rules of the American Economy”.

This book has its roots in a report from the Roosevelt Institute, and its layout and overall tone belie the audience. It was written more towards policy makers and a popular audience than towards students of economics. It was a team effort too – they just slapped his name right up front because he’s the one with the Nobel Prize, and if you forget that they also put that on the cover too.

In terms of content, the stronger part is the first half, where Joe and company look at various issues facing the national economy today like increased monopoly power, and the idea of shareholder value, and low taxes for the rich all while marginalizing the worker and minorities. Structurally, this book is nice and symmetrical, as it is not one of those where 90% is problem and 10% is resolution. Fully half of the book is proposals on what needs to be done.

Basically, what needs to be done is to make the economy more like it was in the golden age of capitalism, but this time with less racism and sexism. The problem with both this book and Reich’s book is that there is no sense of a mechanism of how to do this. Of the people in my generation, we look and see that Capitalism has always been this way, so it doesn’t make sense to roll back some of the bad things when they will creep back when you’re not looking.

Both authors mention Gailbraith’s conception of the “Countervailing Powers” that are absent, and they remain away from the scene and political decisions that are happening right now are trying to make it such that workers lose their separate identities as workers and lose their ability to collectively bargain. The left only has one branch of the federal government, and they re-pick that every four years. What hits me is that Stiglitz doesn’t want anything new, but the economy in terms of what we do to create the GDP is vastly different than it was 70 years ago. At least Reich is looking at how to come to terms with a post scarcity sort of economy in the first world by proposing a basic income, but as much as I like Stiglitz, I was missing any sense of something new.

Even then, so many of the rollbacks would involve large political movements just on their own that they would have to have some sort of mass movement behind them to pull them through as a whole plan, like new New Deal. As it is, the political process is such that you have blood of children running in the street and nothing gets done because of partisan priorities. There’s money involved in stopping any rollbacks. I’m just not sure how we get from here to there, even at the margins.
10 of 12 people found the following review helpful
4.0 out of 5 stars Inequality Is a Choice We Make With the Rules Created to Structure Our Economy Nov. 25 2015
By Loyd Eskildson - Published on Amazon.com
Format: Paperback
Ninety-one percent of all increases in income from 2009-12 went to the wealthiest 1% of Americans, and millions remain trapped in disguised unemployment and part-time employment. The workforce participation rate has fallen to levels predating the widespread entry of women into the labor market in the late 1970s. The unemployment rate, including those working part-time involuntarily and those wanting a job but not actively looking is over 10%.

The American economy is not out of balance because of the natural laws of economics, nor the result of the inevitable evolution of capitalism. The rules shaping our current economy were formed by incorrect economic orthodoxy. Supply-side economics posited that constraints imposed by regulations and disincentives imposed by taxes and a generous welfare system were limiting growth, a sharp break from Keynesian economists' emphasis on insufficient demand as the limiting factor in today's employment scenario. Per Stigler, when the rules no longer work, it is time to rewrite them.

Wages for most Americans are stagnant, but worker productivity continues to grow - the disparity between the two has become unprecedented. CEO and bankers' incomes soar, with no concomitant improvement in the performance of the firms for which they are responsible. We have a deficit of 3 million jobs needed to reach pre-recession employment levels and absorb those who have joined the potential workforce. Eighty percent of job growth has been in low-wage service and retail employment. More and more piece together a living as 'micro-earners,' working through a variety of platforms to offer rides, rooms, or services - cleaning to computer programming.

Since the late 1970s, we have seen a decline in our growth rate, four significant economic downturns - including the worst since the Great Depression, and an increasing share of the limited growth that has occurred going to the top, with stagnant incomes for many and a hollowing out of the middle class. Policies that focus only on the symptoms of our dysfunctional economy - eg. remedying the worst extremes of inequality, will not tackle the underlying causes. Piecemeal proposals that tinker at the margins of our current economy will not suffice to get our economy back on track.

Skill-biased technological change cannot explain why highly skilled workers have had to move into lower-skilled jobs. It cannot explain why what has been happening to wages in the past decade - even skilled workers are not doing well. Nor can it explain the magnitude of the rise of pay at the top - including CEOs and those in the financial sector, or the rising gap between growth in worker productivity overall and average wages. Historically, wage and productivity growth moved in tandem, but this has not been true for the last third of a century.

