If only Stiglitz would follow his own statement to an insight about policy, there might be a recovery in the economy. Stiglitz wrote:
> It seems strange, in the midst of the Great Recession, > when one out of six Americans who would like to get a > full-time job is unable to get one, to see stores > replacing low-wage cashier clerks with machines. The > innovation may be impressive, profits may even be > increased, but the broader economic and social > consequences cannot be ignored: higher unemployment, > lower wages for unskilled labor as the balance of demand > and supply tilts more against workers, and greater > inequality. The balance of demand and supply tilts more against workers and all we get is a T-shirt that says "increase the stimulus." What about reducing the supply? Cut the work week! Gene On May 7, 2012, at 5:32 AM, c b wrote: > Joseph Stiglitz: The 99 Percent Wakes Up > > > > by Joseph E. Stiglitz > May 2, 2012 5:15 PM EDT > http://www.thedailybeast.com/articles/2012/05/02/joseph-stiglitz-the-99-percent-wakes-up.html > > Inequality isn't only plaguing America-the Arab > Spring flowered because international capitalism is > broken. In From Cairo to Wall Street: Voices from > the Global Spring, edited by Anya Schiffrin and > Eamon Kircher-Allen, Nobel laureate Joseph Stiglitz > says the world is finally rising up and demanding a > democracy where people, not dollars, matter-the > best government that money can buy just isn't good > enough. > > There are times in history when people all over the > world seem to rise up, to say that something is wrong > and to ask for change. This was true of the tumultuous > years of 1848 and 1968. It was certainly true in 2011. > In many countries there was anger and unhappiness about > joblessness, income distribution, and inequality and a > feeling that the system is unfair and even broken. > > > Both 1848 and 1968 came to signify the start of a new > era. The year 2011 may also. The modern era of > globalization also played a role. It helped the ferment > and spread of ideas across borders. The youth uprising > that began in Tunisia, a little country on the coast of > North Africa, spread to nearby Egypt, then to other > countries of the Middle East, to Spain and Greece, to > the United Kingdom and to Wall Street, and to cities > around the world. In some cases, the spark of protest > seemed, at least temporarily, quenched. In others, > though, small protests precipitated societal upheavals, > taking down Egypt's Hosni Mubarak, Libya's Muammar > Qaddafi, and other governments and government officials. > > Something Is Wrong > > That the young people would rise up in the dictatorships > of Tunisia and Egypt was understandable. They had no > opportunities to call for change through democratic > processes. But electoral politics had also failed in > Western democracies. There was increasing > disillusionment with the political process. Youth > participation in the 2010 U.S. election was telling: an > unacceptably low voter turnout of 20 percent that was > commensurate with the unacceptably high unemployment > rate. President Barack Obama had promised "change we can > believe in," but he had delivered economic policies that > seemed like more of the same-designed and implemented by > some of the same individuals who were the architects of > the economic calamity. In countries like Tunisia and > Egypt, the youth were tired of aging, sclerotic leaders > who protected their own interests at the expense of the > rest of society. > > And yet, there were, in these youthful protesters of the > Occupy Movement-joined by their parents, grandparents, > and teachers-signs of hope. The protesters were not > revolutionaries or anarchists. They were not trying to > overthrow the system. They still had the belief that the > electoral process might work, if only there was a strong > enough voice from the street. The protesters took to the > street in order to push the system to change, to remind > governments that they are accountable to the people. > > > The name chosen by the young Spanish protesters-los > indignados, the indignant or outraged-encapsulated the > feelings across the world. They had much to be indignant > about. In the United States, the slogan became "the 99 > percent." The protesters who took this slogan echoed the > title of an article I wrote for the magazine Vanity Fair > in early 2011 that was titled "Of the 1%, for the 1%, > and by the 1%." The article cited studies that described > the enormous increase in inequality in the United > States-to the point where 1 percent of the population > controls some 40 percent of the wealth and garner for > themselves some 20 percent of all the income. In other > countries, the lack of opportunities and jobs and the > feeling that ordinary people were excluded from the > economic and political system caused the feeling of > outrage. In his essay, Egyptian activist Jawad Nabulsi > discusses how the system was fixed in favor of the upper > classes, and he uses the word fairness repeatedly to > describe what was lacking in Egypt under Mubarak. > > Something else helped give force to the protests: a > sense of unfairness. In Tunisia and Egypt and other > parts of the Middle East, it wasn't just that jobs were > hard to come by, but those jobs that were available went > to the politically connected. In the United States, > things seemed more fair, but only superficially so. > People who graduated from the best schools with the best > grades had a better chance at the good jobs. But the > system was stacked because wealthy parents sent their > children to the best kindergartens, grade schools, and > high schools, and those students had a far better chance > of getting into the elite universities. In many of these > top schools, the majority of the student body is from > the top quartile, while the third and fourth quartiles > are very poorly represented. To get good jobs, one > needed experience; to get experience, one needed an > internship; and to get a good internship, one needed > both connections and the financial wherewithal to be > able to get along without a source of income. > > > Around the world, the financial crisis unleashed a new > sense of unfairness, or more accurately, a new > realization that our economic system was unfair, a > feeling that had been vaguely felt in the past but now > could no longer be ignored. The system of rewards-who > received high incomes and who received low-had always > been questioned, and apologists for the inequality had > provided arguments for why such inequality was > inevitable, even perhaps desirable. The inequities had > been growing slowly over time. It is sometimes said that > watching changes in income inequality was like watching > grass grow. Day by day, one couldn't see any change. But > as those who live near abandoned subprime houses know > all too well, within a few months, scrub and weeds can > quickly replace the best of manicured lawns. Over time, > the change is unmistakable, and so too, over time, the > inequality has increased to the point where it cannot be > ignored. And that's what's been happening in the United > States and many other countries around the world. > > Even in the United States, a country not given to class > warfare, there is today a broad consensus that the top > should be taxed at a higher rate or at least not taxed > at a lower rate. While some at the top may believe that > they earned what they received through hard work, and it > is their right to keep it, the reality (which many of > the richest do realize) is that no one succeeds on his > own. The poor often work far harder than the richest. In > developing countries, the poor lack the chance of > education and have no access to funds, and their > economies are dysfunctional, but they work long hours > carrying water, looking for fuel, and toiling at manual > labor. Even in developed countries, life chances are > affected by where one is born and the education and > income of one's parents. Often it comes down to luck, > being in the right place at the right time. > > It was not just the worsening inequality that outraged > the protesters of 2011. It was a sense that at least > some of those incomes were not honestly earned. > Injustice motivated the Occupy Wall Streeters just as it > motivated the young Tunisians of the Arab Spring. If > someone earns huge incomes as a result of a brilliant > contribution that leads to huge increases in incomes of > the rest of society, it might seem fair that he receive > a fraction, perhaps a substantial fraction, of what he > has contributed. Indeed, the dominant paradigm in > economics attempted to justify societal inequalities by > saying (I should say, assuming) that they were related > to differences in "marginal" productivities: those who, > at the margin, contributed more to society got more. > > Faces of Occupy Wall Street > > Now, in the aftermath of the crisis, it seemed grossly > unfair that the bankers walked off with outsized bonuses > while those who suffered from the crisis brought on by > those bankers' reckless and predatory lending went > without a job. It seemed grossly unfair that government > bailed out the banks but seemed reluctant to even extend > unemployment insurance for those who through no fault of > their own could not get employment or to provide > anything but token help to the millions who were losing > their homes. What happened undermined the prevailing > justification for inequality, that those who made > greater contributions to society receive (and should > receive) larger rewards. Bankers reaped large rewards > even though their contribution to society-and even to > their firms-had been negative. In other sectors, CEOs > who ran their firms into the ground, causing losses for > shareholders and workers alike, were rewarded with > gargantuan bonuses. > > If no one is accountable, the problem must lie in the > economic system. This is the inevitable conclusion and > the reason that the protesters are right to be > indignant. Every barrel has its rotten apples, but the > problem, as MIT Professor Susan Silbey has written, > comes when the whole barrel is rotten. > > Much of what has gone on can only be described by the > words moral deprivation. Something wrong had happened to > the moral compass of so many of the people working in > the financial sector. When the norms of a society change > in a way that so many have lost their moral compass-and > the few whistle-blowers go unheeded-that says something > significant about the society. The problem is not just > the individuals who have lost their moral compass but > society itself. > > What the protests tell us is that there was outrage and > that outrage gives hope. Americans have always had an > idealistic streak, reflected both in the instruction in > schools and in political rhetoric. Kids read the > Declaration of Independence, "all men are created > equal," and they read the words literally, all men, > white and black, and they believe them. They recite the > Pledge of Allegiance, which promises "justice for all," > and they believe it. > > Market Failures > > The list of grievances against corporations was long, > and longstanding. For instance, cigarette companies > stealthily made their dangerous products