- Date published:
7:10 am, November 10th, 2015 - 65 comments
Categories: class war, economy, labour, national, poverty - Tags: choice, choices, inequality, Joseph Stiglitz, poverty
The Atlantic reports Nobel laureate Joseph Stiglitz on inequality in this excellent piece:
Stiglitz: Here’s How to Fix Inequality
If there’s one thing Joseph Stiglitz wants to say about inequality, it’s that it has been a choice, not an unexpected, unfortunate economic outcome.
The last Labour government chose to implement a higher top tax rate and Working For Families, these policies (though arguably too little too late) did reduce inequality. The current National government chose to cut the top tax rate, attack labour laws, and increase GST, these policies are increasing inequality.
That’s unnerving, but it also means that citizens and politicians have the opportunity to fix the problem before it gets worse.
In his new book Rewriting the Rules of the American Economy: An Agenda for Growth and Shared Prosperity, Stiglitz … asks the question “Can the rules of America’s economy be rewritten to benefit everyone—not just the wealthy?” The answer, he insists, is yes.
Stiglitz describes the current situation as “a stark picture of a world gone wrong”: He notes that 91 percent of all income growth between 2009 and 2012 was enjoyed by the wealthiest 1 percent of Americans. In the first half of the book, Stiglitz focuses on the practices and policies that have gotten the country to this point. It is a familiar story: The demise of labor unions, the increasing financialization of the economy, and the lack of wealth-building opportunities in minority communities have made the rich richer while leaving everyone else to flounder.
Stiglitz spends the latter portion of the book laying out how to fix things. … the solutions cover everything from fiscal policy to corporate boardrooms to retirement savings. His overview doesn’t prioritize pragmatism: A solution that only involves overhauling the few things that everyone agrees need to be overhauled is no solution at all, he argues.
Actually implementing all of these changes would require a complete shift in American policy and practice. The world that Stiglitz envisions in his book, one where all citizens can enjoy the promise of education, employment, housing, and a secure retirement seems at once like the realization of the American dream and an unattainable utopia.
Why is it that “education, employment, housing, and a secure retirement” are now regarded as unattainable? Governments choose inequality that is true. But we the people choose governments. Time for a change.
"We will not tolerate poverty in New Zealand in the 21st century." – @AndrewLittleMP #nzlpconf
— New Zealand Labour (@nzlabour) November 8, 2015
Stiglitz is too focused on the USA. He also needs to take a breath and look at how much the world really has worked for the poor in recent decades.
So, let me trot out the fithy capitalist line about economic growth.
Nearly one billion people have been taken out of poverty world wide in the last 20 years. You might recall Harry Truman in his inaugural address in 1949 stating that “more than half the people in the world are living in conditions approaching misery. For the first time in history, humanity posses the knowledge and skill to relieve the suffering of those people.”
And finally it did. Took 50 years, but it really did. Between 1990 and 2010 the poor in developing countries dropped as a share from 43% to 21%. About a billion people.
A lot of that is higher life expectancy in developing countries, and of course China pulling about 680m people out of misery between 1981 and 2010. Plus roaring economic growth.
Getting a further billion out of poverty will be much harder. India and Pakistan, and sub-Saharan Africa, have much weaker governance cultures than China. Basic safety nets like Brazil’s Bolsa Familia really help. Crap middle-class subsidie fuel subsidies in Indonesia don’t help. We should be having the argument about the actual benefit/loss of Working For Families versus just taking all of that cash up in a helicopter and dumping it over our ten poorest suburbs.
But the biggest poverty-reduction measure of all is liberalizing markets to let poor people trade with richer people. And even better: let poor people trade with rich people face to face, through freer immigration. Both trade liberalisation and massive immigration have been New Zealand’s economic making over the last 25 years. Counterfactuals are everywhere: both India and middle Africa are crowded with monopolies and restrictive practices. Same with most of the Pacific islands. We smashed ours decade ago.
New Zealand is one of the exceptions to rich countries and country-blocs seeking to entrench market dominance and roll back economic globalization. Arguably TPPA does as much to entrench existing trade controls than liberalise them. Germany faces the sternest test of this in the next decade.
