1This work is a compilation of articles by Joseph Stiglitz originally published from the start of the recession in 2008 to 2015 in the American press (The New York Times, Project Syndicate, Vanity Fair, to cite only the main sources). These are short, incisive texts written for non-economists in spontaneous reaction to primarily American economic events. They include his famous “Of the 1%, by the 1%, for the 1%,” published in Vanity Fair in May 2011, a major source of inspiration for the “Occupy Wall Street” movement launched in August of that same year. Following the general introduction, the articles are organized into eight topic areas and range from an overall review of the extent of inequality in all its dimensions to analysis of its causes and effects and policy recommendations; there are also comments on a number of third countries (including Japan, China and Mauritius). The last section returns to the United States, with recommendations on how to “put America back to work.” The book reads easily, being less technical than some of Stiglitz’s earlier popularization works, notably The Price of Inequality. And for readers “allergic” to economics it is a good introduction to immediate history and current economic debates.
2The downside to a compilation of articles organized by topic area is that the reader may lose a sense of the chronological order of events. Many of the texts analyse and comment on specific, time-situated, event-triggered political decisions. The Contents might have indicated the articles’ first publication dates, and it would have been helpful if the publisher had provided an economic and political timeline indicating presidential terms, the main legislative bills passed, and decisions by monetary regulation authorities. Another weakness, one inherent to the genre, is repetition of some ideas and turns of phrase. And the very form of the book makes it impossible to analyse its subjects more thoroughly; in particular, Stiglitz’s diagnoses of situations in countries other than the United States seem somewhat superficial – and debatable.
3But these formal flaws are slight given the intrinsic quality of the book, a new addition to a growing body of economic studies of inequality, how to measure it, and what its effects are. It should be noted that Stiglitz’s observations draw heavily on Thomas Piketty’s Capital in the Twenty-First Century and that he stresses the importance of Piketty’s and Saez’s studies for providing historical data on the subject.
4Stiglitz is a political economist in the original sense of the term: he establishes a diagnosis, sternly calls policymakers to action, and explains to them how to improve general wellbeing. His assessment of the situation in the United States is implacable: inequality has risen to such an extent that it has become self-sustaining: the rich now fund election campaigns and shape policy to their own self-interest and benefit. The American ideal of equal opportunity has been shattered. Access to fundamental goods such as health, education and housing is increasingly unequal, impacting on life expectancy. At several points Stiglitz returns to the US housing loan crisis (average Americans taking out loans well above their ability to repay) that triggered the worldwide recession in 2008, to the banks’ responsibility and the responsibility of liberal dogma and the monetary authorities in this chain of events. The link between the housing crisis and income inequality may be stated thus: the fact that 1% of the population has been capturing an increasing proportion of new wealth has resulted in income stagnation for the middle class and regression for the poor. Making it easier to get a housing loan seemed an easy way of postponing the moment when the majority of the population would start feeling budgetary pressures; at the same time it offered banks a means of pulling in quick, substantial gains. Stiglitz draws a disturbing parallel between this situation and American students’ current over-indebtedness: the same mechanisms are at work, he explains, and student debt will trigger another major crisis in the near future. The soaring costs of higher education have forced young people who belong to the other 99% to choose between not getting trained and therefore being excluded from good jobs or getting into exorbitant debt to earn degrees whose value is doubtful and thereby risking to default on those loans if they cannot find a job. Stiglitz points out that this is a way for the 1% to keep to themselves and to ensure their own children a high-quality education regardless of their potential.
5The book also shows the path Stiglitz’s own thinking has taken, how he came to focus his discourse more and more exclusively on denouncing inequality in the United States. In a personal account, he tells of being “in the crowd” for Martin Luther King’s “I Have a Dream” speech of August 28, 1963. Stiglitz was deeply involved in the racial integration movement of the time and had recently visited segregated universities in the South where the inequality of educational resources by social and racial group was patent. He vividly recounts his stupefaction on discovering how ignorant academic economists were of the real world – how they understood unemployment to be the fault of the workers. This recalls the economic models John Maynard Keynes devised to take into account massive unemployment during the Great Depression and so to determine actions that would put an end to the crisis as fast as possible rather than waiting for some distant, hypothetical resolution to come from the “law of the market” defended at the time by the neoclassical school. Like Keynes, Stiglitz has gone beyond developing a vision of how the economy operates and what its failures are. His major academic analyses of imperfect information and rent-seeking (in the sense of economic actors using other people’s lack of knowledge to get rich without creating new wealth) all lead to the conclusion that regulatory agencies and a strong state with real power to collect taxes and fund general-interest spending are absolutely necessary. Just as Keynes aired his views on the harm done by the Versailles Treaty in The Economic Consequences of the Peace (1919), so Stiglitz has for several years now been denouncing the ravages wreaked on the economy by rising inequality. He speaks at public debates, holds official positions (he was head of the IMF from 1997 to 2000), and with his writings and media presence has been labouring to convince as wide an audience as possible. But while his analysis of American ills is strong and uncompromising, the policy proposals he puts forward for resolving them are less convincing. They do of course seem logical: The market is not self-regulating so it is up to the state to intervene through progressive taxation, put a stop to multinational corporate tax evasion, combat rent-seeking, regulate the financial markets and provide public goods to all, the first of which is education. But in order for all of this to happen, the rich would have to feel empathy for their fellow citizens or be conscious of interdependence, and to have the sense of enlightened self-interest that would make it acceptable to them to pay more. And as Stiglitz explains, economic segregation, which goes hand in hand with rising inequality, means that the super-rich are free to live exclusively with their own kind, buy up fundamental public goods (health, education, security), manipulate governmental decision-making, and ultimately escape the economic consequences of their selfishness. The reader closes the book with a clear understanding of why inequality has become a central focus of economics, why it can only be reduced if there is economic growth and improved general wellbeing, and why corrective policies, so easy to understand, are so difficult to implement.