Notes on "The Price of Inequality" (Joseph E. Stiglitz)

The Price of Inequality

Joseph E. Stiglitz

Published by the Penguin Group

Penguin Books Ltd., England

2013 Edition

• lay out the scope of inequality in the U.S.
• how it affects the lives of millions in different ways
• The past 30years, a nation divided
• trickle-down economics
• giving more money to the top will benefit everyone
• discredited
• the opposite has been experienced in the U.S.:
• in the period of increasing inequality, growth has been slower
• the “polarisation” of the labor force
• more of the money is going to the top, more of the people are going toward the bottom
• the housing bubble had provided a temporary reprieve from the consequences that would have followed from falling incomes. They could, and did, spend beyond their income as they struggled to maintain their standard of living.
• a standard of living in decline
• money that is spent on “security”- protecting lives and property- doesn’t add to well-being.
• equal opportunity is myth
• decline in opportunity <->growing inequality
• the top: grabbing a bigger slice of the pie
• “fair pay within companies matters; it affects productivity, employee engagement and trust in our business. Moreover pay in publicly listed companies sets a precedent, and when it is patently not linked to performance, or rewards failure, it sends out the wrong message and is a clear symptom of market failure”
• recent US income growth primarily occurs at the top 1 percent of the income distribution
• America has more inequality than any other advanced industrialized country.
• American inequality was created
• a result of government policy
• competitive forces should limit outsize profits, but if governments do not ensure that markets are competitive, there can be large monopoly profits.
• the U.S.: a political system that gives inordinate power to those at the top
• limit the extent of redistribution
• shape the rules of the game
• extract from the public
• Adam Smith: “people of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices”
• private rewards and social returns are not well aligned when competition is imperfect
• rent seeking: 
• hidden and open transfers and subsidies from the government
• laws that make the marketplace less competitive
• tax enforcement of existing competition laws
• statutes that allow corporations to take advantage of others or to pass cost on to the rest of society.
• monopoly rents: creating sustainable monopolies
• there was a battle over ideas about the role that government should take in ensuring competition
• the creation of monopoly power was easier in some of the new growth industries
• businesses found new ways of resisting entry
• U.S. financial institutions:
• The champions of the rights of capital- over the rights of workers or even political rights
• ->lowering wages + weakening worker protections
• ->race to the bottom
• =>crisis: workers and small businesses bear the brunt of the costs
• the movement of goods is a substitute for the movement of people
• capital highly mobile, tariffs low

->company will more elsewhere if  workers do not accept lower wages and worse working conditions

• inequality-> poor macroeconomic performance
• lower public investment
• the end of opportunity
• a less well-regulated economy
• private rewards differ from social returns
• rent seeking is pervasive in the American economy
• making markets work better, by aligning the two and reducing the scope for rent seeking, and by correcting other market failures, whose effects are especially hard felt at the bottom and in the middle, would also simultaneously reduce inequality and increase efficiency – just the opposite of what the right contends.
• US: overestimating the costs and underestimating the benefits of more- progressive taxation
• democracy
• voting paradon
• asymmetries of information
• most individuals would rather accept an inefficient outcome –even hurting themselves- than an unfair one
• LAW: de facts vs de jure
• myth: austerely will bring recovery and more government spending will not.
• a macroeconomic policy and a central bank by and for the 1 percent:
• more “wage flexibility” but ignore the risks of financial fragility
• lend to banks at very low interest rates, especially in terms of crisis
• independent central banks had been captured by the financial sector
• reform:
• curb the financial sector:
• curb excessive risk taking and the two-big-to fail and two-interconnected-to-fail financial motitations
• make banks more transparent
• make the banks arid credit card companies more competitive and ensure that they act competitively
• make it more difficult for banks to engage in predating leading and abusive credit practices, including by qulting struts limits on using
• curb the bornuses that encoverage excessive risk taking and shortsighted behaviours
• close down the offshore banking centers
• stronger and more effectively enforced competition laws
• improve corporate governmance
• comprehensive reform of bankrupty laws
• end government giveaways
• end corporate welfare
• democratising access to justice, and demovishing the arms race
• tax reform:
• more progressive
• enforced eotate tax system
• social protection
• education
• health care
• active labors polices