more addictive, > and even as they tried to persuade Americans that there > was no scientific evidence of the dangers of their > products, their files were filled with evidence to the > contrary. Exxon had similarly used its money to try to > persuade Americans that the evidence on global warming > was weak, even though the National Academy of Sciences > had joined with every other scientific body in saying > that the evidence was strong. Chemical companies had > poisoned the water, and when their plants blew up, they > refused to take responsibility for the death and > destruction that followed. Drug companies used their > monopoly power to charge prices that were a multiple of > their costs of production, condemning to death those who > could not afford to pay. > > The financial crisis itself had brought out more abuses. > While the poor suffered from predatory lending > practices, almost every American suffered from deceptive > credit card practices. And while the economy was still > reeling from the misdeeds of the financial sector, the > BP oil spill showed another aspect of the recklessness: > lack of care in drilling had endangered the environment > and threatened jobs of thousands of people depending on > fishing and tourism. > > But even before the crisis, the evidence was that the > market economy was not delivering for most Americans. > GDP was going up but most citizens were worse off. Not > even the laws of economics long championed by the > political right seemed to hold. Earlier, we explained > how the theory that is supposed to relate rewards to > social contributions had been falsified by the Great > Recession. The theory holds that competition is supposed > to be so strong in a perfectly efficient market that > "excess" profits (returns in excess of the normal return > on capital) approach zero. Yet each year we saw the > banks walking off with mega-profits so large that it is > inconceivable that markets are really competitive. > Standard courses in economics talk about the law of > demand and supply, where prices are determined to equate > the two. In the theoretical model, there is no such > thing as unemployment, no such thing as credit > rationing. But in fact, we have a world in which there > are both huge unmet needs (e.g., investments to bring > the poor out of poverty, to bring development to Africa > and the other less developed countries in other > continents around the world, to retrofit the global > economy to face the challenges of global warming) and > vast underutilized resources (e.g., workers and machines > that are idle or not producing up to their potential). > As of December 2011, some 25 million Americans who would > like a full time job can't get one, and the numbers in > Europe are similar. > > Innovation and globalization provide the most recent-and > the most important-contexts to observe the failings of > the market. Both were supposed to make our economy more > prosperous, and yet both seem to have resulted in an > economy in which most citizens are becoming worse off. > > In recent research, Bruce Greenwald and I have traced > the roots of the Great Depression to an increase in > agricultural productivity so rapid that fewer and fewer > people were needed to grow the world's food. In the > United States in 1900, a large portion of the labor > force worked on farms; today less than 2 percent of the > population grows more food than even an obese population > can consume-and there are large amounts left over for > exports. Over time, most people working in agriculture > who were no longer needed looked for alternative > employment. But at times, the movement away from > agriculture was far from smooth. Between 1929 and 1932, > agricultural prices plummeted, and incomes fell by an > amount variously estimated at one-third or two-thirds. > Such precipitous declines in income resulted in > corresponding declines in demand for manufactured goods. > Rural real estate prices plummeted and credit became > unavailable, and so, despite their already low income, > farmers were trapped in the declining sector. Just when > migration out of the rural sector should have been > increased, it came to a halt. If people had been able to > relocate, if new jobs had been created, the increases in > productivity would have been welfare-increasing, but as > it was, given the market failures, those in both the > city and the rural sector suffered. > > It seems strange, in the midst of the Great Recession, > when one out of six Americans who would like to get a > full-time job is unable to get one, to see stores > replacing low-wage cashier clerks with machines. The > innovation may be impressive, profits may even be > increased, but the broader economic and social > consequences cannot be ignored: higher unemployment, > lower wages for unskilled labor as the balance of demand > and supply tilts more against workers, and greater > inequality. > > Political Failures > > The political system seems to be failing as much as the > economic system, and in some ways, the two failures are > intertwined. The system failed to prevent the crisis, it > failed to remedy the crisis, it failed to check the > growing inequality, it failed to protect those at the > bottom, and it failed to prevent the corporate abuses. > And while it was failing, the growing deficits suggested > that these failures were likely to continue into the > future. > > Americans, Europeans, and people in other democracies > around the world take great pride in their democratic > institutions. But the protesters have called into > question whether there is a real democracy. Real > democracy is more