The Price of Inequality: How Today's Divided Society Endangers Our Future Reprint Edition

The Price of Inequality: How Today's Divided Society Endangers Our Future by Joseph E. Stiglitz"The Price of Inequality" is one of the most compelling economic books about the excessive inequality in the United States. It does a fabulous job of explaining three interlinking themes: that inequality is cause and consequence of the failure of the political system, and contributes to the instability of our economic system, which in turns contributes to inequality. Winner of the 2001 Nobel Memorial Prize for Economics and acclaimed professor and author, Joseph Stiglitz, provides the reader with a quote-fest of a book that addresses not only the reasons for such a financial divide but provides pragmatic economical ways to tackle them. This enlightening and pragmatic 449-page book is composed of the following ten chapters: 1. America's 1 Percent Problem, 2. Rent Seeking and the Making of an Unequal Society, 3. Markets and Inequality, 4. Why It Matters, 5. A Democracy in Peril, 6. 1984 Is Upon Us, 7. Justice for All? How Inequality is Eroding the Rule of Law, 8. The Battle of the Budget, 9. A Macroeconomic Policy and a Critical Bank By and for the 1 Percent and 10. The Way Forward: Another World Is Possible.Positives:1. A well-written page-turner of a book that is accessible to the masses. A quote fest.2. It's always a treat to read a book from an expert who knows what he is talking about and how to relay it to the public.3. Great format. The author starts each of the ten chapters with a quick synopsis and closes out with concluding comments.4. This book succeeds in getting to the heart of the thesis: why inequality is growing to the extent it is and what the consequences are. Stiglitz is relentless in his pursuit and we are the beneficiaries.5. Why are economic system is unfair? Answered to satisfaction. Eye-opening information.6. "While there may be underlying forces at play, politics have shaped the market, and shaped it in ways that advantage the top at the expense of the rest". It's a quote fest alright.7. The 1 percent in perspective. " For an even more striking illustration of the state of inequality in America, consider the Walton family: the six heirs to the Wal-Mart empire command wealth of $69.7 billion, which is equivalent to the wealth of the entire bottom 30 percent of U.S. society. The numbers may not be as surprising as they seem, simply because those at the bottom have so little wealth".8. How government policies shape inequality. "A major theme of this book is that inequality is the result of political forces as much as of economic ones".9. There is so many mind-blowing facts in this book, " A little-noticed change in legislation, for example, can reap billions of dollars. This was the case when the government extended a much-needed Medicare drug benefit in 2003. A provision in the law that prohibited government from bargaining for prices on drugs was, in effect, a gift of some $50 billion or more per year to the pharmaceutical companies". Oh yeah, it's like that.10. How societal norms shape inequality. How globalization as it has been managed contributes to inequality. Interesting stuff.11. The true role of government and how our government failed the 99%. "The United States spent far more on its big bank bailout, which helped the banks to maintain their generous bonuses, than it spent to help those who were unemployed as a result of the recession that the big banks brought about. We created for the banks (and other corporations, like AIG) a much stronger safety net than we created for poor Americans".12. The effects of inequality on national output and economic stability, and its impact on economic efficiency and on growth.13. Some very key points that will stick with me, "The 2010 decision in the case of Citizens United v. Federal Election Commission, in which the Supreme Court essentially approved unbridled corporate campaign spending, represented a milestone in the disempowerment of ordinary Americans". A need to reform our political process.14. How the 1 percent convinces the 99 percent that they have shared interests. It's about shaping perceptions.15. The battle over laws and regulations that govern our economy and how they are enforced. How the powerful have turned America's legal system into a travesty of justice.16. A great section on predatory lending. How the banks won at the expense of America. And an infuriating section on student loans.17. How surpluses under Clinton were turned to deficits under the influence of four major forces. The budget in perspective.18. Practical recommendations to reduce the deficit. "lowering the taxes on firms that created jobs and invested in America and raising taxes on those that didn't".19. A section on debunking myths: the supply-side myth, the raising taxes on millionaires will hurt small businesses and therefore cost jobs myth, the government-run programs must be inefficient myth, blame the poor myth, the austerity myth, and the failed stimulus myth.20. Understanding the real role of policy makers. "A central theme of the book is that some of the policy choices have simultaneously increased inequality, benefitting those at the top-- and hurt the economy".21. "The Fed gambled, in trusting that banks on their own could manage risk--a gamble that paid off handsomely for the banks, and especially for the bankers, but in which the rest paid the price. The Fed could have curbed the reckless and predatory lending, the abusive credit card practices, but chose not to do so. Again, the banks were the winners; the rest the losers". I just can't word that any better.22. The obsession with inflation. A good section.23. Ending on a positive note. " This book is not about the politics of envy: the bottom 99 percent by and large are not jealous of the social contributions that some of those among the 1 percent have made, of their well-deserved incomes. This book is instead about the politics of efficiency and fairness. The central argument is that the model that best describes income determination at the top is not one based on individuals' contributions to society (the "marginal productivity theory" introduced earlier), even though, of course, some at the top have made enormous contributions. Much of the income at the top is instead what we have called rents".24. A list of recommendations in narrative format that shows what needs to be done to create reforms we need in our economics and our politics.25. A comprehensive notes