Don’t get me wrong, I’m a sucker for a good GINI coefficient line. But all the large moves needed to pull people out of poverty in New Zealand have already been made. We have gone through spectacular exterior crises in the last decade. The changes required to erase the last tough percentages of poverty here are relatively small, compared to the economic and social moves already made.
Poverty and the GINI are not the same thing. This is basic stuff. Your last paragraph misses the point by miles.
I know they’re not.
Go right ahead. Propose your own view.
That measures to tackle inequality not be derailed by false comparisons. As for what those measures should be, I daresay Stiglitz provides some answers, although it has to be said all he has to do to find them is look at governments and societies that do a better job.
Wilson & Pickett talk about re-distribution and pre-distribution. Personally I think the latter is preferable.
It almost sounded like a more subtle attempt at the “you can’t complain cause people in Africa are starving” line. Completely ignoring that what Stiglits primarily focuses on is inequality withiin a particular sociatal group and how damaging that is to the cohesiveness of that group.
Of course I am sure that is down to miss understanding rather than dog whistling.
It’s a learning opportunity f’sure.
Go ahead. Actually engage.
Maybe start with: “is societal cohesiveness traded off with eradicating poverty due to the strength of interventions required to achieve it.”
Do some work.
Answer: no, it isn’t: that outcome is a choice. I note that inequality and poverty have increased over the last thirty years, so your assumption of eradication is probably a learning opportunity too.
That’s true for New Zealand, but not globally.
The comparison of Stiglitz’ work to New Zealand doesn’t work yet.
We don’t in fact need Stiglitz: there is plenty of information and research available that relates directly to us. The failure is political, not academic.
Completely and utterly agree.
Rashbrooke in particular recently.
“We don’t in fact need Stiglitz: there is plenty of information and research available that relates directly to us. The failure is political, not academic.”
Well, stap me. I agree with OAB.
We actually have some fairly unique economic/social structures in NZ which have increased inequality and inequity in an abnormal fashion.
The best example is the disparity between ACC and MOH:DSS for support for people with disabilities and serious medical conditions.
There has been some talk about extending ACC to cover all….at very little extra cost.
Yet…the fuckwits in the House voted to lower ACC levies rather than have serious look at extending cover.
Why would we not lower taxes to the people to pay in good faith for specific purpose, if obligations are being more than met at any given time?
It would be cynical for the “fuckwits” as you call them to continue high taxation and then them for a purpose for which they were not intended. Yes, I’m sure we can do more for those with disabilities but treating a specific tax as a general health dip in is not on.
“Yes, I’m sure we can do more for those with disabilities but…..”
You know…those with disabilities (not on ACC) and those battling cancer and MND, MS, mental health, issues, diabetes and all the rest of the medical conditions that can blight us through no fault of our own (not that that should matter)…are absolutely fucking sick and tired of the ‘but’….
First they came for the disabled…..
“Yet…the fuckwits in the House voted to lower ACC levies rather than have serious look at extending cover.”
That is the last thing we need. I pay more in ACC levies per year than I pay for top medical insurance.
If people want medical and disability insurance there are many efficient companies that provide it. We don’t need a state monopoly fouling that nest.
Funny how we always look to our colonial origins for guidance on ‘how to’… but failed to even consider looking at the the UK NHS scheme…examine it’s strengths and failings and build something better of our own.
“Oh, that’s right. that would require a commitment to a fair and equitable health and disability scheme. I pay more in ACC levies per year than I pay for top medical insurance.”
What do you do to attract such high ACC levies?
Or do you run a business with a high accident rate?
Here is the line in that article which stick out like the proverbial doggie bits for me:
He notes that 91 percent of all income growth between 2009 and 2012 was enjoyed by the wealthiest 1 percent of Americans.
Another way of expressing the same thing is that over the past 35 years the doubling, tripling or more of labour productivity in most industries has created enormous new wealth. Yet the numbers show that almost 90% of this was captured by a tiny handful of people.
Crediting capitalism for pulling a billion people out of poverty misses the point that under a different economic model, this technology-driven increase in productivity could have pulled everyone out of it. Well out.
And while NZ may well be less extreme than the USA, I’m not sure that you can argue the same fundamental forces have not been at work here.
Not really arguing with the forces at work.
Definitely arguing about whether Stilglitz’ prescription is applicable here without a decent debate.
