Here are some of the things that "capitalism" needs
in order to be civilized and "progressive".
Strong anti-fraud regulation,
and strong consumer protection regulation,
at the federal level,
including strong oversight
from government agencies such as
the Federal Trade Commission,
Consumer Financial Protection Bureau,
Food and Drug Administration,
and Securities and Exchange Commission,
and empowering such agencies to promulgate regulations
including doing away with the nonsense historical tolerance for exaggerated "puffing" in advertising,
doing away with the so-called "parol evidence rule"
(which allows supposed "contracts" in writing
to override oral promises),
with federal regulatory rules controlling,
and overriding,
"contracts of adhesion"
(including the reams of "fine print",
which the modern public has come to experience
as the absurdly complicated and convoluted "click through" "legalese" verbiage in internet transactions),
and, in situations where federal regulations are "silent",
construing the "fine print" strictly against the party that produced it -- i.e the dominant party.
Also, prohibiting "arbitration" in all employment contracts and all consumer contracts --
"Arbitation" should be sent back to where it was originally intended -- for contracts between the "big guys" --
but not in "adhesions contracts" forced on "little guys".
In the corporate area --
tighter regulation of the "proxy solicitation" process
allowing more access by non-management shareholders.
27
The latest effort in the rebranding campaign for socialism
Democratic socialism
Social democracy
Democratic capitalism
Progressive capitalism
Leftists think it’s just about the “label” but their defensiveness betrays a deeper quandary
10
Between this editorial and the book "Winner Take All" by Anand Giridharadas, it is increasingly apparent that the reverberations of Reagan's are still being felt today. The idea that "Government is the problem" has imbued all our thinking for the last 40 years to disastrous effect.
54
Listening to anyone over the age of 45 about how to fix our system is pointless; they are mentally stuck in yesterday’s world. Tomorrow’s world introduces factors no economic system has ever seen. Full scale industrial automation, mass world hunger, ecosystem and environmental destruction, the fall of at least one major world currency, AI and every risk and opportunity associated with it. None of these factors have ever hit the world like they will over the next few decades, and a successful working economic policy also will not look like anything the world has ever seen.
Or... it won’t. Change won’t happen in time to stop today’s prevailing forces, and billions will starve while the wealthy live in segregated communities protected by private automated armies. AI advances will go to the wealthy first, increasing the gap in standards of living from today, corporate influence will continue to be the biggest factor in government policy ensuring their ever growing power remains, and the environment will continue to suffer and wreak havoc on those who can’t afford to escape.
So yes, we DO have a choice, but following the leadership of those who cannot see the future isn’t the way to go.
17
i refuse to read this article on the grounds that the headline right off the bat is a lie
4
Our society has been dealing with 'tyranny of the minority' since the beginning. Take health care, please. The richest country in the world pays many times more than any other country.
Mr. Stiglitz advocates for societal fixes we all should recognize. "We the people" were much better off when the government maximized benefits for everyone.
AOC got it right when she said unemployment was low because people are working two jobs.
Giving the wealthy more money during the Bush and Obama administrations did nothing for society and everything for those who already have much too much.
We need to create wealth again, not flush it down a golden toilet.
17
Most of the problems in this country stem from 3 main issues. The first is the fact that for over 50 years Congress has failed to tax for all the legislation that it passed that needed funding, and instead borrowed for more, and more of it. It started seriously with the build up of the Cold War, and the Vietnam War, and has continued since 2000 with the wars in the middle east, at a clip not seen since. We are now borrowing 30% more each year that what revenue our government takes in. $22 trillion of debt, current spending of $1 trillion more each year going forward of debt, $365 billion paid in interest on that debt, and as that increases, shoring up future entitlement fiscal needs, will send us into fiscal crisis. The second issue is the over 70,000 pages of the IRS Tax Code, that is nothing more than legalized extortion by way of lobbyists, lawyers, and Congress, that has created so many deductions, and credits, that many businesses like Amazon, the Kushner Holdings, and the Trump Organization pay little, if anything in taxes, while those with children, are given more credits to medicate them from paying attention to what is going on fiscally in this country. The third issue is that most in this country, whether the above, or those receiving entitlements, where there is no monthly premium, or only a small amount, believe that it is okay. I have been a gardener for 50 years, and worked for an investment firm at the age of 20, and human nature is not on our side.
11
Vulture capitalism is flourishing in a casino economy stoked by "an ego maniac in the oval office", as Maureen Dowd describes him. Does anyone think the US political system is capable of providimg solutions for problems like this? I would like to think so, but I don't see it.
14
Meanwhile MTV likely a doyen of capitalism and Marketing are accused of Provoking a riot in Derry, Northern Ireland where a Young Irish journalist was shot at killed.
MTV lawyers are said to be cooperating with the Police, no doubt trying their best to promote progressive capitalism by avoiding any admission of either guilt or moral compass.
The Fact that they had cameras there.
Before the first Molotov cocktail was thrown creates some suspicion.
I dispute the assertion that the USA provided a middle class life for most or all Americans after WW11 as minorities were left behind. Otherwise I find the article very interesting !!
Thanks!!
8
Many comments, sadly, lump the “rich” together without embracing the distinction between wealth through creation and wealth through exploitation. That’s a shame. Until we stop demonizing all people who have amassed money, we won’t tackle the structural weaknesses of our system.
12
Just explain one thing to me. Mr. Stiglitz has a very good grasp of the issues facing our capitalist - oligarchy? - society.
It could all work out - somehow, someway - I'm sure, in a very interesting and positive way. But for the moment, the country is going down the plughole: socially, economically, ethically, morally.
Our country is being run by a pack of corrupt prevaricators: Trump, McConnell, Nunes, Barr, Burr, Mark Meadows, Jim Jordan. Patriots all...
The thing I can't figure out, is why 40% of the American electorate buys this applesauce, no matter how you spin it...
18
Eliminating inequality is easy; just eliminate wealth. And that is EXACTLY what leftists propose.
Rent seeking IS a problem – created by government. Simple example: want to reduce the price of cars? Permit direct sales to customers. But that’s illegal in every single state, due governmental edict.
The most abusive practices in the financial sector were governmental: threats to a lender’s bottom line if its portfolio was not Politically Correct. Regulation – mandates – not deregulation, led to risky loans.
It’s not foreign trade which depresses wages; it’s importing foreigners. If we eliminated corporate taxation and closed the borders to unskilled immigrants, we could out-compete anyone. But labor gluts, fueled by immigration, are leftist dogma. If machines are replacing some jobs, why not ensure that the ones remaining are taken by Americans, not immigrants?
Markets most certainly CAN provide disability and unemployment insurance. Greater educational freedom (vouchers) would improve the product and reduce costs. If we went to a private pension system, akin to Norway’s sovereign wealth fund, we would not be staring down multi- trillion dollar unfunded liabilities. (How did the pensions managed by state governments work out?)
Want rampant dishonesty? There is no substitute for government, where “you can keep your policy if you like it.”
7
Somehow, Reagan has gotten a pass with his “It’s morning in America” add selling his huge tax cut that changed the country for the worse ever since.
Thank you Dr. Stieglitz for pointing that out.
21
As a student I read Adam Smith, whose biggest complaint was that the invisible hand was handicapped by monopolies and duopolies and oligolopolies, which had to be struck down.
I resent Prof. Stiglitz, who ought to know better, presenting Adam Smith as a justifier of unregulated capitalism.
6
Nice to hear an advanced view of economics that isn't mired in Washington political food fights among the special interests.
The public option Stiglitz talks about makes perfect sense if we start from the position that private industry should do what it does well and government should do what government can do well or what private enterprise will not touch.
I am old enough to remember the day we woke up to hear the news that Sputnik was orbiting earth. That night we went out to see if we could catch a glimpse of the first spaceship. Where was western private enterprise? Sputnik had been launched by a monopoly one party socialist state in the Soviet Union.
Yet we are told over and over that government can't do anything; that government is the problem not the solution.
If progressives ever get a chance to save our society, I can only hope they don't blow it. My economics professor back in college during the Cold War related how an anarchist approached Baron Rothschild in the streets of Paris and screamed "when the revolution comes we will take all your money and everybody will be rich" and Rothschild pulled one franc from his pocket and said "why wait for the revolution, here is your share now".
2
An idea whose time has come! I hope.
3
Professor Stiglitz, thank you for your wonderful article. As always it is full of brilliant insights.
Wherever or not we call it progressive capitalism or social democracy or democratic socialism, the idea of striving towards a Rawlsian society is what needs to be emphasized in the progressive discourse.
Since the days that I read A Theory of Justice and had a chance to hear its praises from no less an economist than Ken Arrow when I was in graduate school, I have been surprised in how little talk there is about the man and the concept these days among progressives.
The idea of organizing society in a way that people are indifferent to who they wake up as having gone to bed as themselves seems a simple yet powerful enough idea to communicate to everyone again and again. The fact that we end up maximizing the utility of the least fortunate among ourselves before we optimize everyone else’s is as attractive as anything Jesus, Moses, Mohammed and Buddha have said.
There is no room for Reagan voodoo economics or rescinding of G-S by Rubin/Clinton there. There is no room for idiotic tax cuts of Trump-Cohn-Mnuchin.
It is much simpler and beautiful. It will provide a framework to evaluate between progressive alternatives that Bernie Sanders and Elizabeth Warren have been proposing. It is worth bringing Rawls back for a little. John Roemer of Yale could even help model mathematically what it is needed, with your help of course!
7
This looks like a template of platform positions for the Democratic Party-if they listen. The cred is excellent, and this piece stands in stark contrast to the lack of and (vapid /stale/vague if offered) proposals offered by trump and his crony capitalists.
I urge the GOP to double down and inform the American public of how "successful" their actions have been.
The silence will be deafening-here. It will be overwhelmingly and screechingly vile as they unleash the hate and other deflections so common to them. For they have little to nothing to sell at this point.
Translated: this is a winning formula.
7
At the risk of an oversimplification to provide an initial hypothesis; the concept of democracy cannot be limited to the political sphere. Unbalanced self-interests of elite minorities ultimately corrupt and destroy whatever environment; social, economic or political, in which they predominate.
President Roosevelt's New Deal in the 1930s recognized and institutionalized the necessity of rebalancing the collective good of society at large against the excesses of
limited self-interests and outsized power of financial and professional elite minorities.
4
Trade, the free market and the quantifiable properties that emerge from those human-human interactions are as natural as any other naturally emergent phenomenon. However, so are viruses, tornadoes and psychopathy. Interesting how we collectively allocate resources to mitigate the damaging effects of the latter but we leave capitalism relatively unchecked.
Capitalism is wonderful. But only for the people who have capital. It’s good to be rich.
Strange how so many who aren’t rich vote like they are wealthy. Seems obvious to me it’s a branding problem. It’s not that we need a new John Maynard Keynes, we need a new Franklin Roosevelt. Yet, FDR existed in a time when administrations had total control over their image: even Stalin was surprised that the president couldn’t walk when they finally met face to face.
In the end, I think we need to solve the misinformation problem before we tackle the regulating-modern-economies problem. When poor people in rural America are voting like they are fat cats in the city you have a problem that no amount of logic, evidence, nor reasoning can solve.
7
I wonder how 90% of working people could have experienced stagnant wages over 30 years, most have not even worked that long. Our system is working as desired, if you don't like it move. Today and in the future the value of capital will far outstrip unskilled labor. Self driving cars, automation in a lot more areas, and machine learning will eliminate or reduce the need for human labor.
1
Your does that the system is “working as desired” is laughable. Never had economic inequality been so large. Only people who have benefitted from income equality would think that the system is working.
3
The premise is that if we abdicate more power to the government to dictate outcomes in the economic arena, we will have a "better" society for all. This ignores the observable fact that powerful governments have a history of rewarding political friends and punishing political opponents.
Why progressives cling to the notion that people in government are "purer" than capitalists baffles me.
2
The NYT should do an article on why Obama did not include a public option in Obamacare. My vague remembrance of the events was that even without out he had to twist the arms of conservative Democrats to vote for it and that Roberts then saved it from going under in the 5-4 Supreme Court ruling in 2012. Too many representatives, too many doctors, rely on money from the health-care and pharmaceutical industries and are financially constrained from supporting more public healthcare. We have to get money out of our politics with a financial version of HR 1 and at least open or two new SCOTUS appointees who recognize (as Roberts & co do not) how pernicious the influence of money is on our electoral and health systems.
3
Found on Wikipedia:
"According to a 2018 study by the OECD, the United States has much higher income inequality and a larger percentage of low-income workers than almost any other developed nation. This is largely because at-risk workers get almost no government support and are further set back by a very weak collective bargaining system. The top 1 percent of income-earners accounted for 52 percent of the income gains from 2009 to 2015, where income is defined as market income excluding government transfers."
This editorial has good words and ideals but doesn't address much specific policy. How about:
-- Increasing oversight / regulation of wall street (Dood Frank + more)
-- Strengthening and defending unions
-- Increasing the minimum wage
-- Ramp up anti-trust enforcement
-- Bring the corporate tax rate back to what it used to be, after decades of sliding downwards + more loopholes
5
American wealth:
Take 11 people making $100,000.
11 x $100,000 = $1.1 Million
Average = $1.1 Million / 11 = $100,000.
Take 10 people making $10,000 and 1 person making $1 Million = $1.1 Million.
Average = $1.1 Million / 11 = $100,000.
Same average, very different economies.
6
I, for one, do not understand how a capitalist could stay away from developing her capital and equivalent resources to their optimum in order to gain maximally from a market. If I don’t investment my capital to get better tools, if I neglect my labor force to the extent they are demoralized making them feel their works as only chores, and I don’t pay them up sufficiently enough to become part of the very consumer force that keeps me alive – could I be an optimum capitalist?
I may be an approximate capitalist skirting all these issues, or an asterisked one who does not care a whit about investment. By parking my money in offshore accounts, or buying stocks back without furthering any investment, am I not abusing the very concept of ‘capital’?
2
This editorial is mere rhetoric. Mr. Stiglitz is remiss in failing to acknowledge the profound historical realities that created American wealth.
At the end of WWII, America was anything but a "poor country". It had a massive industrial base created by war spending and production, virtually unlimited natural resources, and a unique position as essentially the last industrial economy left after the utter destruction of Europe and Japan. That is why America enjoyed unparalleled prosperity until the Asian economies became more efficient and America exported jobs.
Politically it is clear that America will never be a managed economy as Stiglitz proposes. The only way forward is for America to regain economic primacy among the (now numerous) industrialized nations. This can only be done by massive investments in education, infrastructure and technology by the federal government. Legislated increases in minimum wage will help, but ultimately skilled workers will acquire the bargaining power to raise their standard of living. Our system is not "broken", we just have ignorant and incompetent political leadership.
7
I don't really believe in this distinction between "rent-seeking" and other aspects of capitalism. And if the distinction is meaningful, then anyway every economy contains a mixture of rent-seeking and other activities. Any business that creates something new that has an element of infrastructure could be accused of rent-seeking. An investor who saves enough money to live off the earnings of his savings could be called a rent-seeker, yet we sing the virtues of savings and self-reliance; and anyway those investments provide capital for other economic enterprises. Someone owns pretty much all land, and there will always be a Bell-curve of wealth. So which landowner is just a rent-seeker?
I do not like the ideological signature of this distinction. It is not honest. How wealthy one becomes depends on many factors: help, infrastructure, genius, risk-taking, investment savvy, simply the passing of time. There will always be a distribution of wealth, and I do not see a fair way to decide who to punish. The right answer is for more people to participate in investment and own equity in productive, creative businesses. Let's help make that happen.
4
I hope for a return to a form of capitalism which strives to benefit ALL stakeholders, including WORKERS who deserve to earn a living wage. Back in Grandpa's day he knew his employees, valued their work, and paid them enough so they could support their family in a dignified life. Grandpa eventually drove a Cadillac but only owned one house and one car. CEOs who work their way up from the "mailroom" and know first-hand the jobs and people in their company no longer seem to exist. B-School grads who moved into the executive slots starting in the 1970s seem to have been taught that only the shareholders matter.
8
Mr. Stiglitz, it is time that we move past what happened after WWII as a archetypal economic model, or what you would define as a well functioning, progressive economy.
After all, in the period immediately following WWII, vast parts of the industrial world were completely destroyed, whereas our industrial structure was not only intact, it was poised to expand.
This, in combination with the GI Bill, the strength of unions. plus rapidly growing demand due to rebuilding across the world after WWII. lead to a greater sense of economic equality.
It was also an aberration in terms of economic history Mr. Stiglitz.
No other time in our history matches that particular moment.
We are no longer that singular force in the industrial supply chain, as we were in the period following WWII to the mid 1970s.
Furthermore, even then, economic opportunity and personal growth was not evenly distributed. For example, while not formally barred from the benefits of the GI Bill, few, if any returning minority vets got these benefits.
While I understand your points, we need to expand upon your definition, while also changing it to a different context.
When Reagan came along, the wounds of WWII have largely healed.
We had industrial competition on the world stage again.
Reagan just began a move back to what existed previous to the Great Depression and WWII. The very same kind of capitalism, with a more sophisticated means to make money from money.
Just a thought Mr. Stiglitz.
4
"The neoliberal fantasy that unfettered markets will deliver prosperity to everyone" was always a lie to sell the public on tax cuts for the rich, wage cuts for workers and cuts in regulation that protect the public from the rapacity of capital.
11
I think that the root of the problem in the economy is that we have not understood how enormous the wealth of some people are and how the values they have amassed is affecting all of us. The richest man, according to Forbes, is valued over 100 billion dollars. That's a lot of money, but how much is it? I have around $10000 in assets and when I give a dollar to a homeless I give him 1/10000 of my wealth. If Jeff Bezos would give him the same share, that guy would suddenly have $10 MILLION. Plus my dollar.
I give out $10-20/week.
Just imagine your joy when you find a dollar behind the sofa. Hardly worth a Hallelujah is it? If Jeff Bezos find $10 Million behind the sofa he would probably not bother to draw a hallelujah either.
4
Unbelievably naive about Smith's vague sense of the well being of society. As we have seen the ultra-rich are almost universally anxious that they don' t have endlessly expanding treasuries.
Modern technology and anxiety has let massive wealth become ever more oppressive and solipsistic.
The top .1% own 70% of the country and they are hungry and clawing for more. As you can see fro the "Trump-Republican" tax policy of 2017, all power is directed toward infinite welfare for the ultra-rich.
If this is "capitalism," it is the dehumanization of the rest of society.
5
Professor Stiglitz, thank you for your wonderful article. As always, it is full of brilliant insights.
Wherever we call it progressive capitalism or social democracy or democratic socialism, the idea of striving towards a Rawlsian society is what needs to be emphasized in the progressive discourse.
Since the days that I read “A Theory of Justice” and had a chance to hear its praises from no less an economist than Ken Arrow when I was in graduate school, I have been surprised in how little talk there is about the man and the concept these days among progressives.
The idea of organizing society in a way that people are indifferent to whom they wake up as having gone to bed as themselves seems a simple yet powerful enough idea to communicate to everyone again and again. The fact that we end up maximizing the utility of the least fortunate among ourselves before we optimize everyone else’s is as attractive as anything Jesus, Moses, Mohammed and Buddha have said.
There is no room for Reagan voodoo economics or the rescinding of G-S by Rubin/Clinton there. There is no room for vain tax cuts of Trump-Cohn-Mnuchin.
It is much simpler and beautiful than anything we have right now. Plus, it will provide a framework to evaluate between progressive alternatives that Bernie Sanders and Elizabeth Warren have been proposing. It is worth bringing Rawls back for a little. John Roemer of Yale could even help model mathematically what it is needed, with your help of course!
4
I read Prof. Stiglitz dissertation 50 years ago and have devoted a good part of my time studying distribution issues. Evidently progressive capitalism is not an oxymoron. The only thing we have to introduce into the economic analysis is to give sufficient weight in our personal preferences to the welfare of our neighbors. Unfortunately this does not happen in our real world and the political decisions under democracy are mostly influenced by the rich (people and organizations). Unless people under the capitalist system start really to care for the others we will continue going through the the path the article points.
4
Yes, it's past time to have another round of progressive trust-busting and require corporations to make contributions for "the general welfare." The reason we are back in this situation is human nature, so it will be cyclical, as human nature will take much longer to change than technological and economic progress. May be in 100,000 years, our innate instincts will be different. In the meantime, we urgently need to help one another: neighbors, communities, states and nations. We really are all in this together, for good or ill. The practice of government is far less competent than we require, across the world. The old adage, "Democracy is an imperfect form of government, but all others are worse ( or something to that effect) is not acceptable, if it ever was. We need improvements in the practice of governing. Opportunistic capitalism, unreformed, won't do--but oligarchy, national socialism (fascism) , traditional socialism, communism, monarchy, militarism and dictatorship of course are not answers. Democracy and Capitalism in some forms must be the answers, but remember most of the world has no history with either, and those countries new to it are not very good at it. Democracy and Capitalism are historically new and need mature development. Since these developments take time, we will be presented with existential challenges that will provide incentive for change, but will it be regressive or progressive?
