Eco­nom­ics miss­ing in mo­ral view

The Price of In­equal­ity

The Weekend Australian - Review - - Books - Frank Car­ri­gan

By Joseph Stiglitz Allen Lane, 448pp, $39.99 (HB)

PART of the plea­sure that comes from roam­ing through a book­shop is see­ing how the ser­ried ranks of books sym­bol­ise the shift­ing trends of a mar­ket so­ci­ety. Prior to the global fi­nan­cial cri­sis the shelves were dot­ted with non­fic­tion works that re­flected the ex­u­ber­ant op­ti­mism of a new Gilded Age. The eco­nomic boom was fer­tile ground for in­struc­tion man­u­als on how to skip from rags to riches.

Now that an age of un­cer­tainty and aus­ter­ity has de­scended, there has been a rash of books ques­tion­ing the mo­ral foun­da­tions of a mar­ket so­ci­ety that is ex­hibit­ing steep in­come and wealth in­equal­i­ties.

The post-GFC lit­er­a­ture has lash­ings of mo­ral cri­tique. It nor­mally mar­shals an ar­se­nal of em­pir­i­cal data to show how eco­nomic in­equal­ity is breed­ing di­vided so­ci­eties that suf­fer a range of mal­adies such as low so­cial mo­bil­ity, chronic health prob­lems and high rates of vi­o­lence, crime and im­pris­on­ment.

What has been miss­ing in the de­bate is rig­or­ous eco­nomic anal­y­sis. There is no need to put eco­nom­ics on a pedestal, but the fact is great thinkers such as John Locke, Jeremy Ben­tham and John Stu­art Mill, who were re­spon­si­ble for pi­o­neer­ing the growth of lib­eral democ­racy, fash­ioned their so­cial doc­trines to suit a bur­geon­ing mar­ket so­ci­ety. Eco­nomic as­sump­tions loomed large in their work.

The cre­ators of lib­eral in­di­vid­u­al­ism were not afraid to wres­tle with the in­equal­i­ties spawned by a mar­ket so­ci­ety. They ac­cepted them as the price for the free­dom of the in­di­vid­ual from the statu­tory dom­i­na­tion that shack­led pro­duc­ers dur­ing the feu­dal epoch.

With the publi­ca­tion of The Price of In­equal­ity, an em­i­nent Amer­i­can econ­o­mist has stepped for­ward to shed light on the com­plex is­sues in­volved in in­come and wealth in­equal­ity.

Joseph Stiglitz has had an il­lus­tri­ous ca­reer, capped by re­ceiv­ing a No­bel Prize in 2001. He has been chief econ­o­mist at the World Bank, an ad­viser to then US pres­i­dent Bill Clin­ton, and taught in pres­ti­gious univer­si­ties. His fame sky­rock­eted fol­low­ing a Van­ity Fair ar­ti­cle he wrote in mid-2011 that pro­mul­gated the theme that the top 1 per cent of wealth­i­est Amer­i­cans were en­joy­ing a dis­pro­por­tion­ate share of na­tional in­come at the ex­pense of the 99 per cent. His ar­ti­cle fu­elled the cause of the 99 per cent and pro­vided a ready slo­gan to the Oc­cupy Wall Street move­ment. He is a lead­ing global pub­lic in­tel­lec­tual.

Stiglitz snap­pily sums up the cen­tral theme of this book: The sim­ple story of Amer­ica is this: the rich are get­ting richer, the rich­est of the rich are get­ting still richer, the poor are be­com­ing poorer and more numer­ous, and the mid­dle class is be­ing hol­lowed out.

To sup­port this the­sis he notes that even in 2007, a year be­fore the eco­nomic col­lapse, the top 0.1 per cent of Amer­i­can house­holds had an in­come that was 220 times larger than the av­er­age of the bot­tom 90 per cent. The wealth data is just as strik­ing, ‘‘ with the wealth­i­est

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