I’m not crediting capitalism as some lumpen salvific force for good – rather I’m heading towards putting political energy (both personal and governmental) towards eradicating poverty rather than tilting at inequality as a whole.
Leave the tilting to that idiot Quixote. Poverty is increasing with the GINI – measures that don’t address the latter will make little difference to the former.
Quixote fought with windmills, with Pancho at his side. It could be that TS is a sort of windmill, turning and circulating ideas, and effective for that. But in the end its just words and talk. Action is needed of a practical sort coming from the thought and discussion that arises here.
Poor Cervantes had a hard life but triumphed over odds. He wrote Don Quixote while he was in a contentious job of obtaining grain for the state from farmers who resented parting with it. This was after he had fought bravely in a war for the Spanish which resulted in an injured hand. Then he and his brother were captured by the Turks while they were sailing back to Spain, and he was held for five years till ransome was found.
In late 1580s, de Cervantes began working for Spanish Armada as a commissary. It was a thankless task, collecting grain supplies from rural communities. Many did not want to provide the goods, and de Cervantes ended up in prison on two occasions because of charges of mismanagement. During this trying time, he began writing some of literature’s greatest masterpieces.
De Cervantes published the first part of Don Quixote in 1605. The novel tells the story of an elderly man who becomes so enamored by old stories of brave knights that he seeks out his adventures. The title character soon gets lost in his own fantasy world, believing he is one of these knights, and convinces a poor peasant, Sancho Panza, to serve as his squire. In one scene, Don Quixote even fights a windmill, mistaking it for a giant. Quixote regains his senses before the novel ends.
Note that Quixote did overcome his brainstorm – he wasn’t totally doolally – and regained his strength of mind and purpose.
May it be so for us!
Stiglitz’s new book may be US focused, but it’s largely about the flaws of neo-liberal change, thus the need to rewrite the rules.
As neo-liberalism also took place here, his prescription is largely applicable.
“Crediting capitalism for pulling a billion people out of poverty misses the point that under a different economic model, this technology-driven increase in productivity could have pulled everyone out of it. Well out.”
There is no reason why absolute poverty in the developing world should be a trade-off with inequality levels in the industrialised world.
I also fear the back-patting of capitalist cheer-leaders may have come too early. The Capitalism of small markets is nothing like the corporatist takeover of large tracts of African land and the effects of the wars, in the Middle East. Not to mention climate change and the impact of that on the poorest.
Heard this morning about another drought in Ethiopia – apparently already being spoken of in terms of the 1984 drought. I can’t remember it being capitalism pulling the country out of the drought then – international mobilisation of aid was more immediate. Maybe this base will lead to a better political management of the coming emergency.
Very good reply.
Willfully ignorant right winger mindlessly clapping hands. (pdf)
OECD. My emphasis.
As reported widely, they also quantified the consequent damage to our economy: even the willfully ignorant are affected. Perhaps they deserve it. The rest of us have had a gutsful.
True and that is why we now have far more poverty than we did 25 years ago. And that truth applies to all the bollocks that you just spouted.
It was capitalism that put them into poverty in the first place.
It was extractive capitalism which has kept regions like Africa poor.
Crediting capitalism for reducing poverty, is like crediting Scrooge for an extra bowl of gruel at Christmas.
How much better off would the poor in both New Zealand, and Bangladesh been, for example, if the Bangladeshi factory workers, who make them, had got a larger proportion of the $20 we pay for them.
If we had met in the middle and paid $12 and the factory workers got $3 instead of 2 cents. And companies like Nike reduced their billions in non taxed profits.
Imagine how much quicker we would have reduced poverty if international unionisation gave slave workers decent pay and conditions.
Ad I think you’ve fallen for the old capitalist game of wage arbitrage coated with a slight sheen of moral justification.
I’ll use a more concrete example.
A US company like Apple Computers has the bulk of its manufacturing and supplier base in the USA. Let’s say this set up costs them $500M per year in wages and subcontractor fees paid out to American workers and American companies.
Management figure out that they could get the same work done in China, for just $150M.
So they shift their entire manufacturing and supplier operations to China.
Result: US workers and suppliers are $500M per year worse off, Chinese workers and companies are $150M per year better off. A few Chinese workers get worked to death. Ah well.
