People Power and Profits-Progressive Capitalism for an Age of Discontent --- Joseph E Stiglitz

 

Lucas Films made famous the phrase ‘the dark side of the force’ and ensured that in the films, the dark side ultimately lost. In real life, however, the dark side is not so easily vanquished.

In the book being talked about here, Nobel Laureate and Professor of Economics at Columbia University, Joseph E Stiglitz, takes a long, hard and clear-sighted look at the dark side of the ‘American Dream’-the land of opportunity, the two car garages, the barbeques in the backyard, the Ivy League colleges……

The book is simply written, with a wealth of reasoning, data and references, and needs to be worked through with a fair degree of effort. The effort is, however, amply rewarded.

One striking feature of this work is the categorical inclusion of politics in the analysis and the assertion that economics and politics are inextricably linked and need to be studied together. Most economists tend to shy away from leavening their studies with such uncomfortable realities and stick to pure, but sterile, models of ‘the economy’.

Prof. Stiglitz does not, however, take the safe and uncontroversial path. He brings to light the economic malaise that the USA has experienced since around the early 1980s and shows how the politics of the Right -- the Republican Party -- has been responsible, to a great extent, for this malaise.

One major issue that the author highlights in great detail is the enormous danger of relying on ‘unfettered markets’ alone, to bring about growth with equity and social justice. In fact, if one were challenged to try and summarize the book in one sentence, one would say that it is ‘A study of the real dangers and serious limitations of unregulated markets as illustrated by the experience of the contemporary US economy and society.’

Like all summaries, this is inadequate, but does serve to highlight the principal focus of the study. The gains from reading the book lie, of-course, in the details.

From the early 1980s, inequality in income, wealth, opportunity, education and health has increased significantly and continuously. The top 1% get the bulk of the benefits of growth and ‘trickle-down’ does not work. The three richest Americans are worth more than the bottom half of the US all put together! The US has 5% of the world’s population and 25% of the world’s prisoners and these are disproportionately African-American. The list of illustrations goes on and on.

 Growing inequality is, however, not inevitable. It is the consequence of bad policy resulting from an ideology-and-vested- interest based unreasoning and incorrect belief in the infallibility of markets and the undesirability of state intervention in matters economic.

When unbridled greed and inadequate regulation led to the financial sector creating the humongous economic crisis of 2008, the ‘too big to fail’ banks got a near trillion-dollar government bailout, but those who suffered as a consequence of their duplicity and greed were left to their own devices. Market concentration increased in 75% of industries in recent years and the big boys have used various techniques to regulate competition, retain disproportionate power over customers and suppliers, and avoid taxation.

Markets need to be regulated by the state in public interest.

In addition, the state has to ensure that ‘public goods’ are adequately provided, the environment protected and basic research heavily funded. Active policies and legislation have to be formulated and implemented to ensure equality of opportunity, improvement in intergenerational economic mobility and job creation. Those who lose out due to the impact of globalization have to be supported and jobs created that can compensate for jobs lost.

A judicious mix of state and market functioning is essential if the American Dream is to be realized for the bulk of Americans and not just a miniscule minority of the very rich.

Prof Stiglitz doesn’t just rail against an unjust and iniquitous system; he identifies problem areas, digs out the primary causes and offers possible solutions.

The book is focused on the economics and politics of the USA, but offers a great deal of insight into the problems facing India today.

Happy reading.