By JOSEPH E. STIGLITZ
AN insidious trend has developed over this past third of a century. A country that experienced shared growth after World War II began to tear apart, so much so that when the Great Recession hit in late 2007, one could no longer ignore the fissures that had come to define the American economic landscape. How did this “shining city on a hill” become the advanced country with the greatest level of inequality?
One stream of the extraordinary discussion set in motion by Thomas Piketty’s timely, important book, “Capital in the Twenty-First Century,” has settled on the idea that violent extremes of wealth and income are inherent to capitalism. In this scheme, we should view the decades after World War II — a period of rapidly falling inequality — as an aberration.
This is actually a superficial reading of Mr. Piketty’s work, which provides an institutional context for understanding the deepening of inequality over time. Unfortunately, that part of his analysis received somewhat less attention than the more fatalistic-seeming aspects.
Over the past year and a half, The Great Divide, a series in The New York Times for which I have served as moderator, has also presented a wide range of examples that undermine the notion that there are any truly fundamental laws of capitalism. The dynamics of the imperial capitalism of the 19th century needn’t apply in the democracies of the 21st. We don’t need to have this much inequality in America.
Our current brand of capitalism is an ersatz capitalism. For proof of this go back to our response to the Great Recession, where we socialized losses, even as we privatized gains. Perfect competition should drive profits to zero, at least theoretically, but we have monopolies and oligopolies making persistently high profits. C.E.O.s enjoy incomes that are on average 295 times that of the typical worker, a much higher ratio than in the past, without any evidence of a proportionate increase in productivity.
If it is not the inexorable laws of economics that have led to America’s great divide, what is it? The straightforward answer: our policies and our politics. People get tired of hearing about Scandinavian success stories, but the fact of the matter is that Sweden, Finland and Norway have all succeeded in having about as much or faster growth in per capita incomes than the United States and with far greater equality.
So why has America chosen these inequality-enhancing policies? Part of the answer is that as World War II faded into memory, so too did the solidarity it had engendered. As America triumphed in the Cold War, there didn’t seem to be a viable competitor to our economic model. Without this international competition, we no longer had to show that our system could deliver for most of our citizens.
“Widening and deepening inequality is not driven by immutable economic laws, but by laws we have written ourselves.”
Indeed! The children of the World War II generation turned out to be selfish, prejudiced, and foolish. The selfishness is making their grandchildren and great-grandchildren’s lives a lot harder than their parents’. Their prejudice is turning the clock back on the achievements of their parents and the Civil Rights movement. Their foolishness is making the conditions ripe for another Depression.
Our economic and social problems are 100% derived from our broken and corrupt political system. Our institutions are in decay – natural and forced by obstruction. Our partisan corporate news media isn’t doing its job, leaving large gaps in its coverage of news.
So, while inequality isn’t inevitable, the political and economic conditions put in place by that generation, over the last three decades, have us almost completely boxed in. Elections 2014 and 2016 may well be the last two opportunities the voters have of undoing the plutocratic state. After that, it will be a lot harder to get our Democracy back.
You and a few other economists have provided the nation with the voice of reason amid the madness of our politics during the last six years. We need you and your peers to continue to warn the population of the grave dangers our nation faces. While this series may be at an end, I very much look forward to seeing you on Bill Moyers’ program and other places.
To read the rest of this article and the rest of my comment, click here.
Curated from opinionator.blogs.nytimes.com