And the difference (hence the term “arbitrage”) of $350M gets happily pocketed by the 0.1% hedge fund banker types who own most of Apple’s stock.
In other words, pointing out that poor Chinese workers are now $150M better off due to Apple ‘globalising’ its operations is telling only the PR third of the story.
The poor in developing nations largely benefited from the outsourcing and undercutting of western jobs, coupled with soaring debt stimulating demand.
Surely that’s the macro attitude. Look at all the money pouring into that poor enclave – how good that is attitude. In fact the poverty along with some personal autonomy in the country got changed mainly for females, to poverty, familiar bad conditions, isolation, and mind-breaking working hours and conditions in town. Plus when they returned home, they probably faced hostility from peasants who imagined they had been working as prostitutes.
Benefit? – Loss? How do the scales measure both money, very little of that, continuing existence, mere, and wage slavery?
The benefit I was referring to was employment opportunity relating to Ad’s comment on the number of poor in developing countries falling. However, it was largely a case of jobs going from developed nations to developing nations.
As CV highlighted, this was done in a neo-liberal way. A number took advantage of low wages, poor work and safety conditions and lacking environmental standards. Thus, the outsourcing of jobs allowed owners to further profit, widening inequality.
Sometimes I just need to try out a contrary view.
A good local example you describe is Fisher and Paykel appliances.
“But the biggest poverty-reduction measure of all is liberalizing markets to let poor people trade with richer people. And even better: let poor people trade with rich people face to face, through freer immigration. Both trade liberalisation and massive immigration have been New Zealand’s economic making over the last 25 years. Counterfactuals are everywhere: both India and middle Africa are crowded with monopolies and restrictive practices. Same with most of the Pacific islands. We smashed ours decade ago”
“Liberalising markets” has bought us from the highest standard of living in the world to having 300 000 children in poverty. FIFY.
India was one of the richest countries in the world in the 14th and 15th centuries.
A century of British colonialism and wealth extraction to feed the Crown and her elite put paid to that.
You are wrong. As always. India ended up poor because for 40 years it refused to liberalise markets. When it did so, its GDP grew rapidly:
Hey Shitlands I was referring to a period centuries before your latest version of economic fuckery came into being, the first version being the British version imposed on India.
And fuck GDP as a metric, only the already rich benefit from increases in GDP, everyone else gets turned into poorly paid slave labour.
CV is correct, srylands, While India 500 years ago was physically smaller than the country we know today, it was either the largest or second largest world economy, depending on who you read. It was an exporter and trader and had consistent currency, taxation and business regulations.
The colonial power managed to knacker that by promoting internal divisions, encouraging invasions and empire building, imposing it’s own rules and distorting the the existing market and social relationships. In other words, they behaved just as they did here in Aotearoa a couple of centuries ago.
500 years on, India is about 2% of the world economy and still waiting for their ‘brighter future’.
You are wrong in my view. There is no alternative to the continued process of liberalising markets. I suggest that you read this brilliant book on the history of markets by one of the greatest ever New Zealand economists, perhaps the greatest:
Nah fuck it mate, the game is up. Mother Nature is calling time out on your bullshit. She’s pretty close to calling time out on this human race experiment in fact.
Here’s an interesting quote from the book you cite (page 9 in my edition):
“Examining markets up close, the new economics emphasises market frictions and how they are kept in check. In 2001, this work received recognition with the award of the Nobel Prize in economics to George Akerlof, Michael Spence, and Joseph Stiglitz for laying the foundation, as the Nobel citation said, ‘for a general theory of markets with asymmetric information.’ Expressed in mathematics and impenetrable jargon, these new ideas reside obscurely in the technical journals. They have, however, a deeply practical content.”
I suspect that Stiglitz knows something, then, about markets – and their shortcomings. He may well also understand the limits of liberalising markets in ways that cease to make them work for the common good and, instead, produce the kind of inequalities we see today.
But you may beg to differ.
” The changes required to erase the last tough percentages of poverty here are relatively small, compared to the economic and social moves already made.”
We need to vote in a government which is prepared to make those changes in NZ. In my view, economists seem to ignore any variables that they can’t quantify with numbers or formulae. Personal hopelessness, poor health, blighted lives and misery have huge costs on society. Bill English should hang his head in shame.