2
Thank you sir for this article. I hope that somehow this information reaches the many Americans who actually read. Unfortunately, we also have a very flawed education system and lots of corporations who desperately want to keep this sort of information bottled up.
4
Once again professor Stiglitz is demonstrating his devotion to the common weal. To those criticizing the "failure" of this post to provide answers to all of today's problems, there isn't enough space to do so and that isn't the purpose of this post. What it does do is remind us that the U.S. was able to do better for the bottom 90% at a time when the U.S. was not as wealthy than it is doing today; thank you President Reagan for setting us on the path to greater income inequality
Income inequality is not only due to Republican efforts but the capture of top policy makers in both parties as well as both parties dependency on big money contributions
That is why, for those that don't remember, professor Stiglitz resigned in protest from the Clinton administration over its ruinous policies
Also, for those who don't remember, the foundations of modern economics was laid out by Adam Smith in his book the Wealth of Nations which was a treatise on morality that emphasized the need for fair and good regulations
6
Volkswagen is not "ours", and the failures there are seem to be at least in part a consequence of creating a company or culture where the workers are put ahead of the customers or citizens. We are much better off with workers who would rather try to cash in on a whistle-blower lawsuit than protect their jobs while killing people with pollution.
1
This is a great article by Joseph Stiglitz but what is not mentioned is the huge disparity that has existed since Reagan in the taxation of labor vs capital. Wage earners that are taxed to a maximum approaching 40% are paying almost twice the taxes as apply to capital gains, which is why Warren Buffett decried the fact that his secretary was paying a higher percentage income tax than he was. The sooner that disparity and the reinstatement of intelligent regulation as proposed by Prof. Stiglitz is implemented, the sooner the middle class will begin to recover in real terms. Corporations should also begin to accept, encourage even, representatives of labor on their boards. That is a legal requirement in Germany and their economy has not suffered at all as a result, but flourished.
5
Technological advances and globalization have allowed companies to dramatically increase profit margins by reducing labor costs (moving production overseas and/or importing trained workers), sourcing raw materials from the cheapest suppliers, and reaching huge global markets. A dozen or so of these entities now dominate the stock market. But corporations are not countries. They work for shareholders, not citizens. They are not responsible for ensuring the education, health, or well-being of a nation’s people. Their competitors do exactly the same. And as they work across borders, regulation becomes that much harder. And yet, we must find a way to do it. Inequality is a corrosive force that is systematically eroding the core values upon which this country was built. What we are left with is greed, exploitation, envy, poverty, and despair.
3
Progressive capitalism is an oxymoron to those who would be forced to yield. A different paradigm that renders their ability to plunder and game the system less efficiently is seen as enemy number one. To them, capitalism is a game of ‘I win, I win’, ‘I win, you lose’, ‘I don’t win, you definitely don’t win’, ‘I lose, you’re gonna lose more’, and ‘If you win, I had better win more.’ They are willing to do whatever it takes to achieve such results, and don’t care what label is on the game. They’ve already decided how they are going to play.
That said, a dynamic, AI-guided, progressive form of representative governance is needed to prevent the continuing self-destructive cycles of capitalism threatening democratic principles and representative forms of governance.
3
Believing that the upper crust earned all the money and privilege they enjoy is half the myth. The other half is that "the others" lack the capacity to earn their way up. "They" don't work hard enough, aren't smart enough, are low information and poorly educated, etc. So winners shouldn't feel guilty and losers deserved to lose.
America was most prosperous for all and became the world leader in technology under FDR's New Deal when the GI Bill made a college education possible for so many and labor was empowered and we had progressive taxation and workers were viewed as assets by their employers and colleges were funded by the states who saw their people as assets. The nobel prize winners and inventors and artists and athletes mostly came from the middle class and below, not the so massively deserving and talented and hard working upper class.
The version of capitalism we have now is corrupt, rigged to increase the wealth at the top and extract more from the bottom with for profit health care, for profit education (crippling student loans), for profit prison and not paying a living wage.
11
Nice academic thought. But if a capitalist-run economy goes too far off the rails, as it is now, there is a quick and simple way to get back on track. Tax more excess profits, unearned capital gains, excess wealth and large estates, and recycle those dollars back to the workers whose labor produced those dollars in the first place. Raise the minimum wage significantly for the bottom tier. Then use the tax revenue gained from the top tier of wealthy to provide to everyone something everyone needs and now pays too much for: healthcare. Those two measures alone would not only raise living standards but recycle money right back into the economy as it is spent on new cars, homes, and electronic gadgets instead of insurance premiums and rent. If this is what Mr. Stiglitz means by "progressive capitalism," I'm for it. Let's do it now!
11
Republicans love to say that liberals want to make the US a socialist country like Venezuela.
Republicans never mention Germany.
Germany is known for high-tech manufacturing.
Germany has low unemployment around 3.5%.
Germany has a very large trade surplus.
German management and unions work much more in partnership.
Germany has a higher minimum wage.
Germany has a form of universal healthcare.
Germany doesn't have the poverty we have.
Germany has better schools for the working class.
Germany has less inequality.
Germany has better economic mobility, the ability to "pull oneself up by your bootstraps." That is directly related to their better schools for the working class.
And they have faced the same globalization we have.
After 35 years of trickle-down Reaganomics, we got an opioid crisis.
20
PS
And Germany has done this while taking in on the order 1 Million Syrian refugees as a result of W Bush's invasion of Iraq for "weapons of mass destruction."
https://www.statista.com/chart/14494/germany-is-home-to-the-most-refugees/
With the "G" word as the only mantra running the economy for the past few decades, the inertia is way to big to turn this ship before a fairly big crash. It will take a bit, but there are too many hazards in the forms of debt, energy, pollution and climate change ready to upend the system. There is no long term sustainability critical thinking.
When the only goal is a simple minded word without any vetting of complex issues, something has to go wrong.
1
Capitalism is exploitative in nature. That fact is inescapable. Profiting at the expense of others is fundamentally immoral. All these efforts to hang on to a system that clearly doesn't work, is unsustainable, and which results in death and destruction, is profoundly stupid.
Necessity is the mother of invention and now we NEED to INVENT new ways to live, or we will not live.
1
Thanks, but the problems go back to the years of Nixon and the Lewis Powell Memo. Accurate diagnosis is necessary for effective solution. It's the corruption of capitalism and of government.
See https://www.legalreader.com/republican-racketeers-violent-policies/
3
You refer to the golden years after World War II when the so called middle class did so well. It's no mystery why that era provided a great improvement in the economic life of most people in this country. We had just come out of 10 years of depression and about 5 years of a war economy with rationing that resulted in a tremendous level of demand for goods and services. This coupled with the devastation of the rest of the developed world left us with no external competition and put us in a very sweet spot that lasted for a generation. Nothing I have heard from progressives or anyone else can recreate the U.S. economy of that unique post-war era.
3
I truly appreciate Mr. Stigliz taking the time to reiterate something that desperately needs to be reiterated, time and time again. He is not the first nor the last economist, many of whom have shared the accolade of receiving the Nobel Prize, have said before.
A quotation I frequently use:
'Well-regulated free markets' is not an oxymoron, but a necessity for good economic outcomes.
~ Peter Diamond, winner of the 2010 Nobel Memorial Prize in Economic Sciences
4
Stiglitz, an eminent economist, make a fairly obvious point concerning the role of science and rational thought in accelerating social progress and economic growth since the enlightenment. The importance of respecting “truth” is mentioned, alluding to what is going on today where we often here conflicting versions of “truths”. What we are forgetting is that scientific “truth”, if it exists, is established by what Karl Popper call conjecture and refutation.. How well does your theory explain the evidence? That is established by experiment. Economists have trouble doing experiments because the only data they can access are what they call “natural experiments”. You recently saw one where Kansas’s economy shrank after years of tax cuts and budget cuts. But as your colleague Paul Krugman says certain failed theories never die but like zombies keep shambling along. Why is that? The great socialist experiment of the Soviet Union, on the other hand, seems to have thoroughly discredited anything tainted by Central Planning.. It would be nice if we could have a controlled experiment where the republicans could have their form of government and the progressive could have theirs, without these federal transfers that prop up the weak states. I’m afraid though that can’t be done without first relitigating the Civil War
3
Progressive capitalism is an oxymoron. Capitalism is a predatory system, where a minuscule segment of the population feeds on the work of 90% of the population, paying them miser wages that are not nearly enough to feed a family and keep a roof over their head, and god forbid if you get sick, for even if you have health insurance (which in the USA is a business) the co payments for doctors and prescription drugs will send you to live under a bridge.
7
Yes "progressive" capitalism is an oxymoron.
1
@jaco
Liberty will not survive predatory capitalist assault.
1
One thing has been left out of this analysis. The vast increase in the number of people in each congressional district has rendered the voice of the people irrelevant. Large special interests that can raise huge sums of money have, in a de facto way, bought congress. This has been done through campaign dollars, disinformation as well as outright bribery. We need to get back to what the founding fathers put together - small congressional districts of no more that 100k voters.
Those small districts will also be impossible to effectively gerrymander. That's another thing that keeps getting missed, gerrymandering is rife and the reason it's easy to do is that each congressional district has a many of 800,000 people in it. With so few districts, it easy to tilt the playing field.
3
Smith's invisible hand is giving you the finger, and in Dylan's words, "Money doesn't talk, it swears."
A positively-functioning economy would reward good behavior and penalize destructive behavior, overcoming the problem of "externalities," where priceless is equated with worthless. This is becoming all the more imperative as our economy is getting distilled down to monolithic money-making automata.
Politically, allowing wealth to translate into the power to make its own rules is a well-proven recipe for disaster.
4
Capitalism without constraints will lead to French style revolutions.
3
Funny, I seem to recall that Hillary Clinton's plans were aimed at "saving capitalism from itself." No one paid attention.
We now have the kind of "booty capitalism" that Max Weber opposed to "rational capitalism," seeing that the former ultimately destroys capitalism.
3
It's too bad Republicans can't (or won't) read. This should be must reading for anyone shouting 'socialist". An enlightened society evolves as it's needs evolve. Reaganomics was a failure, only glorified by rewriting history. If we don't react to our current income inequality, we are doomed to become England with a landed (monied) gentry and a general population of serfs.
6
We all know what side white evangelicals were on when a black pastor was fighting for civil rights in the 50s and 60s. Racism has been a feature in their churches since the very beginning.
Black people had to create their own churches, which resulted in the Church segregation that still exists to this day.
1
"Progressive capitalists" is the branding Democrats should use to counter being labeled as "Socialists" in the upcoming election.
7
How sad. How bittersweet. How quaint. This reads like a last letter from a spurned lover. If only he had been more like this; if only I had been more like that...
Good column, but I'm surprised he doesn't mention the climate. Surely a progressive capitalism must be green, and end the practice of externalizing costs of carbon and other pollutants.
2
Mr. Stiglitz, your column is excellent and I wish capitalism would turn in your direction but I think we’re beyond that. It’s winner take all now. And this scenario will exacerbate with external influences like Climate Change and Global Inequality.
Republicans will soon align with Russia and off we go.
2
Let's do the Time Warp again! This nostalgia for the post-war era is absurd:
"As an economist, I am always asked: Can we afford to provide this middle-class life for most, let alone all, Americans? Somehow, we did when we were a much poorer country in the years after World War II. In our politics, in our labor-market participation, and in our health we are already paying the price for our failures."
Uh huh. That post-war Golden Era when women and ethnic minorities were excluded from the workforce (Per FRED, women's workforce participation has roughly doubled from 1948 to 2017, from 33% to 58%).
That Happier Time when our natural industrial rivals (e.g., Germany, Japan, the UK, France) had been bombed to rubble and were struggling to rebuild, leaving a clear field for US manufacturers in steel, autos, ships, coal, and really, anything else.
As Europe and Asia rebuilt and provided meaningful competition, wages in the US were put under pressure. This was not helpful to Big Labor, as high-paying jobs built on global oligopolies (such as steel and autos) were cut back.
All of which Prof. Stiglitz knows, of course. Still, I suppose its fun to reminisce. Just as long as no one proposes to bomb those countries back into submission to boost job prospects in the US.
2
@Tom Maguire
Sorry, but your analysis would imply that corporations as well as workers should be poorer than back in the 60s, and this is clearly not the case. We are in a second gilded age as the corporate CEOs and many corporations now control capital in the billions if not trillions like Apple. These facts do not correlate with your theory.
5
@Tom Maguire
I am not sure what you think this society should be aiming for. In 1971, 61% of Americans were considered middle class. It is now 50% and the numbers aren't looking good. Mortality rates are creeping up. Infant mortality and maternal mortality are increasing and it is the worst in the industrialized world. Fewer and fewer Americans are going to be able to afford health insurance and pharmaceuticals as healthcare spending is increasing 5.5% /year. I think professor Stiglitz sees the concentrated political power of the wealthy as an accelerant of these problems.
1
A brilliant person wrote this brilliant column. Professor Stiglitz is one of the great stars of our society.
4
Get a job...I know a McDonald that’s hiring.
Capitalism and socialism, like many "isms", are not inherently good or bad. They are labels, but I like the label "progressive capitalism". Just as the heart is not better or worse than the lungs, both capitalist and socialist policies have their place. They have different functions, and but both must function correctly for a healthy system. The government should not "get out of the way" of capitalism any more than the Chicago government should have "got out of the way" of the entrepreneurial Al Capone. Rules and regulations are what define our society and culture, and they need to "get in the way" of ill health and bad actors. Yes, taxes are an element of socialism, and they are good. In fact, they are essential to ensure the "general welfare" as decreed in the U.S. Constitution. The only problems with capitalism come about when it is not regulated or taxed correctly.
6
Kenneth N. Dayton (Dayton Corp, which has morphed into Target Corp) speech 11/16/77
I believe that the only reason for the existence of the free enterprise system is to serve society. If it doesn’t do that, it will be replaced by another system. That other system may not be as good, but if the public perceives that it is not well served by us, it will surely replace us – in one way or another.
I believe that every business must define for itself how it will serve society. (In our case we have recognized and clearly stated our obligation to serve four constituencies – our customers, our employees, our shareholders, and the communities in which we operate.)
I believe that there is no conflict between any of those four constituencies. Furthermore, I believe the common denominator of all four is maximum long range profit, without which none can be served well.
I believe that long range profit is both the means and the measure of that service but it is not the end. To put it another way, profit is our reward for serving society well.
I believe that only when business recognizes this subtle but important difference, only when it states clearly that we are in business to serve society rather than just to make money, only when it allies itself with the public interest, will it begin to secure its own future.
In short, I believe that serving society is the only way to assure our survival. Serving society therefore is very much in our own enlightened self interest.
4
The last expression of social interests superseding the imperatives of base selfishness. Conservatives under Reagan asserted that it constrained the kind of drive for selfish advantage that fueled maximum economic expansion. The nation never questioned that assertion.
1
In keeping with what Churchill said about democracy being terrible, but at the same time better than all other political systems, there has been no better economic system than capitalism. The problem is that the capitalists alone determine how the system operates, and other stakeholders, e.g., workers, have no decision making power. As long as owners of capital solely determine how capitalism is designed and implemented, by buying politicians of all parties, as well as through monopoly control of decisions, there will be no reform to capitalism.
3
There's a consensus that capitalism needs to be regulated. The new technologies and their network effects also create monopolies and rentier mentalities.
The problem is how ot regulate without hampering economic growth.
Also public options cost money - it is all very well to say that the US figures this out in the 50s and 60s but that was a black swan era when the US economy was far more dominant than it is now.
I don’t pretend to understand economics in depth, but I do understand that our global economy where success is based on growth is unsustainable and largely responsible for crises that are threatening our survival. Thus, if progressive capitalism (or any other form of capitalism) is based on growth, then it just won’t work long term.
2
Elizabeth Warren is the candidate who best encapsulates Stiglitz's thinking and can turn it into policy if elected. In any case, this is the conversation we ought to be having. We should be deeply suspicious of any other, more scandalous conversations foisted by the media upon us, because the media is owned by the 1%, and the 1% have a vested interest in the status quo. I first realized just how capable the 1% can be in misdirecting a conversation through my interest in climate change, where almost impossibly, the dark money of Big Fossils, was able to turn the spotlight off the climate and onto the 'scandalous behavior' of the climate scientists. Remember 'Climategate'? That was a Putin email hack designed to take the spotlight off climate action and onto scientists who, in their private moments, were also human beings. Putin never tired of hacking other people's emails and broadcasting them to misdirect the conversation. As we know, this is why Trump (Mr Misdirection himself) is now our President. Today's media is chock-full of news events designed to take the public's eye off the ball.
9
The crux of the issue is short-term thinking versus long-term thinking. We won’t have a planet, much less a functioning society, if we don’t start thinking about the long-term implications for what a highly deregulated market looks like.
If you’re the richest person in a post-apocalyptic society, what good is your money?
1
@Alex Being the first to colonize other planets when this one is used up. I wouldn't be at all surprised if that's what the likes of Musk and Branson have in mind--ferrying their billionaire brethren and their families to space outposts via their commercial space flights.
1
@Sabrina
They won't survive. They stand on the backs of greatness. Us.
Dear Mr. Stiglitz:
You make a case for what's wrong. The greed of large corporations, the disappearing middle class, the power of the elite minority taking over the wealth and power of the nation - all this is well-known. What is missing is the means to correct our huge political problem.
A wealthy minority controls Congress through unlimited political donations, guaranteeing a continuance of the control of the wealthy. This has led to control of the Supreme Court by interests of the wealthy, and 118 federal judgship appointments of political hacks by Trump. The separation of powers has thus been erased.
The President is not elected by the majority, and can freely access foreign powers to help win the election. What he promises in return is unknown.
Voting laws, and even the census are being changed to exclude minorities and immigrants.
Your learned words mean nothing if the political basis of our problems is not addressed.
6
Prof. Stiglitz was betrayed by his editors in the second sentence:
"Some 90 percent [of US citizens] have seen their incomes stagnate or decline in the past 30 years."
Well, no. From a chart showing median earnings by age bracket over time we quickly confirm the obvious: the median 25-34 year old in 1987 was earning $56K (inflation adjusted, 2017 dollars). Thirty years later, the median 55-64 yr old is earning $69K. That is neither stagnant nor a decline. The median 15-24 yr old in 1987 has seen a boost from $33K (again, adjusted 2017 dollars) to $80K. Not stagnant.
Unsurprisingly, people who retired are mostly earning less. On the other hand, folks who weren't working at all thirty years ago have seen the median income of their age cohort spike. There is simply no way that 90% of Americans are earning less now than they themselves earned in 1987.
If I had to guess, I would say that Prof. Stiglitz is trying to communicate the idea that median income has not gone up for Americans as a whole in most income brackets. That is quite a different idea, and we shouldn't have to be guessing at the intended idea of a Nobel Laureate in the second sentence of a NY Tines guest piece. Send better editors!
1
"Growth for the sake of growth is the ideology of a cancer cell."
Edward Abbey
Capitalism is the perfect and one true religion because Money is the one and only true God.
2
Controlled Capitalism is what made this country prosper and we must get back to it. "To accomplish the goals and objectives of its citizens, this country needs to go back to an economic philosophy believing in a “controlled capitalistic system”. Capitalism was never meant to be the “Wild, Wild West” as laid out by Gordon Geico in the movie Wall Street. This is nothing new, we simply drifted away from it, allowing giant entities to control our lives with little input from the electorate." ... https://lstrn.us/2CORkXF
2
Anyone smell the coffee yet?
1
Bravo from the get go.
2
Start with justice—social justice, climate justice, economic justice or their integration in sustainability justice—and build new political systems around it.
While the notion of progressive capitalism is a good start we could also start using sustainability justice to build an alternative to the present unjust, unsustainable and, therefore, unstable international monetary system and the looming climate catastrophe. Such justice system is proposed by Verhagen 2012 "The Tierra Solution: Resolving the climate crisis through monetary transformation" (www.timun.net) where the conceptual, institutional, ethical and strategic dimensions of such Tierra global governance system are discussed based upon the monetary carbon standard of a specific tonnage of CO2e per person and a balance of payments system that accounts for both financial and ecological debts and credits.
States another socially minded economist and moreover a climate specialist about this Tierra global governance system: “The further into the global warming area we go, the more physics and politics narrows our possible paths of action. Here’s a very cogent and well-argued account of one of the remaining possibilities.” Bill McKibben, May 17, 2011
1
The Country is lost. We have more working poor people and impoverished people now than ever before its killing us from the inside.