Technology, globalization, shifting demographics and other major forces are important, but largely global in nature. All advanced countries should be similarly affected if they are the primary drivers - but among advanced economy countries, the U.S. has the highest level of inequality. Regardless, even those global factors are not out of our control.

The economic crisis of 2008 and the Great Recession that followed demonstrated that the promise of a deregulated market economy was empty. Only through an $800 billion government bailout were the banks and the market sustained. Further, saving the financial system did not trickle down to ordinary mortgage holders or average workers, who lost over 4 million homes and whose real median income declined nearly 8% between 2007 and 2013.

Much of the increase in wealth is attributable to the increase in the value of fixed assets, not an increase in productive value. The most obvious and widespread example is the massive rise in real estate values. If the value of real estate increases thanks only to the rising price of the property and not to physical improvements, this does not lead to a more productive economy - no workers have been hired, no wages paid, no investments made. Much of this is due to the financialization of the economy, including the increased supply of credit that typically goes to those that already have wealth. Land rents, monopoly profits, drug pricing, patents and other forms of intellectual property have become the major sources of increased wealth.

Financial services comprised 7.6% of GDP before the 2008 crisis, then fell back to 6.6% in 2012, and back to 7.3% in 2014. In the 1950s, when the U.S. economy was growing more rapidly than recent years, financial services constituted 2.8% of GDP, and between 1950 - 1980, generated between 10 and 20% of total corporate profits. After 1980 it generated between 20- and 30%, and still is well over 20% today. Between 1979 and 2005, finance professionals increased their presence among the top 1% by 80% (from 7.7 to 13.9%).

A recent target of market manipulation has been the LIBOR rate, bringing higher profits. The growth in asset management income accounts for about 35% of the growth of the financial sector as a percent of GDP. The other core growth business for finance has been shadow banking - moving traditional commercial banking functions to the financial markets where they are outside regulation of traditional lending banks. Long chains in the provision of credit are complex, creating leverage and more vulnerability to fraud etc.

Economist Thomas Philippon has shown that the U.S. financial sector's cost of supplying credit was 2.4% in 2011, compared to 1.6% at the end of WWII. Thus, for all the growth in the financial sector, we cannot see any improvement in the performance of the economy.

The average stock was held for about 7 years in 1940 and two years in 1987, seven months in 2007. In the 1980s, half of all U.S. corporations were the objects of takeover bids.

There is little relationship between pay and performance. CEOs are often compensated simply for luck, such as when oil company executives get paid more when global oil prices increase. New proprietary data show public firms invest substantially less and are less responsive to changes in investment opportunities compared to similar private firms. Thus, pay incentives are now tipped towards underinvestment. Before the 1980s, a firm borrowing a dollar would invest 40% of that on average. Shareholder payouts have nearly doubled since the 1980s and corporate profits are at record highs - with no increase in investment. Finance before was a mechanism for getting money into firms, now it functions to get money out of them. Executives at nonfinancial corporations in 2014 U.S. spent 705 of pre-tax corporate profits paying shareholders in the form of stock buybacks and dividends; in the year prior to September 20008, corporations spent an average 107% of profits buying their own shares and paying dividends. In the postwar period, nonfinancial corporations only dedicated an average 18% of profits for such.

According to the CBO, 'in 1979, households in the bottom quintile received over 50% of transfer payments. In 2007, similar households received about 35% of transfers.' Again, per the CBO, 69% of the $161 billion annual capital gains tax expenditure goes to the top 1%, only 7% to the bottom 80%.' Advocates of cuts to top marginal tax rates contend the reduction was supposed to encourage more work among top earners and increase the size of the pie. A Congressional Research Service report found 'no conclusive evidence...to substantiate a clear relationship between the 65-year reduction in the top statutory tax rates and economic growth.' Evidence from the 2003 dividend tax cut shows the only effect was to increase dividend payments.

Over the 40 years between 1973 and 2013, productivity grew 161% while compensation rose only 19%. There are roughly 8 million undocumented (illegal) workers in the U.S.