The exploitation of the assets and people of undeveloped nations by large foreign corporations has been appalling. Liberalising markets without any ethical and fair trading regulation to mitigate power imbalance and voracious greed does little to reduce inequality.The TPP with its ISDS does not meet the required standard.
The biggest problem with economists and politicians is that they’ve lost sight of the actual, physical, economy and what its purpose is. The limited resources that a nation has and that those resources need to be used to provide for everyone.
Instead, we’ve had both the economists and the politicians focussing on making a few people richer.
I thought a quarter to a fifth of NZ families lived in poverty. Hardly the “last tough percentages.”
For those who are not sure where the quote below comes from. it is from Ad at No.1. And a fine mash-up of ideas he has. I think Ad has always been coming from the Right He is convinced he is clever and knows what’s good for the Left but he is not right.
But all the large moves needed to pull people out of poverty in New Zealand have already been made.
Me – As recommended by those providing the new economic nostrums pre and post Douglas et al.
We have gone through spectacular exterior crises in the last decade.
The changes required to erase the last tough percentages of poverty here are relatively small, compared to the economic and social moves already made.
Me – FIFY – The changes required to erase the last tough percentages of poverty here are [huge and radical requiring gradual but thorough reorganisation over a decade] to match the swingeing economic and social moves already made. –
The TPP has become a lost opportunity to rewrite the rules.
The purpose of the TPP was to entrench the rules that we have now that cause the poverty.
Expand and entrench.
Passes four out of five of Labour’s bottom lines.
It is a choice that people don’t want to continue to bail out the wrong life decisions of others’, “no second chance.”
Yawn. Why are you reading from the book of right wing dogma like some sort of Jehovah’s Witness on the doorstep? Don’t you have any opinions of your own? More importantly, why are you telling lies about choices?
As for your “no second chance” gutter attitude, it shames you.
INEQUALITY IS A CHOICE
The inequality that plagues world economies today has been a choice, not an unfortunate outcome. Totally true, we get the governments that we vote for. This begs the question, why do we vote for bad governments? The answer to that question is that voters are both uninformed and misinformed. It is the role of media to supply voters with information on which to base their votes. It is not the role of media to tell voters which party to vote for. The media should report the news, not make it.
Today’s main stream media is owned by established wealth and not surprisingly, almost without exception their economic commentators push the established wealth argument. In short, in its most important role the main stream media has failed totally, and it has failed tragically. Voters go to the ballot box uninformed, misinformed and guided by spin that is either meaningless or just plain wrong.
Ii believe that this global credit crisis, which is not over, will hopefully be the swan song of monetarist economic theory. When it is over we will need to make changes to our information system to guarantee that what happened will never happen again. Never again must the mainstream mass-media play the role of devil’s advocate.
But how can you say that WE get the government we vote for. A lot of governments get in on a simple majority. Or people try to make a choice and in voting for a new small party which has something different get a majority government they definitely didn’t want. They have made a sacrifice to bravely vote for change knowing they will lose.
Voting is such a blunt instrument. That sentence of yours is a constant lie we keep repeating.
“Voting is such a blunt instrument”
In its current form (representative democracy).
Thus, the need for a form of direct democracy, where voters have a more direct say over the more important issues.
Greywarshark I thank you for your comment. No individual vote can alone elect a government. I am not blaming individuals for our failure to elect rational government. I am blaming the mainstream media. The record of monetarist governments in power is a total failure when compared with the Keynesian period of economic management. If the masses were aware of the magnitude of that failure no monetarist government would ever again get control of the NZ economy.
The masses are unaware of this failure because the mainstream media in collusion with the monetarist lobby have brain washed the masses to look away from the obvious truth. I know what brain washing means. What I said was not a mistake. I meant it.
Yes I know you are right Murray. But unfortunately you were right before also. We do choose our governments but the process is so faulty that it’s sometimes more of a lottery. The media don’t help, but the word is out there if we bothered to seek it.
I don’t watch television. I don’t want to be that baby bird that gets its fodder mashed up and regurgitated into my mind from the chosen news source.
There is no doubt we are brainwashed. Our education has not taught us how to critically read information.
