Mike Kueber's Blog

October 18, 2013

Inequality and Stiglitz

Filed under: Economics,Issues,Politics — Mike Kueber @ 11:04 pm
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When I ran for Congress in 2010, I would posit on the stump that America’s two great challenges were its burgeoning debt and rising inequality.  These problems are fundamentally different because one has an easily-understandable solution while the other does not.  Everyone knows how to solve the debt problem.  Like the simple bromide of diet and exercise to lose weight, solving the debt problem simply requires cutting spending or increasing taxes.  Reversing the rising inequality, however, is a problem for which politicians have no generally acknowledged lever to address.

The Great Divide is self-described by the New York Times as a “series on inequality — the haves, the have-nots and everyone in between — in the United States and around the world, and its implications for economics, politics, society and culture. The series moderator is Joseph E. Stiglitz, a Nobel laureate in economics, a Columbia professor and a former chairman of the Council of Economic Advisers and chief economist for the World Bank.”  Because of my political interest in addressing inequality, I closely follow the series, but am invariably disappointed when the articles fail to deliver a panacea, or even a credible hypothesis.  An article by Stiglitz earlier this week was more disappointing than normal because the Times’ teaser was full of promise.  Titled, “Inequality Is a Choice,” the teaser read, “Income inequality results more from political decisions than economic forces.”  Excellent, I thought, Stiglitz is going to reveal the political decisions that cause income inequality, and then wise politicians can modify those decisions to ameliorate the inequality.

Boy, was I disappointed.  After spending countless paragraph bemoaning the rising tide of inequality in America, Stiglitz summed up his entire article in the following paragraph:

  • But the trend was not universal, or inevitable. Over these same years, countries like Chile, Mexico, Greece, Turkey and Hungary managed to reduce (in some cases very high) income inequality significantly, suggesting that inequality is a product of political and not merely macroeconomic forces. It is not true that inequality is an inevitable byproduct of globalization, the free movement of labor, capital, goods and services, and technological change that favors better-skilled and better-educated employees.

Although the paragraph sounds promising by listing five countries that have been able to reduce income inequality, the rest of the article utterly fails to describe what those five countries have done to produce their preferable result.  We need causation, not correlation.  By failing to provide the reader with the cause-effect information, Stiglitz does nothing to disprove the reasonable consensus that inequality is a byproduct of globalization and technological advancements.

I wish Stiglitz would disprove the consensus, but until he or someone does, the only obvious way to reduce inequality is through redistribution of income, and that will put us on a slippery slope to socialism.

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1 Comment »

  1. Chile, Mexico, Greece, Turkey and Hungary: these are not countries that one should hold up as successful in reducing income equality when, for the most part, they are barely functioning as economies.

    Comment by bobbevard — October 19, 2013 @ 1:16 am | Reply


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