Monday, June 25, 2012

Stiglitz - Pushing Back the Oligarchs

Nobel laureate economist, Joe Stiglitz, has a warning for America - and for Cajnada too -  we cannot hope for our societies to survive the cancer of inequality.   Stiglitz had some noteworthy comments during a recent AlterNet interview, excerpted here:

what drives capitalism is the profit motive. You can profit not only by making good things, but also by exploiting people, by exploiting the environment, by doing things that are not so good.  ...a lot of the inequalities in the United States are not the result of creative activity but of exploitive activity. And if you look at the people at the top, what is so striking is that the people who've made the most important creative contributions are not there.

By that I mean the really foundational things like the computer, the transistor, the laser. And how many people at the top are people who made their money out of monopoly -- exercising monopoly power? Like bankers who exploited through predatory lending practice and abusive credit card practices. Or CEOs who took advantage of deficiencies in corporate governance to get a larger share of the corporate revenues for themselves without any regard to the extent to which they have actually contributed to increasing the the sustainable well-being of the firm.

...If you had an economic machine that worked the way it was supposed to, everybody would be getting better. And an economy that's normally growing, say, 3 percent, even over a 20-year period. Steady accumulation would lead to their wealth more than doubling in that period. And it clearly hasn't happened.

...We're paying a high price for this inequality. Now, one of the mischaracterizations of those of us who want a more equal or fairer society, is that we're in favor of total equality, and that would mean that there would be no incentives. That's not the issue. The question is whether we could ameliorate some of the inequality -- reduce some of the inequality by, for instance, curtailing monopoly power, curtailing predatory lending, curtailing abusive credit card practices, curtailing the abuses of CEO pay. All of those kinds of things, what I generically call "rent seeking," are things that distort and destroy our economy.
So in fact, part of the problem of low taxes at the top is that since so much of the income at the very top is a result of rent seeking, when we lower the taxes, we're effectively lowering the taxes on rent seeking, and we're encouraging rent-seeking activities. When we have special provisions for capital gains that allow speculations to be taxed at a lower rate than people who work for a living, we encourage speculation. So that if you look at the design bit of our tax structure, it does create incentives for doing the wrong thing.

...By definition, waste is waste. The Republican rhetoric has focused on waste in the public sector. But waste, at some level, is an inherent consequence of human fallibility. We're going to make mistakes, and that's going to be true in the public and the private sector. No government program has ever wasted resources on the scale of America's private financial sector in the run-up to the crisis. So the first thing you realize is there is waste everywhere including in the private sector.

Now if you ask people about things there are important to them ... obviously they care a lot about the school their children go to. They worry about too-large classes. They worry about police protection. Those are all things that people value a lot. They value the Internet, which was created by government-funded research. Health care and drugs were are all based on government-funded research. So the bottom line is that government services have proved highly valuable. And this is where the big lie, the big distortion is. By talking about the few instances of inefficiency, they try to direct the attention away from the teachers, the policeman, the fireman, the researchers, the people building the roads to make our society function. And they turn our attention away from the failures in the private sector.


Anonymous said...

Thanks for the post MoS,

As far as economists stephen is in the bargain basement on neolithic economies. Joe on the other hand has had real world experience IMF World Bank and did not like what he saw. Yes if I had a hero in economics it would be Joe Stiglitz, he makes harper look like the moronic thief he is!

Anonymous said...

And by the way steve sold us out:

Steve is gonna get rich out of selling us off into slavery:(