The Price of Inequality: How Today’s
Divided Society Endangers Our Future
By Joseph Stiglitz
Published in : 2012 Price : Rs.489
Publisher : Penguin
After the globalization of the world economy, the dialogue between the state and people was reduced. The state withdrew its responsibilities and services and was taken over by corporate. The governments reduced social welfare programs and increased corporate welfare programs. The one per cent rich dominated everything and neo oligarchy started rising. Corporate welfare replaced social welfare.
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Thebook is based on the condition of American economy after the global financial crisis of 2008.* The book deals with growing inequalities, and disparities and proposes alternatives for all such problems.
Joseph Stiglitz was the Chairman of the Council of Economic Advisors during the Clinton era. He was also a member of the committee appointed by UN to counter the global economic crisis. He is famous for his criticism of the free market and resigned from the World Bank for its negligence towards poor countries. In this book, he exposes the problems of the American economy in another sense the global economy correlating psychology, economics, and sociology. The book gives a detailed interdisciplinary critique of a globalized free market economy along with debunking some myths proposed by the Right Wing. The book consists of 10 Chapters.
The first four chapters give a detailed explanation of the inequalities and various other grave problems that economy faces. Stiglitz also debunks myths proposed by the Right-wing. He debunks many claims with the help of statistics.
The next four chapters deal with the role of politics and the state in shaping an economy with fairness and inclusion. The last two chapters deal with the alternatives to correct things.
The global economic crisis of 2008 has exposed the inequalities and also widened them. Even though the USA is the largest economy in the world and also the most dominant one that act as the world police, there are lots of issues that could make the condition of people worse. Inequality in USA is not something that naturally occurred but was imposed. To substantiate this Stiglitz cites the tax rates, unemployment rate, and poverty index from pre-Reagan times till the Obama era.
After the globalization of the world economy, the dialogue between the state and people was reduced. The state withdrew its responsibilities and services and was taken over by corporate. The governments reduced social welfare programs and increased corporate welfare programs. The one per cent rich dominated everything and neo oligarchy started rising. Corporate welfare replaced social welfare. Poverty and unemployment shot up. This gave rise to popular protests like Wall Street Protest. People demanded governance for the 99 per cent i.e. the rest of the people. Stiglitz examines the arguments which are in favour of market fundamentalism and against it and then arrives at the need for a fair, inclusive economy.
The paradoxes of the claims of the right-wing are exposed by Joseph in this book. The trickledown theory states that helping the rich by easing their taxes and giving them freedom can make more booms in the economy. Stiglitz then cites the example of the Clinton Administration which increased progressive taxation and increased corporate tax slightly thus resulting in a better growth rate than the previous times. Let us check some instances of debunking the myth.
Stiglitz illustrates causality of people in America due to the free market economy with various studies conducted by psychologists and economists.
1. The destruction of market jobs leading to high unemployment.
2. America is very much behind countries like Cuba in child mortality and infant mortality.
3. Absence of public insurance and medical care makes condition worse.
4. The employment created after Global financial crisis are not long lasting and are vulnerable.
5. The way globalization has been managed led to low wage working classes creation because workers lost their bargaining powers.
6. The companies are forcing workers to work under dangerous conditions for low wages.
7. Due to corporate governance laws lead to decline of labour productivity. It also led to decline of wage share in national income.
8. Lending and housing discrimination contributed to lowering of standards of African Americans.
9. Firms are exploiting the imbalance of wealth among students by providing unpaid or low paid internships which adds an important element to resume.
10. The studies by EldarShafir have found evidence from experiments that living under scarcity often leads to choices that exacerbate the conditions of scarcity.
11. Incentive system lead to distorted behaviour and an over emphasis on quantity not on quality.
12. The private companies who took over nuclear power plants never made a profit.
The role of government was purposely diminished during the globalization era. The nature of state was changed in such a way that it retarded from its duties. The focus was emphasized on GDP and corporate welfare. The neo-laissez-faire system has widened the economic divide. The policy-making favouring CEOs and companies sprouted. When we examine American politics there are a lot of factors that help in maintaining corporate governance. The media plays a very important role in this.
Here we could refer to Noam Chomsky who accurately showed the minds of people are designed using media. (refer to Manufacturing Consents by Chomsky) The middle class of America is disillusioned according to Stiglitz. The persisting fear of “Socialism” which was inculcated very before also helps to the growthof corporate governance. Stiglitz calls for the need for a strong government to regulate the market. If we read between the lines we can see how myths, and racism are deeply routed in politics.
The last two chapters suggest the alternatives for the morbidity of free market. Stiglitz has given very mixed alternatives for the crisis. They are both Keynesian and socialistic in nature. He focused on banking measures which were crucial during the economic crisis. He shows the example of India which withstood the crisis because of strong banking policies.
Courtesy: ‘New Age Weekly’
* The book deals with American economy that too with that prevailed in 2008. However it is relevant to Indian economy. Of course, it withstood the global financial crisis of 2008. Despite having a unique economic fundamental, to be specific, mixed economy, during the last 10 years. The fundamentals has been eroded perceptibly. Free market economy is encouraged shedding down the responsibility of state interaction slowly. A worse condition has crept in. It is crony capitalism neglecting the welfare of the vast majority of the toiling population. It is again unique in the sense that the outcome of crony capitalism is sucking out the economic welfare of not many corporates but only of a few individual – corporates. Crony capitalism is comparatively worse than capitalistic welfarism. Crony capitalism sucks as parasite the contributions of the rest of the sections of the society. It is an irony in our country where the constitution has declared its socialistic pattern.
– editor