section.Negatives:1. The strength of this book is clearly explaining how we got to this level of inequality, the biggest weakness is the level of the cure not necessarily matching the disease. I feel that the recommendations covered in this book are good, it just doesn't live up to the diagnosis. I also disagree with a few of the recommendations. Getting the marginal tax back to 70% seems unfair even to this progressive-minded reviewer.2. A little repetitive.3. Some of the material in this book will make your blood boil.4. Charts and illustrations would have added value.5. The notes section was very comprehensive but a formal bibliography never hurts.In summary, this is a fantastic book. I really enjoyed it. Stiglitz has a great command of the topic and is able to convey his thoughts in a lucid an accessible manner. His arguments are sound and quite compelling and backed by countless references. If you want to learn how we got to this level of inequality, this is a fantastic book that covers it with expertise. I highly recommend it!Further suggestions: "Red Ink: Inside the High-Stakes Politics of the Federal Budget" by David Wessel, "The Benefit and The Burden: Tax Reform-Why We Need It and What It Will Take" by Bruce Bartlett, "It's the Middle Class, Stupid!" by James Carville and Stan Greenberg, "End This Depression Now!" by Paul Krugman, "Beyond Outrage: What has gone wrong with our economy and our democracy, and how to fix them" by Robert B. Reich, "The Republican Brain: The Science of Why They Deny Science- and Reality" by Chris Mooney, "Winner-Take-All Politics: How Washington Made the Rich Richer--and Turned Its Back on the Middle Class" by Jacob S. Hacker, "Screwed: The Undeclared War Against the Middle Class - And What We Can Do about It (BK Currents (Paperback))" by Thom Hartmann, "The Monster: How a Gang of Predatory Lenders and Wall Street Bankers Fleeced America--and Spawned a Global Crisis" by Michael W. Hudson, "Perfectly Legal..." by David Cay Johnston, and "The Looting of America" by Les Leopold.

The main ideas:Markets are neither efficient nor stable (as they are supposed to be); our political and economic systems are fundamentally un-fair. We created the system of "one dollar – one vote" instead of "one person – one vote". We created the system in which "…"justice for all" is being replaced by …"justice for those who can afford it"" "America is no longer the land of oppor-tunity". All this is the price we are paying for inequality which was growing steadily in the last twenty years. The author gives a lot of examples and data on inequality in America. E.g.:- one out of six who would like to have a full-time job still couldn't find one (p.1);- 8 million families had been told to leave their homes (ibid);- By 2007 … the top 0,1 percent of America's households had an in-come that was 220 times larger than the average of the bottom 90 percent (p.2)- the ratio of CEO annual compen-sation to that of the typical worker by 2010 was … 243 to 1 (p.3);- in 1980 out Gini coefficient was just touching 0,4, today it's 0,47 (p.23);- AIG got more than $150 billion – more than was spent on welfare to the poor from 1990 to 2006 (180); etc.What is the cause of this inequality? Stiglitz's answer: this is the theory which is called "marginal productivity theory": "those with higher productivities earned higher incomes that reflected their greater contributions to society. Competitive markets, through the laws of supply and demand, determine the value of each indi-vidual's contributions" (p.30). The major theme of the author is that nowadays this theory is a Utopia. "…inequality depends on the distributions of "endowments," of financial and social capital" (p.31). And this distributions depends highly on the government policy which creates the rules of the game. "There are two ways to be-come wealthy: to create wealth or to take wealth away from others. The former adds to society. The latter typically subtracts from it" (p.32). All next chapters are de-voted to detailed explanations of how this process is going in America and what are the arguments of those who defend the existing rules of the game. And "America has a government of the 1 percent, by the 1 percent, and for the 1 percent".Some important notes.Stiglitz labels the numerous ways by which current political system helps the rich at the expense of the rest as rent seek-ing. "Countries rich in natural resources are infamous for rent seeking activities"."…one can't really separate out any indi-vidual's contributions from those of oth-ers" (p.78).Many in business sector are craving for profits "they might garner now". They think of their narrow short-term self-interest (p.90).CEO's do not earn the money they get - they redistribute them in their own favor.GDP is a bad metric because when it arises the country's wealth may diminish and the wealth of the 99 percent may worsen."The level of real per capita GDP … and the rate at which it is growing, is not a good measure of success" (p.183)."Individuals can often be better motivated by intrinsic rewards – by the satisfaction of doing the job well – than by extrinsic rewards (money). To take one example, the scientists whose research and ideas have transformed out lives in the past two hundred years have, for the most part, not been motivated by the pursuit of wealth" (p.112)."…the kinds of incentive pay schemes employed by many corporations, while they create more inequality, are actually counterproductive" (p.114).Inequality lowers trust, and only those economies flourished where there was a higher level of trust. People must feel con-fident that they will be treated well, with dignity, fairly. Then they recipro-cate…(p.122). "… the financial markets' interests frequently do not coincide with those of the country. The markets are shortsighted and have a political and eco-nomic agenda that seeks the advancement of the well-being of financiers rather than that of the country as a whole" (p.139). etc.So what Stiglitz suggests?!- Reducing the rent seeking and lev-eling the playing field (first of all by curbing the financial sector and by tax reform);- Helping the rest (through changes in the system of education, sav-ings, health care, social protection, control of employment)."Is there hope?" - asks the author in his last chapter? And answers: "Four years ago there was a moment where most Americans had the audacity to hope. Trends more than a quarter of the century in the making might have been reversed. Instead, they have worsened. Today that hope is flickering" (p.290).