Bottom-Line: Nobel-winner Stiglitz wisely counsels against proposals that tinker at the margins of our current economy - that they will not suffice to get our economy back on track. And then he does exactly that - recommending more and stronger unions (ignoring the fact they were major factors in driving the Big Three and the legacy airlines bankrupt), more equality between races and gender. And then he ignores the two elephants in the room - illegal immigration (currently an estimated 8 million workers, plus their progeny) and exporting jobs to Mexico, Canada, and the Far East. A major disappointment.
1 of 1 people found the following review helpful
4.0 out of 5 stars A Plausible Economic Program to Rally Around July 4 2016
By Barry A. Klinger - Published on Amazon.com
Format: Paperback
ReWriting the Rules of the American Economy

The premise of Joseph Stiglitz' book is that the stagnating living standard of many Americans is not the result of natural forces but is caused by man-made changes in laws and regulations which should be reversed to make life better for people. In the last few decades, per capita GDP has had only modest growth, most of which has gone to the top 1% of the income distribution. Stiglitz points to changes in tax policy, financial regulations, labor law enforcement, and other areas which have caused wealth to flow to the wealthy from everyone else. He then proposes changes to the rules to reverse this trend, such as making the tax system more progressive, making it easier to unionize, improving financial regulation beyond what has been done since the 2008 banking crisis, and reforming trade rules to help workers in the US and abroad.

The book's value is in the way it provides an agenda for progressives to rally around. Some proposals, such as financial support for college students and increased infrastructure spending, are already being discussed by Democratic presidential candidates. Others that have not gotten the attention they may deserve include taxing capital gains at the same rate as income, demanding that imported goods be produced according to minimum labor and environmental standards, making it easier to punish US companies that fire workers for union activism, and increasing federal enforcement of minimum wage laws.

The book presents interesting information. For instance, not only is there no proof for the common belief that low capital gains taxes encourage investment, but countries that have cut capital gains taxes the most have had the largest increases in inequality. Not only has the financial industry gotten bigger and more profitable over time, it now costs more to supply a given amount of financing, thus finance's rise in profits is not due to providing a service more efficiently. Not only does cutting taxes for top earners increase their take-home pay, it may also boost raises in pre-tax income, giving CEO's a double boost in their compensation packages at the expense of everyone else.

The limitations of the book are due to it covering many topics relatively superficially rather than a few in depth. Certainly it won't convince many conservative readers of the value of more progressive taxation and the other policies advocated here. But even for sympathetic readers such as myself, it does not give very comprehensive arguments for many of these policies, a number of which are barely described, let alone justified.

The book almost completely ignores the effects of immigration (legal and illegal) on labor markets. Stiglitz cites evidence that imports of goods from China has displaced manufacturing jobs in the US, but argues that globalization must not be the key factor increasing inequality because advanced European countries also imports goods from poorer countries but has not suffered as much upwards wealth distribution as the US. Immigration and trade are complex issues which could benefit from more discussion than appears here (though note that Stiglitz has written further on these issues in previous books which I have not yet read).

In summary I agree that the book gives a plausible "Agenda for Growth and Shared Prosperity" (its subtitle) which it does not prove is the correct way forward but which provides a good starting point for further discussion.
1 of 1 people found the following review helpful
5.0 out of 5 stars Solutions for Fixing the American Economy. Nov. 30 2015
By J.L. Populist - Published on Amazon.com
Format: Paperback Verified Purchase
Mr. Stiglitz argues in this book that inequality is a consequence of choices that were made. He explains why some of those choices in the past worked and some obviously didn't while providing some excellent ideas to change inequality and make the economy more prosperous.

One of the problems with the economy is the rewarding of "short-termism" over long term investment. Witness the gambling with derivatives.
Trade agreements are another issue where the agreements are more "managed trade" than "free trade."
He provides a solution for high pharmaceutical costs and calls for transparency in financial markets.
The tax system encourages speculation over actual work or labor.

A helpful feature is the definition of economic terms throughout the book.

The best part of the book is that the author not only explains what is wrong with the American economy, he explains how it can be corrected.