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Stiglitz: Of the 1%, by the 1%, for the 1%

April 7, 2011

Of the 1%, by the 1%, for the 1%
Americans have been watching protests against oppressive regimes that concentrate massive wealth in the hands of an elite few. Yet in our own democracy, 1 percent of the people take nearly a quarter of the nation’s income—an inequality even the wealthy will come to regret.

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It’s no use pretending that what has obviously happened has not in fact happened. The upper 1 percent of Americans are now taking in nearly a quarter of the nation’s income every year. In terms of wealth rather than income, the top 1 percent control 40 percent. Their lot in life has improved considerably. Twenty-five years ago, the corresponding figures were 12 percent and 33 percent. One response might be to celebrate the ingenuity and drive that brought good fortune to these people, and to contend that a rising tide lifts all boats. That response would be misguided. While the top 1 percent have seen their incomes rise 18 percent over the past decade, those in the middle have actually seen their incomes fall. For men with only high-school degrees, the decline has been precipitous—12 percent in the last quarter-century alone. All the growth in recent decades—and more—has gone to those at the top. In terms of income equality, America lags behind any country in the old, ossified Europe that President George W. Bush used to deride. Among our closest counterparts are Russia with its oligarchs and Iran. While many of the old centers of inequality in Latin America, such as Brazil, have been striving in recent years, rather successfully, to improve the plight of the poor and reduce gaps in income, America has allowed inequality to grow.

JOSEPH STIGLITZ: Well, there are two points that I try to make. One is that a successful economy requires collective action. There are lots of things we have to do together. We have to have infrastructure. We have to have an educated population. If you have a divided society, you start worrying more—if you’re in the wealthy and you have an electorate system that can use your wealth to affect the politics, you say, “I’d rather have a small government that isn’t able to redistribute money, take money away from me. I don’t need public schools; I have private money. I don’t need public parks; I have private—you know, my large land.” So, what you have then is an erosion of the kind of collective action, and that makes a society less efficient, less productive. And you see that already happening. We are competing in education with countries in Asia that were much poorer than we were not that long ago. So that’s one problem.

And the second one is that obviously a house divided can’t stand, that you start getting tensions, you start not paying attention to the things that make us cohesive as a nation. And that’s what you’re seeing in Wisconsin. And you also see that in the budget messages that are coming across, saying, “OK, we’re going to cut back on healthcare for aged and for the poor, but we’re not going to do anything about overall healthcare costs.” What does that mean? It means that if you’re going to cut back on health expenditures for the aged and the poor, and you’re going to let health costs continue to rise, that says rationing. They’re not going to be able to get healthcare. Already, we spend more money with poor health outcomes than those in other countries in the advanced industrial world. And it’s going to get worse as the poor and the elderly can’t get access to healthcare.

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