There are two sets of laws
1. for the Rich
2. for the impoverished
Free Enterprise is selective and controlled by the wealthy or crooked government. In fact Big Government has become big business its Egregious what this nation turned out to. Additionally there is lac of oversight within our nation its lost hope....
3
The two prerequisites for true capitalism are competitive markets and a level playing field. We have neither. That ironically, is exactly how our so-called capitalists want it. The true terrorists are not Moslems, Hispanics or illegal aliens but bankers and hedge fund managers who are sifting billions out of the pockets of US citizens and using the money to buy our government.
8
Problem is far more fundamental.
“The rule of thumb is that the complexity of the organism has to match the complexity of the environment at all scales in order to increase the likelihood of survival.” Physicist, complexity scientist Yaneer Bar-Yam — Making Things Work
Why does the complexity have to match the environs?
Because solving problems (including the most fundamental of all problems — passing natural selection tests) is a function of processing relationship information with sufficient Reach Speed Accuracy Power & Creativity.
We're doing multilevel selection in-and-across Geo Eco Bio Cultural & Tech networks, and across Time, with world culture's dominant information processing mechanism / app — humans deploying monetary code.
That is absolutely unworkable. App lacks sufficient information processing Reach Speed Accuracy Power & Creativity.
Increasingly, both our biological and cultural coding, do not match the complexity of the environs we've generated.
“In simpler times, judging a policymaker based upon values or claims made sense. Today they can’t tell what their actions will cause.”
“In the environment in which we live, the complexity progressively becomes higher and higher and it’s basically like we’re making random choices.” Yaneer Bar-Yam
Economists refuse to get fundamental.
As Nassim Taleb has said, economists are astrologers.
2
Sir! Don't blah blah blah, back someone who believes in exactly what you correctly say! She is a professor like you, her name is Elizabeth Warren, she is the only one who has put policy positions to bring equity to America. America has a Roosevelt moment and people like you MUST show the way and encourage us to make the correct choice again! American intellectuals like you and others cannot afford to sit on the fence and let politics play out, you must help us decide!
8
@beachboy Yes. But she's not a Native American.
@Antoine
Who cares if she’s a Native American or not? I sure don’t. What she is is correct. I don’t require the people I’ll potentially vote for to be Native American; I require them to be sane and to promote broad prosperity and the general welfare. Warren and Sanders both fit the bill no matter who their ancestors were.
1
Very well put. A clear implication of this (and many other essays by competent economists) is that there is no such thing as a free market. If one adopts the theory of the free market, then by definition any actor in such a market MUST exploit market imperfections to their own advantage, including violating the cardinal assumptions of free marketry. And because the imperfections are by definition inevitable because of the small perturbations that always occur, any market temporarily in equilibrium, will quickly fall out of equilibrium.
1
The Federal government has created a slave class- those dependent on the government to provide for their needs. Ever since the Great Society, single-parent households have become the norm, multiple out of wedlock kids are considered fine, and our urban centers began to blaze. This does not justify the conditions in the country before, but welfare programs have hurt us in that they have encouraged bad behaviors more than becoming a safety net. Individual responsibility is gone- the government will take care of my bad decisions, and the judicial system makes everyone just want to sue and hold someone else responsible for themselves.
Add to this the crazy influx of migrants who cannot support themselves, and a government that routinely says "they do jobs no American will do..." BECAUSE WE PAY AMERICANS WELFARE TO NOT DO THOSE JOBS. That statement is an insult to everyone that works hard.
We need to make America great again- by mandating that people work, take responsibility for themselves and their families, stop the flow of people who do not have the money to support themselves into the country, eliminate the cash economy that allows people to not pay any tax, and fix the tax code that allows the wealthy to avoid all taxes as well (notice I did not say raise taxes).
THAT WILL MAKE AMERICA GREAT AGAIN.
@Ny Surgeon We are quickly moving to an economy, as Stiglitz points out, that makes a good portion of our working population redundant because of automation and artificial intelligence. Mandating work doesn't solve the problem. If, however, we embraced a government infrastructure build-out program, much like a modern-day WPA, we'd go a long way toward updating badly needed updates to crumbling, and nearly 100-year-old systems (in some cases, particularly in the Northeast), bridges, highways, and airports, instead of assuming our private sector will step up to the plate. Which they haven't.
2
@Ny Surgeon Are you suggesting that we "enslave" them? We did try that already. Didn't work so well.
"Beginning with the Reagan era....."
Deregulation began under the Carter administration. Also, recall that in 1980, nearly all savings and loans in the USA had been made insolvent--and were rushing into illiquidity as disintermediation accelerated in response to high inflation and low regulated yields on savings deposits that had funded 30-year mortgages at 5, 6, 7%.
Moreover, Reagan tax reform, though lowering the highest marginal rates, eliminated or reduced multiple tax shelters.
Throughout this article, Stiglitz misrepresents both history and data. An op-ed writer is entitled to his opinion--but when his theme centers on the value of TRUTH, he might better present his case with less distortion and misinterpretation of data, facts, and history.
1
Reagan’s initial tax reform reduced federal tax recipients as a percentage of GDP. Whatever loopholes they closed certainly weren’t significant. In addition, his “voodoo economics” of supply side never actually increased tax recipients enough to offset his increased spending on defense. That deficit spending has persisted the nearly 40 years of this article’s interest with a small exception of surplus during Clinton. (That was squandered by Bush who lowered taxes again to “give the people’s money back” even though we owed trillions in debt.)
4
Why would we turn the system over to those who broke it?
2
@Russian Bot Err.. who are they? The one's who invented and sold ballon mortgages to those who didn't have credit? Are they the leveraged buy-out specialists that load debt onto healthy companies and force them into bankruptcy? Are they the ones who sell "insurance" to those who have no stake in the success of the insured? How about those who make millions out of failed business "deals"? Or are they those who have found ways to pay no taxes on vast profits?
1
@Antoine
You might be gettin' the gist.
Most Central Planners have a hard time understanding that the answer to the failures of Central Planning is not more Central Planning. And the response to the failures of the integration of the State and Private Business is not more integration.
1
There is no defense against Stiglitz’ s argument.
2
Good article, thank you
2
Sure Dr. Stiglitz and if pigs could fly we could have bacon home delivered. Until we get corporate money out of politics, until we are ready to prosecute corruption and punish incompetence (here's looking at you Boeing) ---capitalism will do what it has always done....feed the greedy. If you want to see enlightened capitalism have a glance at Germany...they still value hard work, kompetenz and keeping corporations in line....except for a few outliers like VW and Deutsche Bank...the people simply won't stand for the kind of games that "the new economy" have unleashed it the US...in any case if all we produce in the future are useless apps for buying things the Chinese will eat our lunch. We need perestroika big time...I'm with Bernie and Liz.
3
I like the semantics of Mayor Pete. Democratic capitalism is a great way to put it. The response to Republicans who scream, YOU ARE A SOCIALIST! (aka Commie) is YOU ARE A MONOPOLIST! And, that's what they are. They do not support competitive markets, real capitalism, democratic capitalism. They are autocrats in the service of plutocrats. And, the plutocrats could care less about maximizing GDP and really good jobs. They like the status quo. And, they like to put it in the guise of "libertariansim." So, is the libertarian going to build his own roads and bridges? Is he going to build his own airports and trains? Libertarianism is as phony as Ayn Rand's refusal to take her Social Security check. She was more than glad to be a hypocrite and take the checks, the darn socialist!
And, the Freedom Caucus is more libertarian jive. More like freedom for the super-rich to exploit the middle and working class. Right to Work...more like right to work for peanuts for plutocrats.
And, what is even "progressive" about much stronger social programs? They would make the middle class more secure throughout life and in retirement. This would promote upward mobility, expanding the wealth engine of the USA. In essence, in the long term, it would be FISCALLY CONSERVATIVE!
And, why do Republicans call it "the Democrat Party," every single one of them loves this slur. Well, it is a slur out of fear and the knowledge that they don't really support democracy, only plutocracy. DEMCRATIC PARTY!
3
Reagan ushered in our current age of unbridled greed and income disparity with this infamous Inaugural Speech line: "Government is not the solution to our problem. Government is the problem". we should all detest this racist, fear-mongering, greedy, delusional idiot who led many adoring lemmings into the economic swamp in which most of now are mired, while his favored 1% look down on us from their mansions.
3
I am a capitalist who do not believe in UNFETTERED capitalism!
The GOP operating principle has ALWAYS been:
1) CAPITALISM FOR THE POOR, SOCIALISM FOR THE RICH
whereas the NOT 1%, WILL pay "market price" for goods and services, while the rich are subsidized via tax shelters/loopholes and low tax rates to consume MORE of public goods - roads, bridges, court system, airports, public works etc.) because of their wealth.
2) GOP lie CAPITALISM=DEMOCRACY
China worships capitalism - nothing will impede profiteering!!) but it certainly is NOT a democracy.
Russia endears "capitalism" as long as the oligarchs i.e. Putin is happy. Would you consider Russia a democracy??
Is Singapore, a GOP darling, a democracy??
https://www.peoplespolicyproject.org/2018/03/09/how-capitalist-is-singapore-really/
The Singaporean state owns 90% of the country’s land. Remarkably, this level of ownership was not present from the beginning. In 1949, the state owned just 31% of the country’s land. It got up to 90% land ownership through decades of forced sales, or what people in the US call eminent domain (like my grandparents!!) AND political dissention is forbidden, albeit shrewdly done.
The GOP's holy grail, the Prosperity Gospel whose cornerstone depends on unfettered capitalism, and on which they developed unfair and cruel public policies have sown chronic divisiveness in our society.
We must not allow UNFETTERED, CORRUPTED capitalism to continue to destroying our way of life and values.
3
This is a thoughtful op-ed piece by a brilliant person and the unchained, unregulated One Percent Capitalism has done little for most of We The People yet those that created this rigged system are horrified by even the word "socialism". Many of their monds are so narrow that they cannot understand how America's greatest Progressive Capitalists were first and formost Capitalists. Warren Buffett is an example.
If the uber wealthy continue to control the monies "gifted" to politicians, especially at the national level, we will continue the unfettered & unchecked reign of the American oligacry .
American founding father John Adams feared the power of a class he called simply “the few”—the wellborn, the beautiful, and especially the rich - the American Ologarcy. This clear inequality has devestared our democracy and empower a small elite. Time is not on our side, my fellow citizens.
4
Why don't we talk about the capitalist welfare system. The tax payer funded social safety net was never designed to provide resources to millions of people working full time for Fortune 500 companies, most of which pay no federal income tax. The government Pensions Administration Agency wasn't designed to let hedge fund groups buy up companies and drag them into bankruptcy court to discharge the bulk of their debt employee pensions, for personal profit.
It's not the governments job to discourage employee unionization while being deeply influenced by the unions of the US Chamber of Commerce and ALEC. And let's face it folks, most everything that's been privatized from government has been an unmitigated disaster. There is no group more firmly latched on the teat of the government than the capitalist rent seekers who currently control it.
6
Spend any length of time on sites like LinkedIn or business news sources like the Wall St. Journal, and it's one endless stream of propaganda deifying the entrepreneur. Quotes from Steve Jobs (who, as reportedly jerk-in-chief is seen as a role model because of his material success, not because he was a decent human being), motivational rhetoric exalting workaholism, and eye-rolling inducing pieces on how little sleep the most successful executives manage to exist on.
Call me crazy, but weren't the industrial and informational ages meant to create a better standard of living for everyone? Wasn't the idea to have more leisure time to become better contributors to one's local community? To have more time to pursue one's personal interests? To not be a wage slave with no free time to oneself? We appear to be back to the days of company towns, with the likes of Facebook and Google building housing and supplying three meals a day for their employees so they don't have to leave the premises!
It seems to me that we once used innovation to create things to benefit all mankind rather than to enrich a precious few. And I for one think it's unconscionable that our unemployment figures are artificially low because of people working multiple jobs to make ends meet rather than because they all have full-time jobs that pay well with benefits. And we wonder why the birth rate is falling? Who can even hope to raise a family these days given housing costs and the price of college tuition?
6
Pleasepleaseplease...do not fall into the Republican rhetorical trap. They have been training America with a dog whistle for decades to squeal like a stuck pig at the words socialist and progressive. How about “democratic capitalism”? It would at least make Republican disinformation a lot harder, and it basically means the same thing.
4
@Mike Pod
You are right. But how about "capitalism based on the teachings of Jesus" for those hypocritical Republicans?
3
I wish we would finally listen to Professor Stiglitz.
3
The esteemed doctor is on point, as usual. But, if you look at Trump's cabinet you find the Three Stooges: Steve Mnuchin (Treasury), Wilbur Ross (Commerce) and Alexander Acosta (Labor)]. Fat chance of Larry, Curly and Moe creating anything other than corruption, chaos and contemp.
4
More than any slow acting “Tax Reform” What is really needed is “Wealth Reform” — akin to the “Land Reform” that was successful in many countries in breaking-up and un-doing the massive levels of ‘asset capturing’ accomplished by the UHNWIs (and the corporations they own) in looting, hoarding, monopolizing, and “taking out of productive use” much of the ‘asset-class’ of capital/wealth.
The methodology of this massive capture, accumulation, appropriation of such looted wealth is actually being done today primarily through the ‘dumping’ of vast, but hidden, ‘negative externality costs’ to generate ‘faux-profits’.
Today, almost all of the supposed discovery of ‘creative destruction’ by the “Masters of the Universe” is produced by finding new deceitful ways of doing nothing but ‘hidding’, ‘disguising’, and ‘inventing new techniques’ of “negative externality cost dumping”.
The ineptly-named investment sector called “Socially Resposible Investing” should more effectively and clearly be re-branded as “Positive Externality Profiting” (PEP) — and should utilize a criteria of GINI Coefficent of ‘Negative Externality Costs’ Inequality as the basis for any investing to clearly avoided at all costs!
3
"We confused the hard work of wealth creation with wealth-grabbing (or, as economists call it, rent-seeking), and too many of our talented young people followed the siren call of getting rich quickly."
I own Stiglitz's title, "The Price of Inequality..." and in many ways I am a fan of his. But his book and this opinion piece did not address the primary causes of inequality and the "wealth grabbing." It has nothing to do with young people.
The primary cause is zoning density restrictions which makes land artificially scarce and thus housing and rents artificially expensive. In NYC, but also SF, Seattle, LA, DC, and Boston, housing is very expensive because of Democratic city councils that pass regressive zoning density restrictions that benefit wealthy landlords such as President Trump while harming people renting apartments and buying homes. In effect, it is a transfer of wealth from those with less money to people like Trump.
Japan has federal laws which override zoning density restrictions which benefit the wealthy. The result: in 2014, NYC built 20,000 housing units and California about 90,000 while 140,000 housing units were built in Tokyo alone.
This is "rent-seeking" which is a market failure. Reversing zoning laws that benefit Trump will make a substantial difference in making housing more affordable and reducing inequality.
While emotionally convenient to blame Trump and Republicans, the cause of inequality is at the local level by Democrats who run cities.
1
Increase density of population in the same land area without limit is the way slums are created but it seems to be the solution desired by both progressives and libertarian conservatives. Packing more people into the same land area increases landlords income. The living areas for people shrink and everyone is interfered by any normal behaviors by their neighbors. Self styled progressives in urban planning are promoting much higher densities because the utility of mass transit becomes far higher than automobiles. But the middle class is not constrained by population density.
Most new wealth is made and remains in the possession by those with the most money. Society relies upon borrowing to fund the commons and average people gain next to nothing from economic growth. That is the main reason for middle class stagnation.
1
Prof. Stiglitz puts the finger in the wound. He is neither polemic nor ideologic. Simply factual. The destruction of the middle-class and lacking innovation plague European societies as well. Redistribution of wealth from the poor to the super-rich is a fact. The US has a larger financial gap between these classes than the one separating the US and the poorest countries in the world. The silicon valley industry acts as a parasite of the traditional economy, without creating any additional value. Arguing outside of worn-out paths is both essential and hard to understand for all those people used to short-circuit superficial thinking. Political degeneration, erosion of institutions, attacks on fundamental values and moral principles is the daily business for the present government. The ideas presented in this article have the potential to restitute a healthy economic and social outlook for the suffering majority instead of their decline as we witness it.
3
"Despite the lowest unemployment rates since the late 1960s, the American economy is failing its citizens. Some 90 percent have seen their incomes stagnate or decline in the past 30 years. This is not surprising, given that the United States has the highest level of inequality among the advanced countries and one of the lowest levels of opportunity — with the fortunes of young Americans more dependent on the income and education of their parents than elsewhere." -- Weren't we supposed to be "great again" by now?
2
We need to draw a distinction between entrepreneurialism and capitalism. The former creates and sustains wealth for the individual and for society as a whole, while the latter, if unchecked by law and/or ethics, becomes a game of monopoly, winner take all, stymying independent entrepreneurialism by manipulation of the financial system.
2
We have been spoon fed the notion that all capitalism is good and all government is bad. For example, our public school system while far from perfect has been an engine for our growth as a nation and prosperity of individuals, but it is now poorly funded and its teachers derided as a class as inept 'losers'. We deride the arts as frivolous and unnecessary even owe liberal arts feed the growth of individuals and society. Thus we pay them less and stunt the growth of democratic principles perpetuating its and our down ward spiral.
Predatory capitalism without control or ethical principles is the result, the idea that only money matters and working together under the aegis of good government is no longer valid.
8
Democratic hopefuls, READ this! Here is our party’s platform in black and white.
5
Nonsense.
Economics as a science is a fiction.
Jesus was a left-wing socialist community organizer. See Matthew 25: 31-46
Martin Luther King, Jr. warned that the confluence of capitalism.militarism and racism would make America first in money, arms and prisoners.
King was right. The economists and historians and politicians and journalists were and still are all wrong.
4
The American middle-class is bleeding to death, one peck at a time.
By the conclusion of William Muir's Supper-chicken Study,
Group 1 -the Average-chickens: grew plum, healthy, and increased productivity (the post WWII chickens, if you will)
Group 2 - the Super-chickens: only 3 super-chickens (let's call them the 1 % in today's terms) remained alive; all the other super-chickens were pecked to death by their fellow MAGA super-chickens.
As a middle-class American citizen married to a former veteran who was laid-off during the Christmas season for a peckish tantrum in the WH, I cannot absorb too many more peck marks from my Republican-led government to survive. I fear for my health, retirement, and my children's future because the pecks are drawing more blood on a daily basis.
2
In March I made a comment that stated “Democratic Capitalist would sell better than Democratic Socialist”. I think “Progressive Capitalist” is great terminology.
4
Progressive Capitalism is not an oxymoron...
That's what Maduro said.
You offer no tangible solutions, just standard talking points.
1
Progressive Capitalism.
Compassionate Conservativism.
Rational Religionism.
Military Intelligence.
Unicorns.
1
@Miss Anne Thrope
all the Scandinavian countries with their progressive capitalism are consistently the happiest in the world.
Fact.
4
Seems to me that what you are talking about is Democratic Socialism. GO AOC!
1
Let's call it capitalism with a human face.
2
As the scorpion said to the frog, “It’s my nature”. It’s the nature of Capitalism to drive like an engine forward with a singular focus as fast as possible. This is what it was and how it was created. A machine independent of human considerations. A machine extremely successful at doing what it was created for. But in order to avoid it running over humanity a steering wheel and brakes have been fitted to it. Unfortunately we seem to be continually arguing over which direction and how far to turn the steering wheel and how hard to apply the brakes. Sure hope we don’t go into the ditch in the near future.
2
Republicans forgot some basic lessons about markets:
1. Markets create externalities, meaning costs such as pollution are imposed on others outside the market. Governments job is to make sure the market participants bear the costs. An example is a cap & trade system, where high-carbon emitters purchase licenses from low-carbon emitters. This gets you back to an optimal social outcome.
2. Unregulated markets tend towards oligopoly and monopoly, which reduce competition thus raising prices and lowering output versus perfect competition. Government intervenes (anti-trust, price controls) to get back to a perfect competition result.
3. Unregulated markets tends to shift income to the top; more egalitarian periods were highly regulated with higher taxes on the rich (e.g., the 1950-1979 period).
Free market advocates who want optimal outcomes should endorse some regulation, which is essential. Address externalities, imperfect competition, and impose more progressive taxation.
7
Liberals want to work from the bottom up helping the people with their lives (pay, education, healthcare) and Conservatives want to work from the top down helping the private sector bosses run the political economy (less corporate regulations & taxes, more rules for everybody else).
Ironically, however, Liberals are associated with wanting to rule from the government at the top to affect the masses down below, whereas the Conservatives are associated with the wanting to protect the liberties of the masses below from the tyranny of the government on top. These associations are propaganda used by the two countervailing forces (parties), Democrats and Republicans, to defame each other's liberal and conservative credentials.