So we aren’t prepared for the present. And we are a mixture of too lazy, too trusting, and too easily diverted. If we were as interested in our own lives and culture, as we are in others playing sport, then we wouldn’t be in this mess.
There needs to be a focus of the difference between highest and lowest worker. Or highest and lowest wages in NZ.
Say for example a Highest government worker can not earn 20 times more than the lowest government worker.
That means that in a company where execs earn a million the lowest worker earns $50k
It would also increase the productivity where those at the bottom really know that they can share in the profits of the execs.
Instead we are getting exec earning up to 5 million by proposing to offshore jobs for peanuts and fire local people which is increasing inequality.
Also there needs to be a focus on businesses that are earning billions like banks and how much tax they really pay in their country of operation like NZ.
How much business tax did Westpac pay in NZ for example last year?
Many of the most profitable companies escape with loopholes and only end up paying 5% tax in country of operation, sometimes none at all.
When the IRD did a crack down they found not only were the banks underpaying they also have been overcharging. There needs to be a lot more focus on the business tax take and overcharging.
Would anyone know if they had been overcharged on their power for example? With their mortgage or telephone account? There needs to be a much more active agency in NZ to audit this type of thing. Instead it relies on consumers discovering it and then asking an agency like commerce commission for help which is not always given.
Look at how WINZ undercharged their beneficiaries for years and then now looking to change the law so they don’t have to pay it back.
The opposition are very focused on PAYE wages and seem less focused on the billions being lost by business through underpayment of tax and inequality of overchanging of business, which in many case is very difficult for the consumer to prove.
Inequality is also about a power imbalance – not just about money.
So power structures need to be regulated to make sure they are not gaming to keep grabbing more power.
Look at the Natz for example gaming the media to promote them, using their funding ability to piggyback on sports stars, changing the laws to promote business and people who fund them etc.
So capitalism, or market economies produce poverty. We know that and have known that since….well, fucking ages ago.
The ‘choice’ of successive governments was to dismantle or reassign welfare so it essentially benefited the business sector, and then to trickle piss down on us while spouting on about rising tides raising all boats while islands sank beneath waves.
Something like that anyway…
When they did a tax crack down in Italy for example – they concentrated on people driving around in Ferraris who apparently did not earn any money or pay any tax and asked if that was the case, how did they afford the Ferrari, the super yacht, the expensive house?
In many ways it is easier now to follow the luxury goods to find money laundering and tax underpaying than looking at tax records – because only the mugs are paying taxes under their real names..
That is why I find it frightening that people think a CGT will solve all the problems, a lot of people are not declaring any rents, hiding assets in trusts and companies, let alone thinking of sending a cheque to the government thanking them after they sell with a CGT, and there are so many ways around not paying it or legal arguments on the amount of payment, that you start finding that enforcement is more expensive than the tax collected.
If you want to tax assets you need to have a very strong sure fire way of taxing it, like a stamp duty on title transfer otherwise the greedy and dishonest will not pay and you just make the honest pay, furthering inequality.
I like the article, but I like the discussion underneath even more. Inequality is a very serious problem and we, as a society, need to take care of it. In my opinion people should simply help each other and together build a strong, wise society. Of course it is a utopia… I work at http://www.sklep-intymny.pl/ and consider myself lucky, because I cannot find any inequality traits at work, but in companies, where my colleagues work inequality is some kind of standard, unfortunately.
Hi. Grewshark when previously I said “we” I meant “we” the voters collectively. I certainly did not vote for national at the last election and I would be very surprised if you did but enough voters did to elect the national government. Regarding my comment about brain washing, while I believe the comment is by common political usage true I have reconsidered and concede it would have been better left unsaid.
There is quite often suggestion that the electoral system should be changed to some form of binding referendum. Democracy stated life as binding referendum but it was quickly replaced by placing a democratically elected government between the will of voters and the legislation. In those days there would have been a problem with implement but with the internet today we are fast approaching a time where implementation would no longer a problem.
There is however an inherent problem with government by direct binding referendum which I suspect was the real reason for the change. Government by binding referendum would be fine for the most numerous interest group but god help minority interest groups. They would always be outvoted. This problem is of course inherent in democracy but it is much less so when a democratically elected government is placed between the will of voters and the legislation.