Saturday, October 12, 2013

The Price of Inequality

I found Joseph E. Stiglitz’s “The Price of Inequality” depressing.  Stiglitz is able to analyze and present complicated economic issues clearly, precisely, and concisely.  The book is easy to read.  The points that he make are convincing.  Perhaps too convincing, and the that is what makes it depressing.  Nobel prize winners are of course very smart.  But he is special in that he can make it understandable by lay people like us. 

The book looks dirty because I have more than read it.  I have truly studied it.  What I get from the book is that the rich are in control of the USA, and in effect, the world.  “The top 1% seized more than 65% of the gain in national income.” Research have also shown that the richer are the parents, the better are the economic, educational and socio-emotional prospects of the children. In other words, the gap between the rich and the poor is perpetuating and widening. 

The market is supposed to be free and open.  But the rich have access to more information, more resources, control of the courts, control of the political processes, and control of the economic policies.  Faced with such overwhelming odds against them, the poor have a bleak prospect.  

Just witness an infamous and well known recent case.  The big investment banks took too much risk and caused the Great Recession of 2008. But they were able to persuade the government to rescue them with gigantic bailouts.  They then used the money to pay themselves huge bonuses.  It is the rest who suffer the consequences, with no recourse. 

How do the rich do that?  Actually it is not very subtle.  The people in charge of  the monetary policy, such as the Federal Reserve Board, are nominated by influential people who either work for the big banks or otherwise hold views favourable to the rich.  These people in turn decide on the bailout which benefit the big banks.  Talk about conflict of interest.  Yet it is done blatantly.  

Poor people, who have the labour, work for the rich, who have the money.  The economic system makes it easy to move money around, so that those with the money can choose to invest their money wherever, and in whatever it is most favourable to them.  But the poor cannot move, change jobs, or learn a different skill so easily.  The market is supposed to be open and free, but in reality it is not.  For the rich, perhaps it is, but not for the poor. 

The world is ruled by the rich.  I guess we all know that.  But it is still depressing to get it confirmed by such well-researched facts and well-presented arguments. 

Stiglitz seems to believe there is hope, and he make some suggestions.  But I am not so optimistic. 

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