We the people are not able to parse this PR messaging. One commenter herein said progressives want to shoot the horses that pull the economy forward, then he went on to say this:
"Talk should be focused on how we harness the horses, the style of bit we put in their mouths, the blinders for their eyes and the roads we build for them to run on.
We should all be able to agree that healthy horses are good thing. From that starting premise we can vigorously debate how we should control them."
This gentleman wants to control the workers who pull the economy forward as if they are livestock. He thinks of the few bosses in the private and public sectors as the farmers: as a conservative he cares for them as wealth builders. Liberals care for them as humans.
4
"In the 1980s, Ronald Reagan’s regulatory “reforms,” which reduced the ability of government to curb the excesses of the market, were sold as great energizers of the economy. But just the opposite happened: Growth slowed, and weirder still, this happened in the innovation capital of the world."
What a palpable misunderstanding of economics this entire article is. Equality and economic growth are inversely related to the size of the unproductive section, that is to say the size of government. And because government alone uses force to exploit the private sector, it is the only American entity the properly fits the description of exploiter.
"The federal government expanded dramatically in the 20th century and has continued growing in the 21st. Between 1900 and 2012, federal government receipts increased from 3.0 percent of the economy’s output to 16.5 percent, and federal expenditures rose from 2.7 percent of economic output to 24.0 percent. State and local governments have also expanded relative to the rest of the economy, although not nearly as much as the federal government. Between 1930 and 2012, state and local government receipts grew from 8.0 percent to 13.0 percent of economic output, while their expenditures rose from 9.1 percent to 14.8 percent of output. For the overall government sector from 1930 to 2012, receipts increased from 11.1 to 26.4 percent of gross domestic product, (GDP) and expenditures rose from 12.1 to 35.6 percent of GDP."--the Tax Foundation.
2
The only good reason to tax is to assure that the needs of society are satisfied. The only justification for cutting taxes is to reallocate real revenue surpluses. The anti-tax movement inspired by Howard Jarvis and Ronald Reagan was mindlessly contrary to the welfare of our society and has only served to shift wealth and political power to the extremely wealthy and huge corporations.
1
The one Democratic presidential aspirant who clearly understands the essence of Joseph Stieglitz's critique and who deserves the nomination of her party is Elizabeth Warren. I'm not saying that she alone can fix it, but she can deliver us from the thug who did say that.
6
A "Free Market" wthout Regulation is like a Tea Kettle left on a gas burner when you leave home. Your house can easily burn down.
All systems, without Regulation, enter chaotic periords, with assymetric strengths
5
@George Jackson
That's when we see the Republicans become socialist overnight to protect the world from great harm instead of taking a pro-active approach.
1
I think I just fell in love with Joseph Stiglitz’s mind.
Progressive Capitalism (or Democratic Socialism) is no more an oxymoron than Totalitarian Capitalism. The term is the marriage of terms describing a country’s political system and a country’s economic system.
It is possible to have a totalitarian capitalist state (China, Russia), totalitarian socialist state (Cuba, Venezuela), a democratic socialist state (most of the countries of Western Europe and Scandinavia), or a democratic capitalist state (the US, although its socialist Social Security and Medicare programs dilute its claim to capitalism).
As for the freedom and well-being of the citizens of a country, the key parameter is not its economic system but its political system. A democratic political system leads to better outcomes for its ordinary citizens than does a totalitarian system, regardless of the country’s economic system.
Confusing the political system with the economic system leads to error, such as concluding that socialism is necessarily bad news for a country’s ordinary citizens, even with a democratic political system that allows those very citizens to adopt socialist policies.
The two economic systems at the extremes - free market capitalism and communism - lead to totalitarian political systems, since both of those economic philosophies require reduction of the interests of the ordinary citizen to insignificance.
1
I wish progressives would understand the difference between socialism and capitalism. Socialism is an economic theory where the means to production are primarily under control of the government,. Capitalism is an economic theory where the means of production are in the hands of the private citizens. Social nets for the most vulnerable among us are not 'socialism.' It is more than reasonable to care for the needy, and the government has the role to make sure that the needy have access - education, for example. It's also the role of the government in any capitalistic society to keep people safe - FDA approves drugs, making sure they don't kill us and making sure they are effective. Very reasonable.
However, most agencies in the Federal government do not adhere to the governments role; making the Fed more socialistic these days than ever. Socialistic in that they move to control the means of production.
@Ma. No, socialism is NOT an economic system where the means of production are primarily under government control. That’s communism, where privately owned business is non-existent. Socialism is an economic system where taxes are utilIzed to fund programs to maintain a level of support to minimize poverty and to strengthen the middle class. I wish folks would stop drinking Fox’s and GOP kool aid that tries with some success to equate socialism (social security, public education, Medicare) with communism.
2
This seems to be the topic of the moment, how to build a better economic system. I agree...BUT... it seems we first must build a better human, one not so vulnerable to corruption.
1
The right wing in our country has won the war of words since the election of Reagan and, far as I am concerned, that is still the case. Both parties feed at the same trough.
2
Our economic system has not been fully 'capitalistic' in decades. Not since the Federal government started creating winners and losers with legislation across most every service or industry they've involved themselves with. The Fed is supposed to be focused on safety and security. We've thousands of agencies that do little when it comes to either.
I believe in regulations that keep us safe, and the budget to enforce regulations that keep us safe. But that's not happening. I see regulations daily that over-reach, have nothing to do with safety or security.
Lastly, but perhaps more important than anything regarding wages over the last 20 years - the Fed lies outright about inflation. Inflation was 'redefined' by the Fed back in the early 90s. As a result, it is underestimated to a very large degree in 2019 (as it was throughout this century). When inflation is given a 1.5%, wages will not rise. When inflation is given as 10%, wages rise accordingly. They never rise at the actual rate, but companies use that estimate from the Fed to determine wages as much as their profit line.
So, let's get honest about what the real inflation has been over the last 2 decades. The Fed employees get raises based on the real rate, why not the private sector?
Capitalism isn't the problem. Unfettered capitalism is. And this is what we've had for the past 40 years, ever since the patron saint of capitalism, St. Ronnie, bequeathed Reaganomics on us. Declaring war on unions while working to undo regulations, and cutting corporate and investment taxes shifted the balance of power to be all on the side of Corporate America and Wall St. It's no coincidence that since that time the working and middle class have seen their incomes actually decline while the top 1% saw massive increases. And these changes were implemented while both Republicans and Democrats were in charge because both parties chase after the same donors now that unions have lost so much power.
Returning to a system where workers were treated fairly and were allowed to share in the prosperity isn't "socialism", as the defenders of the status quo threaten. Empowering workers so that the system is balanced is good for everyone, workers, management, and investors. A consumer based economy is dependent upon the consumers - a.k.a workers - to have decent incomes so they can afford to consume.
Allowing capitalism to only be focused on profit is like allowing yourself to indulge your appetite without limit. Eventually you'll become obese, and your health will suffer, even leading to death. Wall Street and Corporate America have been gorging themselves on profits, and not taking care of the entire system. It's time for them to go on a diet.
3
@Kingfish52: Reagan created the modern cartel of mega-rich who control everything via political donations.
2
Gotta love Joe Stiglitz, but his own diagnosis of the problem raises serious questions about his solution. Yes, monopoly and oligopolistic capital will gain ever increasing control of the political system. Right now, that control looks like a stranglehold. How exactly will politicians move our economy to progressive capitalism when monopoly capitalism largely controls the successful politicians with greatest power? The last time inequality and political control were in the state they are in today it took a Great Depression and WWII to rebuild the sense of common community, common fate that allowed some parts of the New Deal's progressive capitalism to proceed. I doubt we can afford another world war given that we are about to go over the brink ecologically. We need to rebuild common community without the devastations of Depression and war. And we need to build a form of economics that doesn't naturally tend toward concentration of wealth and power in the hands of the few, otherwise we will repeat the cycle again. Politically AND economically, we need to build a bottom-up democracy based on community and strong non-hierarchical principles. There are ways of doing this--look up 'sociocracy' and 'pyramidal democracy'. We need to start experimenting with new political and economic forms seriously and extensively, perhaps to begin with by seeking a dialog across ideological divisions. Ordinary citizens, with some guidance, can form the solution.
2
Simple facts point towards an economy that will need fewer people in the work force as technology advances. The only way to maintain a government and economy that is fairest for ALL people, is to tax the wealthiest so the middle class grows. We must bring the poor into the lower middle and middle classes. We have to grow the middle class, and if it means the richest can only afford 1 or 2 yachts instead of 3 or 4...so be it.
CEO's making 300 times what the average worked makes is criminal. CEO's making 30 times what the average worker makes, as it was in the 50s and 60s, is another answer to solving income inequality. If that is called democratic socialism so be it...bring it on.
2
Many of the problems a predatory capitalism were actually cause by the government. Basically until the early eighties we manufacture it most of our products in the United States. We then allowed other countries to start exporting their cars expression as Japanese we got use to cars at cost less money which at the beginning increased our standard of living then we started letting other countries export virtually anything that could be made cheaper. Both republicans and democrats supported this policy. If you're running an American company and you want to provide health insurance decent retirement plan and benefits before you are only competing with American companies. Would now you're competing with companies that don't have to worry about workman's com unemployment insurance health insurance and can replace a worker with another peasant you totally made it almost impossible for American companies to provide the benefits Americans were used to.
jdavid, it was not government that sent the jobs overseas,, it was multinational American companies. It would have required governmental interference to stop them. Is that what you are advocating?
1
@jonathan: Don't underestimate Reagan's contribution to the exodus of industry by reversing Carter's Metric conversion initiative.
2
In order to work, democratic capitalism (which is a set of rules for economic relationships, not a political philosophy) has one fundamental, non-negotiable requirement: voting. The system we have now is neither democratic nor capitalistic; it’s oligarchy with income redistribution in reverse, and we have it because of voter apathy (which is due to the slave-era electoral college as well as GOP gaming such as gerrymandering and all manner of voter-suppression).
Want to quickly push the rich “conservatives” to the periphery and force them to disgorge their Ill-gotten gains? Get out and vote for progressives. Oh, and abolish the electoral college; the GOP’s real “Wall.”
4
@DenisSt: The Electoral College guarantees that no candidate will run to represent all of the people.
Ironic that people who are ok with Russia attacking our electoral system and our democracy, are at the same time viciously opposed to anything that has a faint whiff of socialism.
3
capitalism is about more money.
progressism is about morality and justice.
you can make capitalism serve progressim as long as it cannot makes more profit with injustice or immorality
1
"Progressive capitalism" is "Socialism"!
@Gandalfdenvite.....Anything done collectively is socialism. When we collectively build roads, provide for education, or establish police and fire protection we are practicing socialism.
1
Government is a corporation too, distinguished from all others by coercive powers over all of them.
Slightly off topic, but I observed a long time ago about Dr. Stiglitz, the dude can flat out write.
3
A very important post. 'Humanistic capitalism' is not only possible, but also essential, and, actually, inevitable.
Why inevitable? Because of the new ‘futuristic’ technologies of the past 20 years (the Internet, smartphones, clouds, AI, etc.), that will inevitably cause, in the near future, millions workers layoffs - especially of the weak ones - elders, 'non-technological', physical/mental disabled, etc.).
But this new technologies' ‘problem' can, and should become a HUGE BLESSING - through a giant ‘social infrastructure’ project, ‘New Deal 2.0’ if you wish, funded by the government, but managed by nonprofit organizations, on the one hand staffing vital non-technological jobs unmanned today - due to funding lack (poor-elderly care, poor-communities activities, etc.), while, on the other hand, stimulating the economic demand/growth, and doing this, first time in human history, under HUMANISTIC CONTEXT.
Is this ‘rosy’ scenario possible?
YES. See realistic example here:
http://www.levyinstitute.org/pubs/rpr_4_18.pdf
And how will this historic change be financed?
By governmental money-printing (in careful, measured amount keeping inflation in optimal level).
Truely, right now this path not possible in most countries, but it IS possible in America, with its giant (almost) autarkic economy and with national currency functioning as the defacto global currency.
Don’t believe this ‘financial magic’?
See here:
https://urpe.wordpress.com/2019/03/20/is-mmt-america-first-economics/
2
When the capitalist elite are allowed to write the capitalist rule book the whole society suffers.
2
Reading through the comments, what's frustrating is Stiglitz's well constructed argument, for a fair and efficient market, regulated by well thought-through policies, is lost among the extreme left wing NYTimes readers.
What Stiglitz advocates is not your Bernie Sander socialism; it is a more fair and regulated version of capitalism where incentive is still allowed to, well, incentivise people to working harder.
2
@Avi -- I'm a left-wing progressive liberal Sanders supporter who is working to pay for my children's expensive education, however, I am privileged and therefore have the moxie to think I can do so: I got the best education money could buy and I'm a white male.
And I am deeply troubled that only a few percent of Americans can do what I am doing because they lack the privilege, and so I vote for Sanders who wants to make such things as healthcare and higher education paid for just like it is done in European countries.
I have raised my children to do they very best they can in hopes they can assist others to do the same. That is the progressive platform. Suggesting that progressives are lazy and against incentivizing people to work harder, as you do, is beneath contempt and smacks of the slander "welfare Queen" that Ronald Reagan spread. Apparently, the problem we have in society today is that too many people would rather sit around blaming others instead of working hard to contribute to our political economy in a way that benefits all.
Avi, if everyone worked hard to contribute to our political economy in a way that benefits all instead of constructing false narratives about those who allegedly promote laziness then maybe our society would benefit. It is a pitiful if not disgusting irony that there are those who solely focus on aggrandizing themselves, fight to take more pie than others, and then blame them for going hungry. This is why gluttony is wrong.
2
@Avi: ...as distinguished from desperation motivation, which many claim to believe is necessary to get most people to work at all.
This article ignores the inherent limitations and utter impossibility of sustaining capitalism. Please read Daniel Rushkoff's Throwing Rocks at the Google Bus for actual history of and severe unsustainable problems with capitalism.
@Thomas Heady....You might as well say there are inherent limitations and an utter impossibility to sustain fire, because fire obviously burns things up if you don't control how you use it.
It is interesting that unfettered markets are referred to as "neoliberal". Reagan hardly considered himself a liberal much less a "neoliberal". Then again, the term liberal itself seems to be little more than an invention proffered by self-described conservatives who are quite adept at regurgitating nonsense.
But the concept of unfettered free markets is fatally flawed as the author suggests. He appears to embrace the economies of Scandinavian countries without saying so. The data strongly suggest their economies are indeed working very well at reducing inequality and creating happiness among the citizenry.
2
@LH -- As a progressive liberal, I view the neoliberal as my natural enemy. Neoliberals are not liberals and they are most definitely not progressives. Neoliberals are to the economy as neoconservatives are to foreign relations. Neoconservatives are not at all like traditional conservatives.
Neoliberals are like the cats who finally decided that they have no other option left but to catch all the mice to save them. Neoconservatives have likewise come the the very concerning conclusion that they must catch all the mice before they catch them.
Neoliberals taught the neoconservatives that they had to burn down the village to save it. It was the neoliberal view that they had to crash the economy to increase the relative wealth between themselves and the masses.
Neoliberals are going to save you from yourself whether or not it maims or kills you, and neoconservatives aren't going to sit on the porch with a shotgun on their lap and a nice cup of lemonade like traditional conservatives: no, they are going to get an assault rifle, swig an energy drink and leave the porch to go out looking for wherever trouble might be hiding, and if they don't find it, then they will create it.
Neoliberals started out during the interwar period of the 1920's in Germany for an easier softer way that the rapacious Classical Economic Liberalism that eschewed all rules and regulations against capitalism. But then Milton Friedman and others stole the name to launder their image, so there you have it.
1
Reads Capital vol I, Capital vol II, and Capital vol III I am going to have to disagree Mr. Stieglitz.
It is Oxymoron unless you are confusing Capitalism with entrepreneurism
2
Outstanding article. This should be the manifesto of the democratic party platform in 2020. We need to educate and explain the impact of the current convoluted sytem on the people. Tax cut for the fat cats is a vudoo economics. It is the exploitation and abuse (“cartel”) detroying pur nation creating absurd economic disparity. People are angry and they are fade up with the system since everything is structured to serve the cartel. The man in the White House is a stooge for the cartel. But his divide and conquer propaganda puts a blindfold on many. We can progress and lead the world as the economic powerhouse if we implement the true principles of capitalism. Time is now- democrats wake up. Trump will loss the election 2020 by a landslide if they do the right thing.
2
ive experienced this in a blue collar job :
The result is an economy with more exploitation — whether it’s abusive practices in the financial sector or the technology sector using our own data to take advantage of us at the cost of our privacy
my company using a team to extract via cameras and audio ,watching me while working and on breaks, viewing what im doing with apps on my phone and listening to my private (?) conversations and speaking at an almost inaudible level covered also by background noise to be extremely abusive in disrupting my personal thoughts and my personal relationships to cause me to have most of my daily focus only on work productive to their needs
1
You could have written this 10 years ago and it's still true.
2
China practices state capitalism where the government owns large firms and decides which industries will receive subsidies. China's government picks winners and losers based upon China’s goals.
US capitalism and deregulation allows companies like Amazon to earn extraordinary amounts of money & pay nothing in taxes. While China has its share of "Bezos", their goals include replacing the US as the global powerhouse and the US Dollar as the world’s Reserve Currency.
Trump’s inept, traitorous behavior has advanced China’s goals more than anyone imagined. When Trump started the tariff war, he dissolved partnerships borne of WWII. As rapidly as Trump violated those partnerships, China filled the void by extending infrastructure loans thru Belt & Road to retain their new partners.
Another huge failure of Trump capitalism is rapidly unfolding. The importance of America’s Reserve Currency status cannot be over exaggerated. As of 2018, the USD makes up nearly 62% of all known central bank foreign exchange reserves making the USD the de facto global currency. When the US needs more $$ to service its debt, treasury prints more w/o debasing the existing currency.
No other country has such privilege.
Amongst all of the self-serving, criminal activities Trump is suspected of, his irrational capitalism policies could lead to the dollar’s loss of Reserve Currency status.
The impact on the 99% will be devastating.
1
@Economics Professor: Amazon is a cancer because it can reinvest all profits to buy up tax-paying businesses.
1
Trump is wealthy because his parents were wealthy and provided all that he needed to become wealthy himself. He is deliberately trying to undo all constraints upon the wealthy to do as they please. He never succeeded in creating new wealth by his own efforts and he has no grasp of wealth generating systems. He actually sees all those cooperative agreements built after WWII as constraints upon himself and others like him by having to make the compromises that these agreements demand.
1
Reading the comments it is difficult for me to believe that most people have chosen not to remember the underlying causes of the financial meltdown in 2008 and the Great Depression. It was the greed of Wall Street and the invention of financial tools that No One in authority at the financial institutions created to manipulate the bottom line, the corruption of Sherson Ledham, managers using technology to hide there lists. To blame it once again on unqualified borrowers who were identified as minorities has been proven false However in rascist America let’s blame the brown people for every ill . We put children in cages and rich people on Wall Street are allowed to keep their ill gotten goods.
Capitalism needs to be addressed, overhauled immediately because at this point the country only works for rich white elites. The rest of this country is going to tear itself about. Listen to Elizabeth Warren and Peter Yang they know exactly the path of doom we are on.
The rich elites cheap to get there academically challenged offspring into elite schools because they to like this administration, Wall Street have no character.
Everything is on the line in 20/20 an we need to hold everyone accountable otherwise we are lost.
1
In all of this unfettered capitalism the pure irony and paradox is that maintaining this course means capitalism is killing itself.
1
Wonderful column; should be required reading for every elected politician and C.E.O. in the country. This idea should definitely drive the message of whatever Democrat winds up being the nominee against Trump. Trump himself is the antithesis of everything this column promotes, and the ideas of this column outline a broad avenue of attack against his presidency.
2
I am repeatedly dismayed by how brilliantly articulated observations in essays such as this (and a host of others) can be buried under the tsunami of greed and ignorance in our society. It seems we have become less civilized when such self-evident truths about inequality can be so eloquently stated and published and not create a real revolution in the the thinking and actions of citizens. It seems we have become a society of unthinking automatons readily distracted by petty silliness of jesters and frightened by the scare tactics of simpletons. Thank you Joseph Stiglitz for much needed reason and reflection.
4
An overarching problem in our nation is the encouragement of mergers. This unjustifiably concentrates wealth and destroys/disrupts the middle class due to the elimination of redundant yet beneficial labor.
1
Well said and this view is solidly reflected in a 2015 book by Robert Reich: "Saving Capitalism for the Many, Not the Few".'
Equally incisive is Stiglitz' own work, "The Price of In-equality" from 2012.
Thank you both!
