Sunday 10 June 2012

Stiglitz on the American dream becoming a myth

Professor Joseph Stiglitz, a Nobel laureate in Economics looks at growing inequity in the USA in Trickle-up wealth is making the American dream a myth:
America has the highest level of inequality of any of the advanced countries - and its gap with the rest has been widening. In the "recovery" of 2009-10, the top 1 per cent of US income-earners captured 93 per cent of the income growth. Other inequality indicators - like wealth, health, and life expectancy - are as bad or even worse. The clear trend is one of concentration of wealth at the top, the hollowing out of the middle, and increasing poverty at the bottom.
 He goes on to write:
A closer look at those at the top reveals a disproportionate role for rent-seeking. Some have obtained their wealth by exercising monopoly power; others are chief executives who have taken advantage of deficiencies in corporate governance to extract for themselves an excessive share of corporate earnings; and still others have used political connections to benefit from government munificence - either excessively high prices for what the government buys (drugs), or excessively low prices for what the government sells (mineral rights).

Likewise, part of the wealth of those in finance comes from exploiting the poor, through predatory lending and abusive credit-card practices. It might not be so bad if there were even a grain of truth to trickle-down economics - the quaint notion that everyone benefits from enriching those at the top. But most Americans today are worse off - with lower real (inflation-adjusted) incomes - than they were in 1997.
I think the trickle down concept is a myth. If anything money flows upwards. I would almost argue that money is the anti-gravity, except that, like gravity, money seems to attract other money. Just as gravity means that large masses attract and ensnare smaller masses so it appears does money. Anyway I digress. Professor Stiglitz goes on to write:
America is paying a high price for continuing in the opposite direction. Inequality leads to lower growth and less efficiency. Lack of opportunity means that its most valuable asset - its people - is not being fully used. Many at the bottom, or even in the middle, are not living up to their potential, because the rich, needing few public services and worried that a strong government might redistribute income, use their political influence to cut taxes and curtail government spending. This leads to underinvestment in infrastructure, education, and technology, impeding the engines of growth.
Recommend reading.

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