Economics missing in moral view
The Price of Inequality
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