6
Academics are supposed to credit their work. This is old hat: it's the social market economy, the basis of much of Europe for generations. It's anchored in the Treaty of European Union, Article 3(3)
3. The Union shall establish an internal market. It shall work for the sustainable development of Europe based on balanced economic growth and price stability, a highly competitive social market economy, aiming at full employment and social progress, and a high level of protection and improvement of the quality of the environment. It shall promote scientific and technological advance.
No wonder Trump hates the EU!
2
I agree with most of what you are saying. Unfortunately, as long as one of our two major political parties believes that "all government intervention is bad," there is precious little chance that we will take any of the actions that you recommend.
1
@Craig: The Republicans are completely inept at enforcing any minimum standards of conduct other than abject sycophancy to concentrated wealth.
1
This is all laid out in Kate Raworth's book, "Donut Economics" from 2017. I would encourage everyone to read it and the plan that she proposes, get in touch with your representatives, and hold their feet to the fire until we see this policy carried out with oversight. So often, we spend our time 'talking' on social media rather than proposing solutions to the ones who represent us.
2
It is sooooo simple.
1. In capitalism money makes money. The more you have the more you'll get.
2. So, there must be a progressive tax to REBALANCE the system or unsustainable inequality will result.
Redistribution or nationalisation of all business, take your pick.
4
@Tracy Rupp....You are correct only if you assume that economy is a zero sum game, which is one of the frequent errors of socialism. It is not a necessary fact that if you make more money someone in the system will necessarily have to make less. The most simplistic example is that I can grow a garden and feed myself and it has absolutely nothing to do with what you are anyone else does.
If only we could get Democrats to be the party of Good Government again! Instead, all Dems try to avoid discussing how government can be the solution to our inequality issues. No American today defends the purpose of government or educates the younger generations what purpose government is intended to serve. Since Regan, we have two generations of young Americans who no longer believe government serves any purpose for them. All they know and hear is "Government is the Enemy" from the Republicans with no rebuttal from the Democrats!
4
As Stiglitz points out, "public options" for things like health care and retirement should be part of the way forward. But call them "public options," NOT socialism: many Americans have knee-jerk hostility against socialism from decades of twentieth-century indoctrination. A fair taxation system--one that doesn't redistribute up, or give con artists like our orange-haired leader massive tax loopholes--is also part of the way forward.
What are the barriers? Corporations and billionaires exert undue influence. Their main goal, of course, is to further enrich themselves and pursue their narrow goals. Witness the 2017 gigantic tax giveaway to corporations and billionaires. Witness our city and state governments (i.e., you and me) giving billions of dollars to companies like Amazon for the privilege of providing workers and infrastructure.
With inequality and middle class stagnation, stress and anxiety are up; happiness and individual security are down. What further evidence do we need that we've been on the wrong path for too long?
3
Ah, what a breath of fresh air. Finally, a piece on economics that makes sense. Thank you.
4
Excellent read. Thank you.
The question I have asked for years is this: how does industry expect to sell products to people without money? Not a sophisticated argument, perhaps, but if you concentrate wealth to an ever shrinking portion of the population, who will drive the economy with purchases? The worker who cannot afford the refrigerator s/he produced, much less needs, represents a world where people are supposed to support the economy; shouldn't we create an economy that supports the people?
5
I realize the writer is explaining how the US (and beyond) ended up in the situation we find ourselves in, and I appreciate that, but any sort of reimagining of capitalism can no longer be just about the workers and those in power. New solutions must also include the environment. Anything else is an outdated suggestion.
2
Capitalism is the world's real religion--the worship of money, the technoindustrial grid, consuming, breeding, and relentlessly increasing growth. It places capital above all other values.
Capitalism is ever-increasing consumption of the finite biosphere, which is why our species is a mass extinction event rapidly extinguishing biodiversity, the web of life, peace and quiet, natural beauty, and the other species who evolved here with us.
Capitalism's reliance on growth in human population and consumption is the ideology of cancer cells--growth for the sake of growth.
And as with cancer cells, capitalism will eventually kill its host.
Every human born is a net loss for the biosphere.
The only human economy that could work is one based on deep ecology (google Arne Naess) and the Buddhist principle of ahimsa (non-harm to all sentient beings).
Anything else is merely rearranging the deck chairs on the Titanic.
3
From June 1944 onwards, the U.S. became the wealthiest and most powerful country on Earth. Over the next three decades it just increased in both while raising the standard of living for all citizens, too. This sweet spot was achieved under capitalism and social controls upon the tendency of industrial economies to enrich industrialists and to deprive society of any of the new wealth created. Taxes and deficit spending were high but easily absorbed by the high rates of economic expansion. That growth was driven by exploding demand and all having a share of the growing productivity.
Then the good times ended. The price of petroleum shot up and double digit inflation and massive foreign imports of high value goods all killed the post war boom time. No efforts to turn this around worked.
Reagan offered a new strategy, redistribute the flow of money so that the capitalist class had so much money that they had to invest and lend to keep it from losing value. Remove regulations to free business people of constraints in taking advantage of opportunities. Nobody could seem to see the dangers with these policies. Today we see the dangers borne out. The control of new wealth and how it is used is in private hands. The loss of regulatory constraints allows businesses to act without consideration for consequences which everyone else must contend. But what nobody but history nerds understand is that these bad outcomes were first seen in all all their sickening degeneracy by 1848.
1
@Casual Observer: What have we got now besides vast investments in projects intended to be monetized by advertising revenue?
The argument laid out here looks a WHOLE lot like what Senator Elizabeth Warren is saying. As she would put it, we need a ref on the field to keep the play fair. She also sees a role for public options for assisting mortgages and student loans as Dr. Stiglitz explains. I can't actually see any point of difference between the two.
The most important goal of all is to restore faith in the system. As long as it is seen as illegitimate it will be unstable. No one should want that!
3
The notion that "a middle-class life is increasingly out of reach for [American] citizens" makes sense only in a very circumscribed way. Compared with prior iterations of a "middle-class life" in terms of absolute material advantages, even the lowest quintiles compare favorably with prior analogues. Moreover, the purchasing power of those lower quintiiles continues to improve, adjusted for inflation, according to government data over the past 51 years. Meanwhile, compared with other nations, the lowest quintiles in the U.S. are slots coveted as middle-class plus, explaining why there is such a press of economic migration into the U.S.
Only in terms of the relative strength of the top U.S. quintile(s) versus the lower quintiles does Professor Stiglitz's comment make any sense. The rich are getting richer, true. That is a different issue, though, from whether the middle class is disappearing. It is not. It is growing by most measures. People are content enough with the system so that, for example, many jobs are unfilled. This is not the Depression. Professor Stiglitz is stuck in a past that has passed.
3
My older cousin graduated from high school, married, took a well paying job in an industrial supply firm, moved into a new house with he and his wife both having their own late model cars right out of high school. They started a family together and never looked back. That was in the mid-1960s. That was middle class life then.
Your examination of quintiles and proportional measures of well being fail to illuminate real life.
7
So, you point to a few bad actions among corporations, but reject all the bad actions of your government. You state without evidence that centrally planned capitalist economies work despite the clear evidence that politicians are corrupted and create regulations that strangle, and the remove regulations that reduced risk taking by the public.
Hoping that corrupted politicians that represent the one true monopoly (government) with full power and control over your ability to live or be free, who can force you to pay without any interest in buying, is childlike.
We can't even do equal protection under the law, much less tune the law to a perfect economy that never has misfires of bad actors, poor choices, unrealized changes, or global competitive forces.
3
"Capital" is now primarily investment money; "venture capital" seeks ownership to increase wealth by production/sales or mere capital gains. It contrasts with ownership for use/enjoyment--house, car, books. Capital is NOT limited to " means of production". "Liquid capital" is cash or readily converted to cash.
Nor is it limited to "private ownership." Some original states were "Commonwealths"--their citizens "tenants in common." Common property includes parks (commons), ports, roads--rail or tarmac. China is a huge polity venture capitalist--investing the world over.
"Private ownership" contrasts with public--as polity (city/town/state) ownership--or as "publicly traded."
Capital also contrasts with income--primarily salary, wages--"earned income"--subject to "income tax"--as opposed to "capital gains" tax. Banks are among the primary sources of liquid capital.
Slaves were capital--privately owned means of production. Employees are capital--rented means of production. Leases are one kind of property rights--so too employment contracts. Corporate raiders take over the employees too.
"Capitalism" (unqualified) is "moneyball"--private ownership/control of all capital; it never exited. Ownership needs property law; law needs a polity; polities always regulated--more or less--as well as owned.
"Communism"--polity ownership of all capital--never exited either.
Real political/economy is ALWAYS a mix. Good polities have good mixes--government FOR the people.
Even Canada with it's "Liberal" federal government, has a plan to decrease its deficit, believes in NAFTA, TPP, and yet allows for chain migration and more immigrants and refugees through its borders than the US. Also, Canada has had a universal medical care act in place since 1966. Canada is the poster child for "Progressive Capitalism", it also understands the need for innovation, and action on climate change. As long as Americans keep allowing "big oil" to dictate their domestic and foreign policies--there will never be a true "democracy"--only a republic--and it is gradually becoming a "Banana Republic". Sad.
10
A refreshingly simple and well presented economics primer explaining our current malaise based on wealth at all costs and ignoring societal well being. There are already great comments from all over the world. I would like to give a great big shout out to the brilliant illustration by Nicolas Ortega which captures the essence of the opinion piece. It clearly juxtaposes the symbiotic relationship between natural resources / nature/ ecology/ save the planet and profit / greed/ money created from the manipulation of nature. Sadly, this system is broken due to the failure of the trickle down brigade. Great read.
3
Capitalism is a system that, as defined over the last 100 years, requires competition in every aspect of the business including the definition of labor as one more commodity to be bartered. Over the last 40 years US manufacturers have lowered labor costs by, in addition to productivity improvements, procuring that labor in foreign lands to some degree offset by added shipping and management costs. At the same time foreign manufacturers have been able to capture significant portions of our domestic markets. The automobile market is a great example of how we lost our own leadership, partly because our labor costs were too high compared to that of foreign competitors.
A major cause of the financial demise of US workers is due to the ideas of supply and demand and free markets.
Human capital should have a minimum value, dictated by law and ethics, such that a US worker has a living wage. That of course will increase US manufacturing costs. This could be easily offset by a duty on all imports whenever total exports fall below total imports. Over time the effect of a living wage would cause a balancing of the economy provided there is some equity in our taxation system.
2
@Barry Rodgers
No disagreement with your central points, save this phrase in regard to U.S. leadership in its own car market:
"...partly because our labor costs were too high compared to that of foreign competitors."
No, Detroit turned out junk and it kept making junk because the public kept buying it. When the Japanese came into the American market, the poobahs at the big car companies dismissed the threat as if a bug were crawling across their boots. Even when the foreign share of the market began to climb, they didn't worry. In Detroit, where most of them lived, people weren't buying and driving Japanese cars. Why worry? Before long, the foreign makers were capturing 40% and more of the market in California.
The great car review writer Dan Neil wrote about Detroit's cars of the 1970s that they seem to have been extruded rather an manufactured. Into this soft underbelly of complacency, the Japanese crept. They made smaller cars when Detroit refused to do it well because of lower profit margins. American cars were more and more unreliable while the foreign competition improved.
To be sure, there was lots of waste, including union contracts that were too generous and saw abuses like workers who were sent to non-factories to sit around doing nothing because they couldn't be laid off or fired. How much of the car's price did waste contribute? No one really knows.
The whole story is one of failure of leadership by the big three companies...a failure for decades.
5
Capitalism: "an economic and political system in which a country's trade and industry are controlled by private owners for profit." If we are unable to change this root purpose, then we are doomed. The modifier "progressive" does not alter the definition of capitalism. The pervasive desire for material success is incompatible with human survival. See for instance today's article "'Medicare for all' makes health care stocks tremble."
2
Toward the end of the 18th century, Europe saw some attempts at "enlightened" monarchies. These reformers, like Prussia's Frederick the Great, enhanced the power of their monarchies by creating efficient bureaucracies, and improved their economies in ways that favored free trade (Adam Smith was their patron saint). But the ruling classes fought against such reforms. Who was right? It's not easy to say. Enlightenment strengthened monarchy and the ancien regime, thus helping to prolong them, but it also led in the longer run to the abolition of monarchy in the interests of even MORE efficient governments (with the promise of greater social justice).
So, Progressive Capitalism would prolong the life of a basically unsustainable economic system, but in the longer run will expose the need for more and more government controls on the economy for purposes of sustainability. The right wing of conservatives, like the ancien regime before it, perceives this likelihood, and is therefore against ANY reform. Thus they hasten the day when there will be a crisis so severe that there will be a violent overthrow of the capitalist system, and perhaps of democracy as well. What will emerge from this crisis is hard to predict - anything from a classless but rather humdrum world order, to a starving remnant ruled by brute force. But probably something in-between, better than the misery of Bangladesh, but not as pleasant as what the already declining middle-class enjoys in America today.
2
@Robert Crosman The right wing wants power to remain where it is or, preferably, become more concentrated. The center and left want power to move towards those who have been unjustly excluded and to be distributed more equally. During the past couple centuries power has been lost by the old aristocracy and religion, but it has recently increased for our most wealthy. The information revolution has strengthened this trend. I believe that almost all of us would be better off with a more equitable distribution. The alternative is instability and possibly devastating decline.
1
The single greatest challenge facing the highly developed portion of the planet, aside from climate alternation and environmental destruction of life supporting habitat, is the potential for work to gradually fade away. This has especially grim indications here in America where we have had a cultural ethic that "you must earn your own way" since the rough times of the frontier days.
Work, its steady demands and required hours and routines, is what helps keep people sane, balanced. As much as we dislike our bosses and their desire to over manage employees, without steady work people lose their sense of self worth and purpose. It is a vital part of social contact and general engagement with the world. What will we do if it is taken away?
With this threat on the near horizon, it is more important that people who work be paid enough to support themselves and have a decent life no matter what work they do. At present, we have hundreds of job classifications where the "worth" of the work performed has been reduced to almost zero, bare survival wages.
Free market capitalism, treated as a religious belief and even justified by obscure Bible quotations from some pulpits, can not solve these problems. It can't solve most social problems because there is no profit in doing so. Instead, capitalism cranks up the exploitation of near poor and those struggling to stay in the middle economic class with high interest rates, payday loans and horrid financing for battered used cars.
5
Conservative dishonesty, intolerance and pandering to the rich is not going to save the middle class.
Programs that help the middle class maintain their standard of living work better.
It's not socialism. It's progressive capitalism.
5
Karl Marx, living in an age of revolutions, described economic history in terms of violent struggle. As feudalism had been "overthrown" by capitalism, so workers would rise up and butcher their capitalist oppressors, bringing in a socialist "classless society," in which resources would be shared equally. This model lay behind the Bolshevik massacre of aristocrats and the rich, and it underlies the ownership class's fear and hatred of anything that smacks of "socialism" in America today.
Conservative Republicans are still denouncing Social Security, unemployment insurance, Medicare, and Obamacare, as though these were the early victories of an advancing socialist army. As a defense of their wealth and privilege this makes little sense, but they feel they are defending their lives as well.
History teaches otherwise. Feudalism did not end abruptly in revolutions, but was gradually eroded by centralized monarchical rule, financed and fueled by the rise of middle-class capitalism. Even when serfdom was abolished in Russia in the 1860's, it was not by revolution, but by a mandate from the Czar, because the feudal system was outmoded economically, making the bondage of human beings suddenly seem repugnant.
The limits of capitalism are not too slow growth, but a growth that threatens the health of the planet, and of its people. It needs to temper growth with sustainability and social justice. As FDR remarked, his reforms did not DESTROY capitalism, but SAVED it.
I could go on.
8
The underlying problem is inequality in skills and education. As long as the wealthiest people are also the smartest and best educated, they have it in their power to maintain the existing system. They can easily maintain control of the government, and structure the system to benefit themselves.
So what you are asking is for the rich and powerful to voluntarily give up their wealth and power, something that has never happened in the past. It is much more unlikely to happen now, because the wealthy and educated number in the tens of millions. The larger the group, the more likely they are to act from self-interest.
The educated (and wealthy) people who make these kinds of proposals are a tiny minority of introspective intellectuals, who have no hope of leading any sort of political movement or getting a single seat in Congress. The Thoughtful Moderate Party is not going to win an election at any level.
5
Stiglitz is a professional, tenured economist and as such a card-carrying member of a famously inbred, theory-obsessed and not infrequently dead-wrong academic clan.
Yes, he can read the statistics, although his brush-aside of the fact of essentially full-employment seems, well..a little brusque.
But, as with all things, there is a flip-side--and here it is the less-than-visible hand of the government. Hard to see how the economy can be massively re-engineered without bringing the government into deeper, more intimate, more insistent levels of interaction with its citizenry.
Stiglitz is eloquent about the dangers posed by the neoliberal market--on the self-evident dangers of government, not so much.
It always looks so darned simple in theory--but that's before the Washington sausage-factory starts grinding out its product..which, almost always, has very little resemblance to an economy professor's rosy schemes.
7
On the one hand, we have been beneficiaries of this economy. If there is a dividing line, we (through work and luck) went from one side to the other.
……but even so……
The worlds as it stands makes me highly uncomfortable. The "halves" and "have-nots" has never felt starker. Something needs to change.
Higher education needs to be free. Healthcare needs to be free. The social safety net needs to cover us all. Our culture has to change from "me and mine" to "us and ours". We need to stop judging each other and equating material comfort with a sense of worth. The two things are at cross purposes.
Doing homework with my children years ago, we talked about the fiefdoms and the system for serfs. Today's corporate workers feel like serfs. They may not be legally "slaves" but they are enslaved nonetheless. To leave a job that doesn't pay a living wage is not possible. People are beholden to jobs due to healthcare benefits and other obligations.
We rode to a comfortable spot on a wave that no longer carries anyone forward. I see that. Really. Clearly.
If the me of thirty years ago was starting out now, well, our outcome would likely be different. With the benefit of hindsight I would say to young people—rethink the college equation. Educate yourself with the knowledge that is out there. Be entrepreneurial. Take your fate into your own hands and don't wait for the wave that may never come.
3
@Gwe: The whole financial life-cycle needs a work-over for 90 year lifespans funded by 30 years of gainful employment.
2
A better name would be participatory capitalism. The 40 percent rule that Senator Elizabeth Warren advocates for requires that ALL stakeholders in decent and proper behavior in the management of corporations and LLCs represented on their governing boards!
2
Such a refreshingly honest and simple economics opinion piece that explains our current malaise. There are already great comments from all over the world. I would just like to give a great big shout out to Nicolas Ortega for his incredible illustration. Simple juxtaposition of wealth and the earth we live in. It is very clever and pertinent and captures the general tone of the article superbly. Well done.
3
I thoroughly agree. The conversations we need to be having are:
1. What should be regulated?
2. How should it be regulated?
3. What should be socialized?
4. How should it be socialized?
Instead, we have too many progressives talking about how "capitalism has failed". There's nothing to replace capitalism. Capitalism will always be the fundamental method through which we organize our economy. The questions we have to answer have to do with the layers on top of capitalism.
3
@ted: All economies are "mixed", with private sectors that function pretty much on "he who has the gold rules" and public sectors that are more or less socialistic.
1
This analysis is spot on and aligned with other recent analyses:
A C.E.O. Who’s Scared for America From The New York Times: Capitalism, he says, is slowly committing suicide.
https://www.nytimes.com/2019/03/31/opinion/peter-georgescu-capitalism.html
Here is a link to his book: https://petergeorgescu.com/books/capitalists-arise/
2
Yes, Mr. Stiglitz, "We need regulations that ensure strong competition without abusive exploitation, realigning the relationship between corporations and the workers they employ and the customers they are supposed to serve. We must be as resolute in combating market power as the corporate sector is in increasing it."
I like the term Social Capitalism. WE THE PEOPLE allow businesses to use OUR taxpayer-funded contracts to build/maintain roads, maintain infrastructure, print educational materials, build housing, build military equipment and the myriad other things that make OUR United States of America the wonderful place it is to live in.
Instead of the "profit" going into the hands of business owners and lazy "investors" one half the net revenue - before corporate growth, new tech purchases for private enterprise, new offices and/or branches and the myriad tax breaks they currently get - goes back into OUR infastructure to fund universal health care, excellent education for ALL children and further maintaining and improving OUR social safety net.
It's really quite simple and takes only courageous people like Senator Elizabeth Warren to make it a reality.
2
First off - there is virtually no "Capitalism" in the global economy today. Some family businesses come close, but in an economy where most shareholders are themselves corporations, the idea of people (real people) making themselves rich through the use of their personal capital is essentially an anachronism.
We live in a world of private bureaucracies in which employees create hierarchical structures which they rule like little kings, voting themselves obscene and ridiculous pay rises on a whim and reporting to nobody other than other filthy rich employees who have also managed to exploit the system to their personal advantage.
