Very good Lawry. Very useful.
REH From: [email protected] [mailto:[email protected]] On Behalf Of de Bivort Lawrence Sent: Saturday, August 04, 2012 8:25 PM To: RE-DESIGNING WORK, INCOME DISTRIBUTION, EDUCATION Subject: [Futurework] My notes from discussion with Stiglitz -- FYI Stiglitz: THE PRICE OF INEQUALITY Book based on his initial article in Vanity Fair. magnitude of inequality in the US: US has more inequality than any other developed country. Top 1% gets 20 of the income and owns 40% of the wealth. Opportunity: growing inequality here too. US now has least opportunity of any advanced industrial country. That is, income wealth of parents more and more determines wealth of the children This means that inequality will only grow. Trickle down economic theory does not work. Most Americans are worse off now than a decade ago. In particular, some groups are markedly worse off. Eg males are no better off than they worse off than fifty years ago. Inequality inhibits economic growth. People at the very top do not contribute proportionally to the economy. Eg US bankers brought the US economy to the brink of ruin. Lack of correlation between pay and performance. The people who HAVE made he biggest contributions have not ended up in the top 1% One out of seven Americans are on food stamps, subject to food insecurity. The recession has made all this worse. Bottomland middle Americans put their wealth into their homes. When the market for homes plummeted ,any of these people were wiped out. The middle is being hollowed out. WHY THIS GROWING INEQUALITY? 1. Much of wealth of the top is from 'rents' -- rent seeking: income unearned. The economic effect of this is to inhibit the growth of the economy. Rent-seeking means trying to get money from others, rather than working to build the economy. Rent-seeking seeks to redistribute the pie; innovation, for example, grows the pie. 2. Senior execs are getting much larger piece of the corporate pie. Not justified by their contribution. Shareholders have been blocked from controlling exec pay. 3. Bankruptcy laws favor the rich e.g. derivatives are the first protected debt when a corp goes into bankruptcy. Eg student loans are excluded from bankruptcy protections. 4. Tax provisions 5. Gifts to the wealthy. Eg prohibiting the US government from bargaining with drug companies. Eg giveaways on value of mineral resources. 6. Tax rates, lower for wealthy because capital gains are taxed at low rate., 15%. Where income at highest rate is 35% WHY IS INEQUALITY BAD? >From an economic PoV 1. Leads to greater instability 2. Leads to inequality of opportunity means that people do not and cannot live up to their potential. 3. Top wealthy view government as a threat, because only the government can limit their disproportionate wealth. INEQUALITY AND DEMOCRACY inequality leads to people being disenfranchised, due to discouragement in the political process. Advertising and selling has become more powerful. If you can sell bad products, you can sell bad ideas. There has been major effort to convince people that we do MOR have problematic inequality and lack of opportunity in America. The rule of law should protect the people at the bottom, but now in America it has come to protect to wealthiest. Tax cut under Bush favored the wealthy. WHAT TO DO? Reverse the decisions of 2001-2011. To get economic reforms we are going to have political reforms, but economic equality also creates political inequality. (Stiglitz: The Trillion Dollar War. ) IS THERE HOPE? The US has bounced back in the past from previous periods of egregious inequality. It can be done. Transparency is where things must begin. Stronger corporate laws that honor the social contract. Shareholder activism. (LdB: Start a list of the Greedy 1%?) No major economy has recovered from a recession via austerity (though some small countries bounced back when their trading partners thrived). When US failed to create a national industrial policy we let manufacturing leave the country. But generally manufacturing is going down worldwide, as agriculture did 100 years ago.
_______________________________________________ Futurework mailing list [email protected] https://lists.uwaterloo.ca/mailman/listinfo/futurework
