The price of inequality Stiglitz

un hombre no debe ser “ni tan pobre como para venderse, no tan rico que como para poder comprar a otro”. – JJ Rousseau

There are times when the people rise up and say ‘this is not over, this must change “Now, we’re at it. Joseph E. Stiglitz, Nobel laureate in economics, has long been preventing diversions of the current system and the financialization of the economy. In his new book focuses on the “price of inequality ‘

Twenty years ago and have been growing inequalities are not only socially unacceptable but even from the dire economic standpoint. Outraged put it very well in evidence flying colors 99% with reference to the 1% already had stigmatized the former head of the World Bank and Nobel Prize economist Joseph E. Stiglitz.

Market failure, failure of political systems that do not correct the excesses of the markets and of the unjust economic and political systems. The current system multiplies and maintains the failures and suddenly worsen inequalities. But what many people do not know is that inequalities are very expensive, because they participate directly to the “economic downturn” and its deviations, which Stiglitz called “subversion of democracy.”

Beyond the interesting and posed based verification, economist shows how inequality is the cause and the consequence of the system that causes a vicious cycle and generates instability and how the current economic system has come to an end.

Part checking the status of the U.S. where, for two decades, the purchasing power of the middle classes has only decrease. The U.S. has “the problem of the 1%”, a middle class down because income inequalities have worsened and profits recovery “will have vanished,” “93% of the additional income created in 2010 have been captured by the 1% of the population of high class. ” So in the course of the last thirty years the United States has become a country divided: the upper class has progressed rapidly and the country has regressed. Low wages in thirty years increased 15% while the 1% level increased by 150%. This situation is even more glaring when looking at the distribution of capital income.

And throughout his book, Stiglitz will not show and prove that the inequalities are due to economic instability and defeat the arguments of those who make a cult of inequality as a basis for growth, according to the thesis of the “economy of the spill” because it does not works.

By contrast the harmful effects of inequality are clear: declining standard of living, consequences of impaired health, education, housing, impaired social relationships between youth and adults caught in the home of her parents … the myth of an America fair and equal opportunity without euphemisms shown.

The textbook and voluntarily for the general public to understand, even when one is not well versed in economics – the different mechanisms and their perverse effects. True, Stiglitz is supported by many examples Americans – the campaign forces – but their reasoning is absolutely “benchmarkable” and moreover does not hesitate to show that beyond the U.S. current system limitations affecting many countries starting with the Europeans. Because the same recipes generate the same evils, but if it is true in France still enjoys a redistribution system achieved slightly more than the U.S. system.

Democracy in danger

Also as stated clearly, the U.S. have played a central role in creating the current rules that have failed. Globalization as currently being administered not provide progress or global efficiency, or justice, but what is worse is that endangers democracy. This is surely one of the most sensitive points of the book.

A democracy in danger, is the title of chapter 5: the current inequality in the U.S. and in many other countries of the world was born and has been maintained by the abstract market forces and strengthened by the policy. That’s why the battle was won by the 1%. But this is not what should happen in a democracy. “In that 100% of people should participate in the system of” one person, one vote “while in reality happens, as he recalls’ one dollar, one vote.” The policy establishes the rules of the market and that game is biased in favor of the 1%.

So the Greeks were deprived of participating in a referendum on the drastic austerity program, as leaders and financiers screamed to the sky at the idea. But as emphasized particularly well Stiglitz, control of financial markets occurs not only indebted countries but in all those who want to win in the capital market. And although there are free elections, markets impose their laws by blackmail (downgrade, no credits, loans increase on interest rates …) The choice is limited economic options. And it’s worth remembering as the 90 (page 205 of the text in French), Lula could have been elected in Brazil, but objected Wall Street (via blackmail). In 2002, Brazilians not allowed to co-opt and Lula elected anyway.

Not forgetting the whimsical side of markets playing with the qualifications to act in the short term, the pressure continues especially multinationals through the WTO. Since multinationals are administered by 1%, the rules favor the top 1%. Another world is possible but with other ways to manage globalization, not permitting unfettered globalization. Because “to preserve democracy, globalization is necessary to moderate” states.

Ending state retrenchment.

And thus defend a just distribution of the roles of both the market and the state, and especially emphasize the reduction of the state but a stimulation of the economy. Now, says Stiglitz, the anti-deficit and austerity are often designed to enhance and preserve inequality.

Moreover “history shows that austerity almost never worked” and that public spending, however, can be very effective. However it is always surprising, Stiglitz stresses, see that many experts (bankers, politicians …) or people who are seduced by the “myth of austerity” as also the “myth of the state budget compare to that of a home “A government spending more than it earns can stimulate production and employment generation. The creation of wealth derived from the policy can be many times greater than the costs incurred.

But “the 1% captured and distorted the budget debate” on the basis of blackmail on overspending but that only hides his desire to shrink the state.

Stiglitz thus leads us to the field of macroeconomic policy, monetary policy (Chapter 9). As has been outlined by the monetarist Milton Friedman ocn head “champion of the free market” and the entire Chicago school whose damage is  worldwide known specially in Latin America.

If central banks were interested in jobs

“Friedman’s theories reflected his intention to shrink the state and limit their freedom of choice” The modern conception of monetary policy has damaged 99% Stiglitz continues. Denying the importance of income distribution, focusing on interest rates starting as single lever and deregulation. Economist shows very well the limits of the concept of an independent Central Bank as it functions in our countries because they are captives of the financial markets. Stigmatizes the lack of faith in the democratic control of those who defend the independence of central banks. Yet should disturb them. And he points the finger at the ambiguous role of the ECB in the Greek crisis for the benefit of the banks (p. 349).

But more importantly, once again, behind monetary policy lies a struggle of ideas, a battle over the conception of the economy and that what is good for the 1% that makes the decisions, it is necessarily for the 99% that suffers. If monetarism has been shelved, central banks have focused on inflation rates as the only goal.

This has become an obsession. But what has diverted attention from more serious problems, such as inequality and low wages. And the conclusion that after 25 years of macroeconomic and monetary policies have provided neither stability nor permanent growth, and a better distribution of wealth among the majority. Now is therefore the time to find another frame. But banks and markets remain resistance.

Another way is possible. Through a program of economic reforms (Stiglitz explained in the last chapter) that the state must intervene, regulating banks, companies, tax havens … correcting the excesses and further scrutinizing high incomes, promoting public investment, improving protection tending to full employment socialy giving a more responsible role for the central bank “abandoning their excessive concentration on inflation to be interested in a more balanced employment, grow … ‘what is otherwise to Argentina through considered heterodox policy regarding the functions of the central bank (see “Slowing growth, Argentina chooses to be countercyclical”).

Described and proposed reforms are aimed at the U.S. – On the campaign trail – but it is understandable that are common to many countries. The analysis suggests that U.S. Stiglitz could use its power and influence – although it is now less than before – in favor of new regulations that create a fairer world economy. A possibly more hegemonic vision in a world where new contours are designed, in which power relations evolve.

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