So forget ideology - all we are talking about is fairness and "fairness" needs no definition. As Lord Denning once said, any child in the schoolyard knows what's fair and what's not fair. What we have to do to create an economically "fair" society is to understand what drives the distribution of wealth - and this is something we now understand better than ever.
What drives economic distribution at the most basic level is the "Pareto" principle - almost a law of nature, it operates to ensure that in any given system of distribution, eventually one person will possess everything. The issue that should be at the centre of all politics and economics is simply how we modulate the reality of the Pareto principle to make society fair.
The answer is - and always has been - taxes. We now know the very rich aren't better, they are just luckier, so tax them.
4
@Colin McKerlie: Wealth is power and power is wealth. Only systemic negative feedback precludes the Pareto singularity.
@Colin McKerlie
You misstate the Pereto principle...it's the 20/80 distribution in a hierarchy...20 percent of the group PRODUCES most of the work; 80-percent are along for the ride.
Thanks Joe: I foolishly thought that some of the glitter of professorial UTOPIA had frayed but your OP-Ed brings it back spot-lite clear
1
An excellent big picture diagnosis of what ails this country!
2
Alas, if only more of this country could listen and understand to these thoughts, the better off we all would be. Instead, these thoughts will be ridiculed as heresy by those whose motives are
based upon greed, corruption and hypocrisy fueled by fear.
3
Replace the bottom dollar with the community dollar.
2
Progressive capitalism, democratic capitalism, harnessed capitalism, is a powerful engine for prosperity. Naked capitalism unrestrained by regulation or moral conscience is a cancer on society.
5
"Left-wing Capitalism."
One shudders to think what "Progressive Communism" would look like.
1
What has recently littered the streets of San Francisco, a city inhabited with a supposedly progressive and definitely capitalist population, shows the failure of such an association and reminds us what capitalism is all about now: the pursuit of hapiness through greed and selfishness.
Let’s watch “Its’s a wonderful life” again and think about what went wrong…
2
Two thoughts;
1) Citizens United has been the greatest accelerant of economic inequality in my lifetime of 68 years. It must be legislated away.
2) Businesses that engage workers in determining the strategy and tactics of production, proper compensation and benefits AND have a transparent and reliable mechanism for those workers to share equity in the success of the business don’t necessarily need formal “unions.” One such company is “Managed By Q”......full disclosure, it was founded by my nephew.
3
Campaign. Finance. Reform.
2
Laissez-faire capitalists talk about Smith's invisible hand as if it were immutable, like the law of gravity.
But economics is about human behavior. If your 6-1/2 ft tall 300 lb neighbor is prevented by law from punching you in the nose so he can take your lawnmower, rich and powerful corporations should be prevented by law from overpowering you to take your money, your health, and your sense of security.
Money isn't speech; it's power. Lots of money leads to lots of power, and lots of of power more often than not leads to corruption.
Capitalism must be regulated to ensure a just society, just like other human actions. Although I'm against the death penalty, I wouldn't lose any sleep if the drug-pushing Sacklers got the guillotine for the opioid deaths they caused. If the driver of a bank robber's getaway car can get the death penalty if someone is shot and killed, even if the driver didn't pull the trigger, so should the Sacklers.
4
The US has broken by decades of big Progressive government. Now big Progressive government Stigy believes more big Progressive government can fix it.
2
@Jabin: I think Reaganism has prevailed since 1980. I never liked Reagan any more than I like Trump.
1
@Jabin
Excuse me ! Our most progressive government in US history, FDR administrations, saved USA from the REPUBLICAN Great Depression and defeated right wing fascism at home and abroad. Oh yeah, and the Greatest Generation voted FOUR times for FDR. AND HISTORIANS rank him next to Lincoln and Washington. Those nasty little facts eh ?
2
Around 25 years ago somebody decided that in order to act "in the stockholders' interest" all businesses (and "gummint") have an absolute obligation to charge as much as they can get away with and to provide as little as they can get away with. In addition, a business must act as if they are not part of any community and must act as if they have zero obligations toward anybody/thing but for/to "the stockholder" i.e., the CEO, COO, CFO.
For a supposedly Christian country - the USA does not not practice much "Do unto others" at all!! No CEO would stand for being treated as they treat their employees/suppliers/customers.
We do not need a supposedly new kind of capitalism ("Progressive"). There is no definition requiring old kind to create only maxima/minima.
We all know what is right. A new definition will not change unmitigated, uncaring greed that has no consequences.
2
Compare this excellent piece with Ray Dalio’s warning on 60 Minutes of a “revolution” if we don’t seriously redistribute the capitalist pie, and the excellent piece in today’s Post on brilliant Indian-Americans from Silicon Valley hooking up with Bernie to save American capitalism and our politics from their winner-take-all billionaire destroyers. The times they are a changin’ Bernie’s way, not Wall St. and Biden’s, much less Trump’s.
2
We at the bottom of the pyramid can no more save ourselves than can those at the top. Humans are like rabbits, we breed and breed and conquer and conquer, until we run out of supplies, and devastation happens.
My guess, some time in about twenty years, when global warming has stunned even the rich...they will find a way to get a world war going...
Hard not to be cynical, really. We are led by tiny people looking for nothing more than a gigantic castle.
Hugh
1
One solution to the Uber rich exploiting the masses is serious jail time for the crimes that were committed. Wells Fargo, Volkswagen, and now the Sackler family might think twice when they see the insides of a real prison, not some white collar country club. Sell off their assets, community service, and live like the majority of people who were victims. Until then, it’s all calculated into the bottom line, profits and loss.
2
Progressive Capitalism.
Has a nice ring to it. Let's give it a go.
3
Progressive Capitalism sounds so much better than National Socialism. It’s more likely to succeed by changing the name of the brand.
1
The last thing we need is the socialists of the Democratic Party planning our economy, recipe for catastrophe.
@Steve Gregg: Who spends the most on the military?
1
Are these some reasons unempoyemt rates ares so low?
* Many have given up looking for work because they can't qualify for the kinds of jobs that are available in their area.
* Automation and other technology reduce the need for human workers.
1
Oxygen, applied to the right chemical cycles, supercharges biology. That same energy, unbounded, rips organic chemicals apart. Maximizing the liberties while minimizing the destructiveness is the role of antioxidants.
American capitalism needs more antioxidants. Institute progressive tax rates for individuals, to pull idle wealth out of the elite class, with low tax rates for corporations, so the "masters of the universes" remain American. Use the high-income taxes for a "strong safety net" (freedom from fear of starvation, exposure, and illness).
But multiple generations in a country with generous social security robs vitality from the labor class. So encourage infertlity in the domestic poor (extra welfare for the childless), while having a wide gate for LEGAL immigration, to shore up the country's work ethic and economic mobility.
But a country with a prominent immigrant class provides plausible deniability for labor-intensive industry to higher illegal immigrants, depressing wages and demands for humane work conditions. The government must have a policy of AGGRESSIVELY punishing companies that hire workers without proper documents, and give them the tools to readily determine legal applicants.
3
The philosopher Isaiah (not Irving) Berlin once said: "The first function of any social organization (read 'government') is the elimination of extreme suffering." And also: “Freedom for the wolves has often meant death to the sheep.” And how well have our social organizations done here? Not very.
To that I might add: "Survival of the fittest does not necessarily breed happiness." That is why all forms of human activity need regulation and control of excesses. I don't know what this is called. But it would be better to come up with a name that is not as emotionally supercharged as socialism.
3
Considering our continued integration of AI with further "tightening" e.g. globalizing the markets, is going to portend to get more unwieldy for all... but the leaders of "market power"..eg. Fortune 50 companies will continue to further drain the social livelihood of citizens' basic needs across the middle class on down...with ever more scale-ability, ever more efficiencies... albeit with compromised margins that move lower, correlate to lower quality products (e.g. China), its a race to the bottom unless we "spread" the wealth with a redistribution model...which means...perhaps our near 70% reliance of GDP spend...needs to be restructured...because more unions would demand that.
2
"Capitalism is the astounding belief that the most wickedest of men will do the most wickedest of things for the greatest good of everyone." John Maynard Keynes
Keynes, who is credited with saving Capitalism, understood the Oxymoron. Like Stiglitz he understood the role of government as regulator and referee to assure the excesses were held in check so as to assure greater participation (benefit) in a thriving economy.
Keynesian economics brought us recovery from the Great Depression and established a thriving economy and society from the 1940's until 1980.
That great economy and great society ended with the Reagan Presidency. Trickle down tax cuts have proved over and over to not work. But presidents and Congress continue to reward the wealthy and punish the working class, to the point the working class is now the working poor.
On Easter we can be reminded of the teachings of Jesus who castigated the hypocrites and rebuked the wealthy for failing to care for the least of the brethren.
We witness today the effect when a society fails to recognize the economic foundations of success and is duped by the greed of the selfish.
11
Keynesian economics turned a depression into the Great Depression and extended it for years after ordinary market forces would have resolved it. The lesson of the Great Depression is for the government to do less, not more.
1
@Steve Gregg: "Liquidate everything!" would have worked better?
Perhaps the most useful essay that has appeared in the NYT in many, many months.
To prevail in our country, the democratic party must plan, then advocate policies supporting regulated capitalism and equal opportunities rather than guaranteed outcomes.
Otherwise, the party can take its obsession with identity politics and retreat into its urban enclaves secure that it need not engage with the rest of the electorate.
6
The success of real capitalism depends on the strength of the triumvirate: competition between businesses, the value of labor, and the needs and rights of consumers.
The phrase "free market capitalism" has become twisted to mean that industry should be free to do what it wants rather than "free market" competition where industry must compete in a market free from artificial government support. Free from regulations? Particularly the ones that artificially defend corporate chicanery.
Labor rights? naw, let's destroy unions and keep employees as serfs to do the bidding of industry.
And the consumer is lost in all this. Monopolies control not only the product and its quality but also control the government to eliminate oversight on safety and real contents of product. With no one but single sources to turn to, consumers buy what is available with no choices.
That structure is built into our laws that protect big industry and not labor and not the consumer. Industry owns our representative democracy.
Start by fixing Citizens United so that the government represents citizens and not industry.
Start enforcing monopoly laws. Big is intrinsically and fundamentally bad for capitalism. Stop putting industry leaders into government leadership of regulatory positions.
Consumer regulations assure that customer safety and satisfaction are taken into consideration in product design. They need to be strengthened, not eliminated to increase industry profits.
3
It was Marx who wrote that labor and capital are equals. If the philosophy underlying capitalism is the rejection of all other economic systems, then capitalists cannot give any voice, weight nor value to labor without risking a headlong slide down the slippery slope to communism.
2
The three Nobel laureates who uncovered behavioral economics need to be included in planning our economy. I shall look with favor on any candidate for office showing awareness of this need.
3
The real world is fractal. Corporations are tiles in a mosaic. Within each tile, there is a dictatorship by the CEO, as regulated by the Board of Directors.
Government defines the conditional rules of relationships of these fractal tiles.
1
I have met up with dozens of millionaires during the course of my life.
Generally speaking, they were people who studied hard and became professionals and small business owners, worked hard and long hours, saved their money, invested wisely, avoided alcohol, tobacco and drugs, stayed married to the same husbands and wives, contributed to charities and have devoted themselves to providing the best lives possible for their children and grandchildren.
There may be better things to do with one’s life, but I can’t think of many.
3
@A. Stanton: The people you describe are typically thrifty and not given over to conspicuous consumption. Billionaires are different.
4
The people you describe are not the problem. They are not today’s billionaire CEO’s, who do not want to pay a living wage to the people who are trying to live a good life & provide for their children. The children of the future will only be able to live the life you describe if they have wealthy parents.
4
On the contrary, frugality is a feature of the rich, including billionaires. Bill Gates buys his ice cream using coupons. Henry Ford once delayed entering a venue until the tickets were a bit cheaper. Conspicuous consumption is a vice of the frivolous nouveau riche, like Bernie Sanders.
1
This is not a bad start but it misses some sociological basics. Adam Smith himself said capitalism needed to be ensconced in a larger moral system that would set cultural limits on it. Instead today we have the market as a secular god and consumerism as a religion. We need to understand and work against the challenges of capitalism as a meaning system, not just an allocation system. Also, this otherwise fine article says nothing about how capitalism is enmeshed with sexism, racism, and other debilitating forms of social inequality. A capitalism that truly works for everyone must help members of devalued social groups even more than it helps those with privilege and power or it will simply keep reproducing (and exacerbating) social inequality. Some of the basic assumptions of how capitalism works may make this impossible but I would love to be shown that I am wrong here.
5
@Amanda Udis-Kessler: Adam Smith's efficient market theory requires some agency to assure that the full lifetime cost of products is reflected in their cost of acquisition and/or ownership.
1
This may sound silly, but what troubles me the most about these discussions is the use of the term "neoliberalism".
In my reading of history, what people are complaining about is properly called "Laissez-Faire Capitalism". It isn't some new concept, although it has been promoted by the "think-tanks" and academic settings supported by the wealthy, since WWII primarily.
So, what exactly is it that makes it neo-*liberal*? Why is it associated with liberalism at all?
"Liberal" covers a whole bunch of concepts about how society should function-- for example, gender equality. How is gender equality equated with a lack of government regulation of how businesses operate? Wouldn't it be exactly the opposite?
Any ideas? I don't think it's a silly question at all.
4
Economic Progressivism IS an American variant of capitalism, articulated by theorists and activist proponents of capitalism like E. R. A. Seligman, Herbert Croly, Teddy Roosevelt, Robert LaFollett, Keynes, Wendell Wilkie and (racism aside) Woodrow Wilson. It's earlier policy core stressed antitrust policy -a defense of free markets from monopoly. Its hardly heterodox economic theory includes work by E. R. A Seligman, A. Asimokopulas, N. Barr and the welfare economists. Too bad for us politically that some of its most vehement current supporters of it politely thrust are so economically ignorant and politically heedless the call themselves "socialist."
3
So if someone builds a better mousetrap, the government should stop the world before they get to his/her door?
1
You can put lipstick on a pig, but it's still a pig. This effort to re-brand socialism as "progressive capitalism" should be called out for what it is, a trial balloon of a phrase to mask the reality of more government control over people's lives.
4
We are doomed if we don't recognize that present day republicans are more so then democrats, owned by petrologist wearing 800 dollar glasses with children driving Maserati SUVs.
Unions have been weakened by republicans. I had a union job were i never made more then 80K with overtime and at age 60 we have saved 3.5 million. My employer paid me well and they made billions per year. Business owners run the country by having republicans do their bidding by weakening labor laws and environmental laws.
I would love to see a democrat run for president that says don't vote for me unless you vote the party ticket.
Let the progressives take over and actually move the country forward, oh yeah the petrologist might have to buy 300 dollar glasses and a Chevy SUV for the high school-er. My point being there is enough money in business that employers could share the profits and still be rich.
10
I'll stick with the Trump Economy, low unemployment, closing the borders, car companies moving back and new plants being built, trade deals with Mexico, Korea, UK, EU & China and hopefully deporting millions to make unskilled green card & welfare recipients get those jobs.
Trump should win the Nobel prize, but beating sour faced Obama light Biden will do.
1
The pundits are finally starting to catch up with what I was saying in the 1980s.
2
America is and has always been driven by MONEY and Power. The human aspect doesn't exist and until it does the country will continue its inexorable décline
2
Excellent piece. Spot on analysis and an absolutely correct reading of history by an extremely bright economist.
The disgusting part of it all is that Mr. Stiglitz's words are pearls before lemmings.
Thirty percent of the voters in this country let Fox News and Infowars do their thinking for them. All it takes is one word from Hannity and meaningful change is all but doomed.
Things will only get worse until Americans discover the liberating powers of a good education and intellectual zeal.
6
An excellent and thought provoking column. Now I'm not educated enough to understand all of this but what I do understand is either we control the markets/capitalism or they control us. If they control us then we aren't a society we are farm animals either for toil or slaughter. There have been many great societies before us, some grand and some small and simple. Why aren't any of these societies still with us? GREED! Some died from GREED from inside, some were killed by GREED from outside. If we learn to master the GREED within it makes it a lot easier to withstand the attack of GREED from without. Again my favorite saying - capitalism is an excellent tool but a terrible master. Now all we have to do is decide is what do we do with this tool, build a better society or allow it to make us animals.
4
The two words not seen together in this otherwise illuminating essay: labor union.
Why Mr. Stiglitz?
1
Labor unions are nothing more than quasi legal conspiracies to extort money in a group setting. Whether it is a single employee demanding a raise or a union thug threatening a strike (see: Stop & Shop in New England) extortion is a felony.
1
Trump's base needs to watch the VICE episode on automation and AI that aired last night. THAT'S what is going to take away their livelihoods, not brown people.
3
The "Progressive Capitalism" model sounds more like China than USA at this time. However, Chinese leaders are loathed to have their form of system called Capitalism. They are steadfast in keeping the Neo-Socialism branding.
Let's go through some of the items on Mr. Stiglitz's to-do list: (1) focus on science (2) state planners assess & verify facts & evidence (3) promote creativity & innovation of its people (4) the state drives economic policies centrally (5) embrace globalization & technological changes (6) check & limit excesses of corporate interests (7) strengthen infrastructures (8) enhance education for everyone (9) boost basic research ... etc
USA vs China: which is the better economics student?
Americans are deeply entrenched to its form of "reality show democracy", thus not much will change. Chinese leaders should be pleased. It is in China's interests for USA to keep doing what it has been doing since Reaganomics took told. Lucky for them those in power will not listen to Mr. Stiglitz.
2
@Observer I agree with most of what you say, but not the parts about state planners assessing and verifying facts or driving economic policies. That may be true of the situation in China, but I did not read Mr. Stiglitz's essay as suggesting that. The role of the state is to establish ground rules and enforce them to ensure that competition is possible and that no one is able to use market power to exploit unfair advantage. This ensures that people feel safe participating in and taking risks in the economy. The dynamism that results creates the economic growth and well being of the population.
2
This needs to be the Democratic platform.
With an eye out for Republican expertise at twisting meaning, the subject of another important piece this morning.
1
your words, professor stiglitz, in all the eyes and ears
of those who have relentlessly been working to cement
the status quo, i.e. the wide divide btw. the 1% and 99%.
"The neoliberal fantasy that unfettered markets will
deliver prosperity to everyone should be put to rest."
it was never a fantasy but rather MAKE-BELIEVE.
a strategy to fool the majority into thinking everything's ok.
["and once i get rich i'll evade taxes like the top brass do."]
while ARROGANCE, LIES, GREED & MEGALOMANIA at the top
kept getting and getting away with everything THEY wanted.
who are WE?
if THEY lie to us. discredit and exploit us. poison and destroy us.
and think nothing of it?
as long as corporate entities are allowed to write the laws
and the loopholes that are supposed to keep them in check,
things won't change. we need a TRUE revolution.
1
Great points by Prof. Steiglitz on progressive capitalism's power to combat inequality. A perfect antidote would be the Green New Deal, which will develop a green and energy efficient economy by putting millions to work and making America the leader for decades in addressing a massive global need. Imagine if every building and home in the United States were made energy efficient and how that would propel our economy with jobs, services and goods that make communities more resilient to climate change. It's a win-win, yet corporate interests against this and other energy efficient programs like HomeStar subsidies for homeowners go ignored or underfunded. They are sound investments for the future.
1
This editorial would be far more influential if it addressed the innumerable problems created by government interference in the economy and how we could do it better. Just one simple example, he mentions the need for pensions but neglects to mention the vast liability of current pension schemes run by states and localities. How do you fix that problem? Or a local problem, I read about the failures of the NYC subway system and then read about the extraordinary costs to fix it caused by regulations, bureaucracy, and union labor. The person he should be trying to convert is the skeptic like me, not the typical left wing NYT reader who will agree with him unquestionably.
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@Jon F
Look at the research, and you cannot but observe that low productivity and professional mistakes are risks that exist in ALL big organizations - including the government.
The main difference between Amazon and the federal government, in a democracy, is that when mistakes are made, "we the people" can vote to correct them.
That's why governments CAN be so effective in reducing inequality and spreading well-being throughout society, contrary to private sector corporations "left alone" - and obviously, the only way to allow private sector corporations to do no matter what their stake holders want them to do, is to ACTIVELY intervene, as a government, by passing laws that make it legal for them to inflict harm on their own employees/society.
So there is no "no government intervention" possible in this world. The government determines the rules of the game anyhow.
In a dictatorship or oligarchy, it can easily decide to rig the system in such a way that only a small minority benefits from it. THAT is when the government become the people's enemy.
In a democracy, however, it's "we the people" who govern, so we get the government we deserve, in function of how we vote ...
In the meanwhile, imagining that somehow equality and a thriving society will arise without actively taking things in our own hands at a national level, as you seem to do, is believing in fairy tales. And being afraid of doing so only because humans make mistakes, won't solve anything either.