than the right to vote once every two > or four years. The choices have to be meaningful. The > politicians have to listen to the voices of the > citizens. However, increasingly, and especially in the > United States, it seems that the political system is > more akin to "one dollar one vote" than to "one person > one vote." Rather the correcting the market's failures, > the political system is reinforcing them. > > Tax systems in which a billionaire like Warren Buffett > pays less taxes (as a percentage of his income) than > those who work for him, or in which speculators who > helped bring down the global economy are taxed at lower > rates than are those who work for their income reinforce > the view that politics is unfair, and contribute to the > growing inequality. > > The failures in politics and economics are related-and > they reinforce each other. A political system that > amplifies the voice of the wealthy also provides > opportunity for laws and regulations-and the > administration of laws and regulations-to be designed in > ways that not only fail to protect the ordinary citizens > against the wealthy but enrich the wealthy at the > expense of the rest of society. > > Globalization and Markets > > My criticism of globalization lies not with > globalization itself, but with the way it has been > managed: it is a two-edged sword, and if it is not > managed well, the consequences can be disastrous. When > managed well-and a few countries have succeeded in > managing it well, at least so far-it can bring enormous > benefits. > > The same is true for the market economy: the power of > markets, for good and for evil, is enormous. The > increase in productivity and standards of living in the > past two hundred years have far exceeded those of the > previous two millennia, and markets have played a > central role-though so too has government, a fact that > free marketers typically fail to acknowledge. But > markets have to be tamed and tempered, and that has to > be done repeatedly to make sure that they work to the > benefit of most citizens. That market control happened > in the United States in the progressive era, when > competition laws were passed for the first time. It > happened during the New Deal, when social security, > employment, and minimum wage laws were passed. The > message of the Occupy Wall Streeters, and other > protesters around the world, was that markets once again > needed to be tamed and tempered. Even in parts of the > Middle East, where they brought increases in growth, the > benefits did not trickle down. > >> From Cairo to Wall Street > > In more than forty years of travel to developing > countries, I have seen these problems at close hand. And > throughout 2011, I gladly accepted invitations to Egypt, > Spain, and Tunisia, and I met with protesters in > Madrid's Retiro Park, at Zuccotti Park in New York, and > in Cairo where I spoke with the young men and women who > had played a central role at Tahrir Square. As we > talked, it was clear to me that they understood how in > many ways the system has failed. The protesters have > been criticized for not having an agenda, but such > criticism misses the point of protest movements. They > are an expression of frustration with the electoral > process. They are an alarm. > > At one level, these protesters are asking for so little: > for a chance to use their skills, for the right to > decent work at decent pay, for a fairer economy and > society. Their requests are not revolutionary but > evolutionary. But at another level, they are asking for > a great deal: for a democracy where people, not dollars, > matter; and for a market economy that delivers on what > it is supposed to do. The two demands are related: > unfettered markets do not work well, as we have seen. > For markets to work the way markets are supposed to > work, there has to be appropriate government regulation. > But for that to occur, we have to have a democracy that > reflects the general interests, not the special > interests. We may have the best government that money > can buy, but that won't be good enough. > > In some ways, the protesters have already accomplished a > great deal: think tanks, government agencies, and the > media have confirmed their allegations, of the high and > unjustifiable level of inequality, the failures of the > market system. The expression "we are the 99 percent" > has entered into popular consciousness. No one can be > sure where the Arab Spring or the Occupy Wall Street > movements will lead. But of this we can be sure: these > young protesters have already altered public discourse > and the consciousness of both ordinary citizens and > politicians. > > Copyright c 2012 by Joseph E. Stiglitz. This excerpt > originally appeared in From Cairo to Wall Street: Voices >> From the Global Spring c 2012 by Anya Schiffrin and > Eamon Kircher-Allen. > > > Joseph E. Stiglitz is University Professor at Columbia > University and the winner of the 2001 Nobel Prize for > Economics. He served on President Clinton's economic > team as a member and then chairman of the U.S. Council > of Economic Advisors in the mid-1990s, and then joined > the World Bank as chief economist and senior vice > president. Stiglitz has received the John Bates Clark > Medal. He was a Fulbright Scholar at Cambridge > University, held the Drummond Professorship at All Souls > College, Oxford, and has taught at M.I.T, Yale, > Stanford, and Princeton. > _______________________________________________ > pen-l mailing list > pen-l@lists.csuchico.edu > https://lists.csuchico.edu/mailman/listinfo/pen-l
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