97
@Jon F
I agree we need hard policy data. Either way this is coming our way as technology will require fewer and fewer workers to maintain society.
As for pensions it depends on the plan obviously. Pensions all over the nation have problems because of ethical issues and or being tied to Wall Street. Also pensions that require larger amounts of people behind it to support it have problems. As we live longer etc. Basically poor planning so we have to plan better and not tie our retirements exclusively to Wall Street which is a casino (401K meltdown). Retirements must be stable as possible and plan for people living longer and less people supporting the pension. How do you do this? Maybe pay more in as you go? Annuity plans? Ideas?
18
@Jon F There is no question that unions and government intervention are part of the problem, but the answer crafted by "free trade capitalists" is not to get rid of them. We've seen what this produces after 40 years of "trickle down" economics. For the system to be healthy, and therefore work for everyone, the "three legs of the stool" - capital, labor, and government oversight - need to be in balance.
We need to resurrect unions along the model of Germany where unions sit on company boards and have a vested interest in both protecting their members as well as the well being of the company
And the answer to red tape and bureaucracy isn't to get rid of all government oversight and regulation. Do you really want to return to the days of sweatshops, child labor, Love Canals, acid rain, strip mining, and the exploitation of our national resources by a handful of people and companies?
To answer your skepticism, I would point back to the era from FDR until Reagan as having produced the greatest rise in wealth for all Americans, not just a few. And it saw some of the greatest accomplishments in history, that advanced civilization, not just the portfolios of the 1%. We need to return to that model of "capitalism with a conscience". Having capitalism work for the benefit of society is NOT socialism.
69
Mr. Stiglitz is right in his prescription but his diagnosis falls far short of reality. The Great Financial Crises was engineered completely. It was a criminal enterprise. It wasn't the only one of course. Going back to the days of the Savings and Loans crises that danced with the Leveraged Buy Out/Junk Bond Craze that gave birth to the Control Frauds that led to the Tech Bubble and Enron Era, its simply second verse, same as the first. The difference of course in this seemingly never ending war, the crime bosses found a way to complete their hijacking through cognitive capture and revolving door. The complicity of the legal and regulatory framework is nothing short of the most tragic era of American History. Mr. Stiglitz can't say it. The NY Times can't say it (and that's an abomination) so I'll say it. We live in a criminal syndicate where fraud undergirds all of it. Think I'm exaggerating? You don't know the half of it.
4
Progressive Capitalism aka Demand Side Economics
Scroll down to 2nd graph at: bit.ly/EPI-study
From 1945 to 72 GNP up 100%; Median wage up 100%, no bubbles, no panics, no scandals, strong middle class.
That's demand side economics.
From 72 to Now: GNP up 150%; median wage up near 0%.
Since the imposition of supply side economics, we've had multiple bubbles, stock panics, flat wages, deep recessions, midclass<50%, Opioids & Proto-Fascism
After the Sandy Hook shootings in 2012, 90% of US wanted reasonable gun control to keep guns out of the hands of crazy people. The Pres weighed in as well. Yet reasonable Gun regs never happened.
Congressmen are for sale in our system. So when wealth concentrates, democracy vanishes. Back in the early 1960s when unions were strong, they could weigh in on legislation and so we got civil rights and voting rights legislation. When the ozone became a problem, laws were quickly passed and the ozone problem began to shrink.
Now anyone with any brain realizes that human effect on climate is a huge problem, but no mitigating laws have passed. The system is broken because of wealth concentration.
We know what the right econ policies should be: demand side economics, ie. progressive.
When Bernie championed them in 2016 he was & is attacked as a radical. The real radical policy is supply side.
Maybe radicalism is determined by where you sit.
4
The highest inequality has its pendant : lack of education, as is also proven here in the comments of rather elevated social level here in the NYT. Education is only bought with money in the USA , as there is practically no public access to culture and cheap culture presented on US TV channels is so bad and so corrupted by commercial powers .
If you speak with a European, even of a modest social level, you immediately feel the difference in knowledge, culture, thinking depth .
And if you put this comparison at the level of college students it is
frightening .
Americans only identify themselves by copying and repeating .
2
Our current economic system can be rightfully labeled "predatory capitalism." Corporate, political and other predators looking to take every nickel from your pocket, bank account, cheat you for a few bucks (see Wells Fargo Bk), lies to you for short term profits at ALL costs (see Exxon lies - since 1970s completely aware that that their product would warm the earth and change the climate to one less friendly to human well being (happening now, just the beginning), and other such predatory behavior. We must redesign and transform the economic system and base it on truth, honesty and focused on the well being of life and the natural world. if it's only about greed and who accumulates the most money, we're dead. 6th Extinction, here we come, we're on our way.
192
@LoveCourageTruth
Outstanding post! If we don't move to a holistic view of the economy and life in general, there's no hope.
24
The very first thing our nation needs to do is to reverse Citizens United and stop the .1%ers from buying elections and thereby securing control over our laws and regulations.
It either that or bring back Madame Defarge and her pals.
3
Our country appears to be evolving into the same political and economic state our ancestors fled from in Western Europe.
Tax structures and exploitation enriching feudalism ... now the top 1percent and corporations...
The other force: cronyism capitalism = corruption has served to limit opportunity and upward mobility. NAFTA has had an enormous impact on the American labor market. Corporate advancement proliferated by unbridled special interest lobbying has created a spinoff: welcome to feudal America!
3
Unfortunately, exploitative wealth creation is baked into the DNA of this country. One cannot discuss the historical wealth of the U.S. without acknowledging that this wealth was built on the bedrock of slave labor. It is this political primal instinct, to take from others in order to enrich oneself, that persistently raises its head in discussions of economic policy in this country. The most recent version of this is supply side economics, the ludicrous theory that in an economic system designed and manipulated to enhance the wealth of the few, allocating even more wealth to them will somehow be beneficial to everyone.
It is this systemic dysfunction that speaks loudest to the need for government intervention in markets but, more importantly, for a restoration of social values within the government itself. At this moment government, in the form of a mendacious, self-serving president and his Republican enablers, has neither the political will nor the social conscience to look toward what serves the people. It is, in fact, engaged in exactly the kind of exploitative wealth creation that is destroying the American middle class.
The 2020 election is crucial, and will tell us whether we are a nation willing to put in the hard work of electing and maintaining a government that serves us all, or whether we will surrender to the inevitable forces that continually try to drag us back to a time when the best way to assure your survival was at the expense of your fellow man.
2
Okay, New York Times, it time you do your job. You have printed the work of a respected academic. However, the current piece contains none of the proof for the major assertion made. Certainly, in this time of low truth, we are not expected to take the author at his word?
Let's see the work. What proof is there that a person in Belgium or France has more upwardly mobility than a person in the US. Stiglitz mentions the correlation is parent income and education. So, I expect you will be comparing people of similar backgrounds. A bit anecdotal, but you might want to start with the Yellow Vests in France or just about anybody in Britain not working in the financial sector.
Also, let's see the proof that Volkswagen lying about mileage (top down) and a completely different case of hundreds of employees misusing an incentive system creates massive inequality in an economy larger than any other.
It is a lot simpler to say Trump is bad, period. (Any hairstylist, person with manners or a rational brain can pen that article.)
Why go to the trouble to suggest that the last guy to the economic party (the diversion scapegoat that acts more like a pig) has anything to do with the negative impact of allowing the hard earnings of middle Americans to be amassed into large investment funds for controlled by five firms only to benefit so few.
Capitalism is working less for the many and more for the few because we have orphaned our own retirements to get return. Greed blinds all.
1
I find myself in general agreement with Prof. Stiglitz. I usually do. But I am not certain the professor has any real appreciation of how difficult it can be to run a small business with the unreasonable burden of dysfunctional and often contradictory regulation we choose to impose.
If we are going to have progressive capitalism, it needs to be intelligent. But that goes to the heart of another often unspoken problem America faces: its chronic and foolish underinvestment in developing a highly competent and professional civil service. That is an issue for another day, however.
2
Mr Stiglitz, nice essay.
Now if we could get it down to a bumper sticker in our soundbite culture we might have a chance to inform half the voters what's going on. Throughout your essay you mention Reagan but never what ReaganISM destroyed. "Progressive Capitalism" is nothing new that has never been tried before.
Here's your bumper sticker takeaway:
It's ROOSEVELTISM vs REAGANISM.
And this has been the battle for decades. Canada, Europe,Australia copied New Deal Rooseveltism that America enjoyed during the Golden Age of Middle Class and ReaganISM dismantled it.
It's as simple as that.
Cons call it scary foreign"socialism" but really it's american Rooseveltism. And Americans loved it and it is American as apple pie.Dems need to only invoke that patriotic legacy and Americanize their message. Don't let opposition otherize it like it's some scary foreign thing we never tried before.
Teach them their history. We've been here before. Reclaim your American values
1944 --2nd Bill of Rights speech on economic democracy. https://youtu.be/3EZ5bx9AyI4
4
Of course Americans love it. Everyone loves free stuff. Just look at your local Costco.
@From Where I Sit
Of course, a rightwinger loves "free stuff sociaism" for the rich and loves unbridled capitalism for everyone else.
" Despite the lowest unemployment rates since the late 1960s, the American economy is failing its citizens"
First sentence = first lie.
The rate of unemployment as a percentage is only calculated today using those receiving unemployment insurance of some form....not those no longer receiving unemployment insurance. If Mr. Stiglitz combined those two columns , the rate of unemployment would be in the low 30's percentile.
1
China became fabulously rich in less than a generation by giving up 5 year plans and embracing free market capitalism. Free market capitalism is the greatest engine of wealth creation yet devised.
But of course it needs regulations to prevent abuses and to provide a safety net for all.
When progressives rail against capitalism they are essentially advocating that we shoot the horses that pull the economy forward. That's foolish. Talk should be focused on how we harness the horses, the style of bit we put in their mouths, the blinders for their eyes and the roads we build for them to run on.
We should all be able to agree that healthy horses are good thing. From that starting premise we can vigorously debate how we should control them.
75
Of course capitalism ‘creates’ wealth, that is by definition what it is - the accumulation of money/property to use as power. Regulations usually then ensue, which invite workarounds, loopholes, and twisting of laws to get around those regulations.
8
@Mike Marks In capitalism, there is no plan. The Fed prints the money and those who can get it, have at it! China employs capitalism in selective market but don't think for a minute there isn't an overall plan, just different organizational structures for its implemented. They are in the late stages of a 50 year plan to reroute a large river from one part of the country to another, to ensure there will be sufficient arable land for future generations. How do they know this? Studies of declining water tables over a period of time told them. In our challenged water supplies as in the Southwest, we explore oil/burn off much of the natural gas, for immediate consumption using today's water to rob tomorrow. Conservative?
15
@Mike Marks We need simple and universal transaction taxes -- no exceptions for religions or for-profit businesses or non-profits -- to be implemented with the idea of phasing out all the corrupting taxes we have now. Complexity and special interests mean we have unfair, unequal taxation in which we pretend to hit some group hard, only to see clearly they are not because of all the corrupt politicians inserting clauses to benefit their donors. Measure the taxes recovered, and see who is actually paying the lion's share. Assuming it's good, increase the rate to cover more of our revenue needs while removing existing taxes.
And return to anti-trust, no longer approving mega mergers and the sweep up of smaller competing firms by the bigger players. Competition is good, and each merger just removes a competitor.
Use a negative income tax to fund the poor and get out of the business of government-run charity, where they do not love you, do not care about you, do not have expertise in solving whatever issue the poor have, etc.
1
“I am always asked: Can we afford to provide this middle-class life for most, let alone all, Americans? Somehow, we did when we were a much poorer country in the years after World War II.”
Yes, and the typewriter was successful after WW2 as well. “Born in America” is no longer the resume builder it was in 1950. The search for top talent is now global, manufacturing is global, and software helps the smartest among us scale to the job of what would have been thousands of people.
GM has about 179K people working there with a cap of $56B. WhatsApp was acquired for $19B and had 350 employees. It’s a different world (and one in which super-high-value services like email, search, social networks, news, etc - are all free to use regardless of income). Trying to turn back the clocks would turn over economic leadership to firms that aren’t American.
1
Capitalism eats up Free enterprise. The only guardian of free enterprise is government. That's why big business spends money buying politicians and inventing slogans about capitalism, brain washing the public into believing capitalism and free enterprise is the same thing, and always complaining that government is too big and to claim any government program that provides the public with something the capitalist do not want to give as socialism.
2
Andrew Carnegie, as foxy & duplicitous he was- "Thou shalt not seek thy neighbors job" & then employing Abbot & Frick to abrogate his prior position in the coke strike, firing Frick, to using him once again at Homestead, in protecting, as Frick called it, the "inviolability of property" to combat the strikers (the Constitution!).
What a transition we've made as a nation from creators of real wealth, often in need of taming, to phonies like Bezos & the Waltons, making the lowest consumer complicit in labor abuses. We've come a long way from the pointed attacks at the immigrant labor majorities at Homestead, the "Slavs & Hungarians" by the industrialists & their scapegoating as too amenable to agitation by the unions & labor leaders.
Just who are the neo-liberals siding with as progress in educating the nation's work force has reversed the proposition outlined above in our domestic situation?
1
Friedman and his " free to choose" economics theory failed to address the moral component of the social compact between business and the community. Communities are the home of all start up businesses. The nest, the womb, the stable source of support all new businesses require to grow and become successful. This is an investment communities make in business. the community builds housing, schools, hospitals and main streets of commerce to assure a safe home for the business they choose to partner with. The gross failure lies in the fact that the community is not rewarded with an equity stake in the businesses who have benefited and flourished from the communities investment in the businesses well being and very existence. This is fake capitalism. True capitalist don't " kill the goose that laid the golden egg". The world today is being ravaged by a class of rouge capitalist driven mad by greed, pillaging the wealth of the working class. Its a crazy form of Parricide. They are burning it down folks. Self destructing.
1
I believe that it is corruption that is harming us. And it is a corruption that is almost universal in our country. Prior to our last meltdown, selling people loans they couldn't afford was pervasive. From government failure to regulate, the banks that gave the loans, the realtors that sold the properties...big and small everyone had their hand out and didn't care about the harm they were doing. FOX News is destroying the country with lies but what do they care as long as the lies makes big money. The Trump Administration is from top to bottom mercenary. We need an ethical country. Does that mean an ethical capitalism? While a start, will that be enough?
110
@Balynt - In any case, if the entire population is a bunch of crooks and schemers, how will you manage to bring about this desired change? Just remember, the people who bought ten houses with no money down also had a plan to get rich at the expense of those loaning the money. Everybody was all in, as long as the money was flowing.
Now they're off on different schemes, which will also end badly.
2
@Balynt But most of the corruption comes from government. Local government, state government, and the federal government. The further up you go the more corruption happens.
1
@Jonathan
It is the duty of the lender to do their due diligence. They must be allowed to fail.
It is the duty of the lender because that protects our liberties otherwise we have debtor prisons and extortion.
The ultra rich 1% all agreed that something must be done - NOW.
The only problem: They don't know how.
Funny Bit: Many if not most of our "law makers" are millionaires.
See any correlation?
1
A very mixed up set of thoughts. The primary thing it ignores is that the development of the scientific revolution in the first place was consciously allied to the development of free markets, entrepreneurial enterprise, and the resultant technologies that catapulted standards of living into widespread prosperity. Mr.Stiglitz: please don’t monkey with forces you do not appear to fully understand.
2
It may not be an oxymoron but deregulation has not encouraged corporate America to police itself. Just the opposite. Boeing, Goldman Sachs, Facebook, Wells Fargo and Purdue Pharma's contributions to the opioid epidemic suggest that some of our most profitable firms engage in all kinds of skulduggery with very little accountability. I don't see any CEOs in the slammer.
3
Is the purpose of society to serve the economy (neoliberalism) or is the purpose of the economy to serve society (democracy)?
We have opted for the latter. It is misguided for two reasons. The first is practical: it can’t be sustained, not only because we live in a finite world, but because the inequality it creates can’t maintain a functioning society. Secondly, there is an ethical issue involved here in which “market fundamentalism” invests, not in people, but in a self-serving Hobbesian profit motive
The first reason is obvious, but too little attention is paid to the second. Neoliberalism redefines what it means to be a human. It relegates humans to functions of the market in which all relationships are business ones. Everyone is either a business partner or competitor. This requires everyone to calculate risk and advantage to someone else’s disadvantage. It turns life into an exercise in exploitation and strips humans of basic attributes like empathy and cooperation
Ethical education is essential. In our business-driven, STEM obsessed educational environment the humanities are disappearing. And, what “ethics” do business schools teach? Whatever it is, it is woefully inadequate. Business ethics must challenge the idea of sole obligation to stockholders that corporations hide behind, and shift the focus to societal obligation. They need to teach the ethics of long-term profit and not just short-term.
Nothing will change without a shift in ethical education.
3
@Michael (You say "We have opted for the latter." You mean we have opted for the former. Otherwise, well said.)
How about some changes in the Constitution to allow for legislation promoting the kind of reforms that economic well-being for all requires? If legislators (federal and state) got a single 4 year term, they wouldn't be tied by an umbilical cord to big-money donors and corporations. Lobbies would lose their clout. Anti-trust measures would pass; Worker Unions and rights would not be decimated. Big business would get the social/governmental supervision needed. Voila! Progressive capitalism.
2
Stiglitz is very wise and clear as a bell. Great article.
2
The problem: "America arrived at this sorry state of affairs because we forgot that the true source of the wealth of a nation is the creativity and innovation of its people. One can get rich either by adding to the nation’s economic pie or by grabbing a larger share of the pie by exploiting others — abusing, for instance, market power or informational advantages. We confused the hard work of wealth creation with wealth-grabbing (or, as economists call it, rent-seeking), and too many of our talented young people followed the siren call of getting rich quickly."
Another term for "exploiting others" = burning human capital.
When you burn human capital the "true source of wealth of a nation . . . the creativity and innovation of its people" is diminished.
The human capital burn rate could be a metric that governments use to calculate how much a business is costing the nation.
The corollary metric (because every thing has an opposite reaction) is the human capital build rate that government may use to reward businesses.
The net result: a competitive advantage to business that build more human capital than burn it, discouraging the motivation for "wealth-grabbing."
5
@Katherine Warman Kern
Wow, that's SO well said, thanks!
Studies show indeed that today, for instance, more than half of hospital physicians are suffering from burnout, which is already seriously increasing the number of deaths by medical mistake.
Neoliberals have created a society where human capital is considered a resource NOT for producing more well-being (a more thriving society), as until the 1970s industrializing countries were doing, but for producing more Wall Street gains for an extremely small minority of uber- wealthy citizens.
Today, most trade interactions are no longer trade in "stuff" or services, but financial interactions (= financial speculation).
That means that the for profit sector no longer works in order to invest profits o improve products, it now works in order to increase the personal wealthy of a handful of human beings.
And the more their MARGINS of profit increase, the more a company (= its stockholders) get rewarded by Wall Street. Even when that means laying off highly competent and hard-working, loyal employees.
Add to that our current work ethics, where peak performance is falsely defined by "working hard", in other words, making yourself suffer and inflicting as much damage on your own body (and as a consequence mind) as possible, and you get an economy where burnout touches already more than 50% of working citizens.
One of the most important ways to avoid burnout and to remain productive is MEANINGFUL work, not accumulating money.
2
The more we try to obfuscate, attempting to deny that we've promoted an economic system that is unsustainable in an age of overpopulation, global warming, economic warfare & mass migration, the deeper the hole we find ourselves in.
Progressive capitalism can work if the participants are limited to those countries that are largely crime free, democratic & environmentally aware.
There is no time to deal with the international laggards led by greedy, undemocratic, militaristic despots. For the time being that eliminates the USA as the leader of a truly brave new world. Perhaps Denmark can help us.
2
It’s worth mentioning that the Boeing problems are another indication of what Stiglitz is talking about. Despite all the propaganda, there are lots of things capitalism just isn’t good at. People don’t get promoted for cutting profits to prevent low-probability events.
The idea that all we need to do is get out of the way of the private sector has always been self-serving nonsense. Even Adam Smith called it that.
3
Smith posited that all labor has value. What else was he wrong about?
The statement 90% of Americans incomes have stagnated or declined over the last few decades. I think that statement sums up capitalism. Yes, there have been improvements since the Gilded Age, mostly due to technology, social organization and some reform. But those well intended reforms, are limited to be only later weakened or eliminated by those who have capital, knowing full well how money leverages political power. Stiglitz is one of my favorite economists but capitalism is selling marketable products or services at cheapest cost( higher profit margins), which means labor is shopped where it is cheapest. Now go back to my first sentence.
2
Easter Miracle:
Once in a lifetime of 70 years, a man gets a divine idea:
You've seen or heard how relatively wealthy people will anonymously pay off all the Christmas Layaway items the local people have at a local big box store. Generous, wonderful humans, they.
Jeff Bezos, Bill Gates, Warren Buffet, etc., should pay off the debts people owe to their local hospital. (Medical debts are the primary cause of personal bankruptcies.)
Mr. Buffet et al. should immediately contact as many hospitals as they can afford to help and thus become historic public benefactors of epic proportion. It's a win-win: They deservedly become secular saints and poor, ill people are saved from financial ruin.
I will help build statues to each and every one of them who perform this Easter miracle.
3
Most have committed to giving most - if not all of their wealth away. The Gates Foundation is the most generous foundation the world has ever known and is creating private market solutions for malaria, sanitation, etc that governments could not remotely replicate.
All have created millions of jobs -- new technologies -- etc
How about we do something ourselves rather than always looking to others
2
@Jim Muncy The Gates foundation is at the forefront of eradicating malaria globally. Bill and Melinda Gates have done more for humankind than so-called “Saints” like Mother Theresa.
This is why I support Elizabeth Warren for President. She understands these issues better than anyone else and actually has a working plan to fix them.
8
@David Parrish
Certainly. But, alas, she comes across like a superior school marm, not exactly the electoral antidote to Hillary Clinton needed to re-secure the Rust Belt vote
1
A solid middle class doesn't just happen. It only comes about through progressive governmental policy. That a middle class life has been either unattainable or has slipped away for so many is the fault of the Republicans, who proclaim to the general public that government is the problem, not the solution, meanwhile they offer the rich all sorts of "solutions."
8
An anthem decrying every cherry picked negative possible, perhaps?
Solutions -- it appears, none.
Acknowledgement of the benefits brought by, though imperfect, capitalism --- zero.
What country - what system -- has brought poverty to all time historic lows? Post WW II, I am confused. Having been born in 1961 and having lived through the 70's, I am totally lost as to what you are trying to say --- the good old days?
Seems everyone wants to come here and that we innovate on a scale that every other country cannot comprehend.
So, let's make it better and be intellectually honest and not just shrill.
4
@tobin I lived through the good ole days of the 1950's. In many respects it was a wonderful time but our nation paid a price(1930's and 1940's) for what amounted to a short almost decade of prosperity (America had most of the factories -WWII). But the latter 1950's, when competing factories were rebuilt in places like Japan, we had a serious recession. My father and many of his counterparts in my Southern Baptist Church became unemployed in the late 1950's. This led to JFK's election, (Get the Country Moving Again) and of course, capitalism was never to blame (how much were JFK and FDR's net worth?), it was Communism and Fidel.
2
In a time honored, measured and reasonable way Stiglitz presents the rationale for Socialism as a means to curb the excesses of Capitalism.
Marx understood the relentless and insatiable appetite of exploitation and greed inherent in Capitalism, because the misery and suffering it always generates is simply the byproduct of its function.
I deeply respect Stiglitz as a knowledgeable expert. Twenty years ago before the ascension of the billionaire oligarchy that rules this nation, this essay would have served as a clear warning to be heeded, offering a solution that could curb the worst excesses of the Capitalist.
I am afraid we are like the horse that runs back into the burning barn when it should logically just leave it.
5
@Mojoman49 When my European history professor spoke of Marxism, (mid 1960's), he said we responded favorably with establishing labor unions. We know what happened to that.
1
"Progressive capitalist" should replace "democratic socialist" as the label of progressive Democrats. "Workforce" should be the word to define the actually-productive members of society, differentiating them from the rent-seekers. Give the American workforce a truly modern infrastructure, state-of-the-art educations, universal health care, progressive taxation and a recommitment to Truth, and the American Way will take off again and reach fabulous new heights.
Stay on our current plutocratic path and plumb new depths.
16
@will duff If I am not mistaken, China has a social contract within their Constitutional Bill of Rights. The individual is responsible for being productive, economic rights (health care, affordable subsistence) carry a public guarantee. Some of our politicians are catching on to
the idea. Bu in order to accomplish this, we must reconcile that capital cannot rule government, the roles must be reversed. For instance, perhaps it would make sense to have health and pharmaceutical research centrally coordinated for the greater good than a $100,000 prescription.
1
Moreover, the rich have much higher savings rates than the rest of us, so if they get all the income growth, consumer demand will stagnate, incentives to invest will be weak, and overall growth will be slow. This insight goes back at least to the economist Michael Kalecki.
2
"Market Economy" does not equal "Capitalism." The idea that they are the same is the big lie of American economic history.
Capitalism is government interference in the Free Market by, for, and of the owners of capital.
There is no inherent property or law of Free Markets that require that the owners of capital be given special treatment by government. The fact that under the influence of campaign contributions, government has been giving special favors to the owners of capital for two hundred years does not prove that this is a feature of Market Economies, or a desired result of We the People. A truly Free Market would not give special tax rates, subsidies, and even wars to the owners of capital.
The biggest interference in Free Markets is the creation of Corporations. Corporations do not exist in nature. They are Chartered by governments! If you are a Sole Proprietor of your own store, or enter into a simple partnership with other investors, you are responsible for the decisions made by your business, and can be held liable for any and all damage done by your business. A corporation shields investors from responsibility for the actions of their business. This major favor given by government to the owners of capital encourages bad behavior because it shields them from the consequences.
Now they are trying to make corporations into Citizens, while they take away the rights of actual Citizens who are not owners.
We the People must stop favoring machines over ourselves.
6
He is stuck in the liberal economic mindset that got the US in the mess it is in. You simply cannot let industries evaporate and just throw some money at the jobless. Other countries that have been able to maintain their industries have protected their market. Protectionism and tariffs are key. That’s the way things have been done for hundreds of years.
1
@Aaron James Browne. Stiglitz is also talking about protecting workers' rights, (the ones who make a business "go"), from receiving a very short end of the stick.
2
I encourage Mr. Stiglitz to examine the economics of one state, any state of the union to give readers a further understanding of the invisible hand.
1
Had Boeing been regulated properly, it would have been forced to build a safe Max 8 and avoided a two deadly accidents, loss in brand value and 20% drop in its stock value (with more to come).
Stiglitz is dead right about the powerful and positive role of the state in guarding against profit-seekers who become addicted to exploitation to the point that they KILL people -- Boeing with its two accidents, Monsanto with its cancer causing Round Up and the Sackler family / Perdue Pharma with their peddling of opioids and I could go on and on.
This is not about left vs. right ideology, as some commenters suggest. Rather, it's about what empirical evidence is telling us, common sense and morality.
Stiglitz failed to mention that Adam Smith's most important work was the "Theory of Moral Sentiments.
8
Thank you, Mr. Stiglitz. You have given us a roadmap for our present predicament that is appropriate for our times and our country. I am quite progressive by American standards. All the same this looks like by far the best approach for the Democrats in 2020. By and large all Democrats would agree with the broad aims associated with your notion of progressive capitalism.
5
Much of the true greatness of America was born through the United States’ investments in science through government programs such as NSF, NIH and NASA. While these investments have saved lives, improved farming and put a man on our moon, the money from science advancements in the US has largely been scooped up by corporations rather than any proceeds back into the government to investment in more science and more education. Progressive economics would allow corporations and individuals to run with new discoveries but would require them to put some fraction of the earnings right back into the government programs to increase research funding opportunities and to improve early education, both of which would build up an innovative middle class and make the United States once again a land of opportunity and, yes, bring back its greatness.
6
Great piece.
Adam Smith also said, “capitalism thrives with a moral center ruled by law”.
We need that large and thriving middle class as much as we need the Bill of Rights.
They’re interconnected.
They’re interconnected also to the voter/consumer holding corporations and politician accountable.
Which is all interconnected to the press doing it’s job to inform us without bias and help us form our opinions based on facts about both sides, not just its favored side.
It works, if each piece does its job the way the job was intended.
5
We already have socialism in this country but in most cases it supports and benefits big corporations and billionaires. Sure we have social security but workers pay into social security so it’s not a benefit or an entitlement program it’s bought and pod for insurance, I’ve been paying into social security AND Medicare all my working life!
Corporations and billionaires on the other hand benefit from everything. We do roads, bridges, air ports and of course massive infusions of government, read taxpayer money, through bail outs, tax cuts and ridiculously expensive government contracts and so called public private partnerships. Just look at Hudson Yards! Socialism for billionaires!
It would be nice if the rest of us could get some socialism and allow corporations swimming in money to take care of themselves!
12
The highest level of inequality in the world needs further study,since the calculation is restricted to the US if done on a world scale many of our poorer residents would be considered well off and certainly in a better place than most.Also where does China fit in this equation since they have a small number of very wealthy individuals and a vast number of poor?
1
Corporations are chartered by state governments. In the application for those charters there is a statement of purpose. I doubt any of the purposes say "to maximize the value to our shareholders." That is the fundamental disconnect.
States afford corporations (and other business entities) favorable treatment (taxes and limits on liability) to pursue objectives which benefit society as a whole. The goal of maximizing shareholder return was an artificial construct adopted beginning in the 1970's. Prior to that, return to shareholders was one of several goals businesses pursued. Rebalancing those objectives is needed.
5
Markets work well when there is a set of rules, a.k.a. regulations, that ensures a level playing field for all capitalists to compete and where those in society, in which those capitalists function, are benefited and not exploited.
Many have this misguided assumption that "free markets" are markets free of ground rules. That is feral capitalism where the innovative species of an economic ecosystem are driven to extinction by a few. The result is a barren wasteland for the vast majority of society at the expense of the few, the oligarchs. The "wealth creators, a.k.a workers, are exploited as their labor is siphoned off to enrich the "job creators." We have many examples of this type of system, from post-Soviet Union Russia to the Central American banana republics. We are heading in that direction, it appears, in this country with a wealth gap not seen since the Gilded Age. Democratic Socialists like Bernie Sanders are not anti-capitalistic, they just want the fruits of a capitalistic economy to be distributed more equitably to those that actually produce the wealth created. Doing so creates a happy and prosperous country. It's why the Scandinavian countries that have adopted this form of capitalism have some of the highest standards of living on the planet and more importantly, rank highest on the happiness scale for societies.
12
The more we get government involved in the economy the worse it gets. The President and Congress have one motivation-to get re-elected. The government cannot significantly impact income inequality. Our workforce is not educated nor trained for the jobs of today. The jobs of today are not the jobs of yesterday. Our educational system has failed us and the government in Washington cannot fix it. The idea that everyone should be prepared for college and attend college is in large part a source of the problem. Individuals should be trained for the jobs of today and a lot of them do not require a college degree. In a large number of cases, an associate degree in nursing and other areas of health care will suffice. The same is true for computer science and other technical areas. Lets see what we need and go after it!
7
America was a force for good during the two world wars of the twentieth century, because it was an industrial powerhouse. Industrial power helped make the country a world leader. In the 1950's thru the early '70's, manufacturing made up almost 30% of the economy. That was a high water mark and it was only a matter of time before the rest of the world's economies wanted their share of the wealth. But today, manufacturing makes up only about 11% of our economy. Because we have lost almost 2/3rds of our manufacturing, tens of millions of Americans have lost their access to a living wage.
Forces of globalization were certain to cause America's high wage work force to lose manufacturing jobs. But other countries recognized the importance of maintaining a manufacturing base. Germany, Japan, South Korea and others have protected manufacturing in their economies.
American economists and political leaders seem to have celebrated "free trade" and the loss of manufacturing might. We were going to become a dynamic service and information economy that would benefit all of our citizens. Everyone would be retrained. It was a Big Lie. Now we have Trump.
6
Progressive capitalism is lead by progressive capitalists. Stiglitz is correct: we do not need progressive, democratic socialism if progressive capitalists stand up and assume leadership.
Today, archetypical capitalists descended from Charles Dickens' times rule our political and economic landscapes. Most t never got past the Classics Illustrated introductions of Dickens' novels. They never got to understand that a unregulated market system will provided wealth beyond imagination for a few and for the others lots of stuff, but it will also feed on itself, destroying the strengths of our lands, our labor incarnate, and our capital.
Capitalism, left to its own devices and without effective social control of those things that are social,those things that are public, will destroy the social, environmental, and financial structures it is built upon. Our natural resources, ourselves, and our money, all social, had to be legally and culturally transformed into as market artifacts to make the price system work. We know from Charles Dickens onward what destruction occurs when "the market's" public and social are controls are weak.
We then know what torn path we will, course unaltered, traverse. We know what hopes democratic socialism and the Green New Deal offer. We have yet to see progressive capitalists congeal into a political movement and present us with a comparative and competitive vision. Time is not on our side. Business as usual, it is a recipe for destruction.
8
This article is rehashing of old arguments and failed solutions. The myopic "it's either capitalism or socialism .(.ahem progressive capitalism.....ahem....democratic socialism... ) haw outlived its usefulness.
At the core of any successful system is the common belief into transparency and fairness. Most people will accept "inequality" as a product of any incentive based system, as long as they believe that everyone is playing by the same rules. Lack of such belief was at the heart of failure of USSR and problem facing us today.
Yes, the basic foundation must be assured for all citizens of a developed country. It does include security against disease and circumstances which threaten the basics - food, shelter, etc. But it can not assure "equality". Never worked, never will as long as we are dealing with humans.
We need to address the problems with impunity of the rich which allows for Trump's illegality, Jussie Smolletts impunity, and college admissions based on "pay to play" arrangements. We need to attack corruption of government contracts, disability rackets. etc. That's what poisons cohesion in the society, not capitalism.
3
While I support the assertions in this article, Stiglitz minimizes the degree to which both women and minorities were left out of the post WWII "golden age" of 'progressive capitalism.' It doesn't mean we cannot do this again today in a more inclusive way, but we should be honest about the limitations of the historical analogy.
5
I didn't find a word in this article I didn't agree with. Republicans (with the acquiescence of some Democrats) have spent years sabotaging the capitalist system in their own short-term interests. They've forgotten what they owe to the New Deal for saving capitalism from itself.
The kind of progressive capitalism Mr. Stiglitz advocates isn't incompatible with the so-called socialism of the Green New Deal. I say "so-called" because the GND isn't doesn't fit the old definition of centralized ownership and control, still less the totalitarian communist idea, but is rather a form of Social Democracy updated to take climate change into account.
Any system that fails to confront climate change, or which fails to address inequality, is fundamentally unstable and unlikely to survive. A system that provides private jets for some and denies medical care to others must change. Capitalism will adapt to survive or it will be replaced by something we cannot foresee.
Unfortunately, Ayn Rand values based on unlimited greed seem to be hard-wired into the system and the people who control it. It has rendered them incapable of adapting to new realities. That's the basis for Trump Republicanism.
10
Mr. Stiglitz says “America created the first truly middle-class society; now, a middle-class life is increasingly out of reach for its citizens.”
This is patently, observably, false. Data collected by economist Branko Milanovic show clearly that even the poorest Americans (those in the bottom 5% of the population in terms of income) have real incomes, and associated standards of living, in the top 25% of the world’s population. Americans have higher standards of living than citizens of all but a handful of small nations (eg Luxembourg).
Mr. Stiglitz and other left leaning economists bang the inequality drum constantly. But the arguments they advance for punitive taxation of the wealthy, their preferred means of evening incomes, are increasingly spurious. Just yesterday, Paul Krugman made the case that punitive taxation is necessary to prevent the ultra wealthy from disproportionate political influence. That argument is patently false, as is borne out by the fact that politicians such as Bernie Sanders and Elizabeth Warren and even AOC have far more political clout than any business leader (see eg NYC’s inability to bring 25,000 good high-paying jobs from Amazon here because progressives objected).
Stiglitz raises some good points, particularly about how to jointly help our fellow citizens who have been displaced by global competition and automation. But punitive taxation and punitive regulation aren’t the answer.
4
@Shiv
Appreciate you letting the facts get in the way.
The speed and ubiquity of globalization is indeed the real issue. Brexit is certainly a result of a generally good idea moving too fast.
2
@Shiv
I agree that the poorest of the world are worse off than the poor of America, but let's not lose sight of the problems that inequality is creating. It is absolutely true that the wealthy in this country are better off than at any other time in history. Healthcare costs are skyrocketing and only catastrophic care will be affordable to most Americans in the future, and only if republicans are stopped from destroying the ACA. The climate is changing and the poor in America and in the rest of the world will be most affected. Taxing the wealthy in progressive taxation system is the most fair and one way to make sure that the accumulated wealth of the few cannot control the government and block common sense reform.
3
@Mark One possible explanation whyour poorest are better off is the currency manipulation of Wall Street/Europe that renders imported goods from abroad(not to mention cheap labor), inexpensive. The plantations and slaves of the South moved beyond our borders. It will work but am not sure how long this trick will last.
1
We can thank Senator Bernie Sanders for spending the last year traveling to red, blue and purple states to help educate voters about what an improved and expanded Medicare for ALL would be like -- and what impact that would have on their lives. Because you see, more than 600,000 families go bankrupt every year due to unpaid medical bills, and the majority had "insurance" when they first became ill or injured. When President Obama did everything he could to have a "public option" that was favored by a majority of voters -- he learned that he did not have the votes within his own party.. the so called "New Democrats" aks "centratists" take too much legal bribe money from the insurance industry -- so does the Democratic Party.
11
Many economists, like Mr. Stieglitz, choose to selectively ignore the fact that that our economy does not operate in a vacuum. Would the U.S. be less competitive if it incorporated his suggestions? Maybe. Would companies move to more hospitable places? Maybe. Does this mean state takeover of companies? Hmm.
Many progressives championed Globalization as a means to raising the standard of living for poorer nations-which it has largely done at great cost to our own workers. So progressives shouldn't complain-they got what they wished for. Now that the results are in, they are looking at Frankenstein's monster.
The key question in a globalized world is how do you compete against countries that: don't play by the same legal constructs, have different governmental structures, and lower worker wage levels? Anyone come to mind? Maybe China?
3
When flogging the progressive dead horse of income inequality, the number of things that Stiglitz fails to take into account in order for his cynical calculus to work is staggering.
As a single example, consider the impact of 50,000 asylum seekers and - of the 300,000-500,000 actual border-crcossing immigrants annualy (not, those already here, but naturalizing that year), about 100,000 come in with no money and few job prospects.
With a total of about 160 million in the workforce in any year, the total from three years of immigration becomes a significant statistic. And few of those poverty stricken immigrants rise to the top of a major corporation within three years, so these people all add to the inequality picture.
So to reverse the trends the simplest place to start - other than the current progressive solution: forcible confiscation and re-distribution - is to close the border to all immigrants who cannot support themselves.
But that would
2
It is just amazing how America survived so much immigration over the last few centuries, so many Italians, Irish, Germans ...
What can save our economy? Our insatiable demand for an ever increasing amount of energy. And, a growing recognition that meeting this demand in an existential threat to our planet. Energy is to human society what food and water is to the members of that society. Without sufficient energy modern society cannot exist. And, unlike the need for food and water the need for energy does not grow with the size of society. It grows with increasing complexity. It is impossible to estimate the energy demand in 100 years; whatever the estimate, the actual demand is likely to be considerably greater.
What does this have to do with our economy? Meeting our future energy demands will require tapping renewable energy sources that are currently ignored. Wind and solar energy are only the tip of vast energy pools in the natural world. And, there are equally vast energy pools in the manmade world that are not being tapped. As Prof Stieglitz points out one of the two achievements that made today’s society possible was technology developed that was a source of jobs. Among the rent seekers to whom Stieglitz refers are investors who favor jobless technology development. It’s not an accident that Fracking is the great technological advance in meeting our energy needs. The vast wealth created by the development was in increasing the value of the gas and oil made available.
1
Very few of our politicians understand this editorial, because the oligarchs that control them have only the goal of amassing and hoarding more money. The next election cycle is going to be about who is going to lead this fight to wrest this power back from the billionaires.
15
Progressive capitalism needs to incorporate into its agenda a philosophic and regulatory agenda that emphasizes support to small scale and micro-capitalism. Right now we have a world view that bends over backwards to favor, support, nurture, and encourage corporate gigantism and its capacity to crush the smaller scale. This problem is at the heart of neoliberalism.
8
Bravo.
The U.S. system needs major repair for its sustainability; otherwise, it will implode or bring about revolt. With profound and increasing inequality in wealth, social upheaval is inevitable. A cursory look at histories is more than telling.
The fair minded of the wealthy or elite applaud progressive capitalism - as it is in their interests too.
5
It is true that "progressive capitalism is not an oxymoron." I am traveling in Germany and Austria at this moment. These countries are living the creed of progressive capitalism and it works very well for everybody.
I only hope that the Germans and the Austrians continue to appreciate what they have built for themselves since 1945 with American help because to lose it will plunge them back into the carnage that they unleashed in the 20th Century.
As for America, I no longer know what to think about its future. The people will decide, but the deck is steeply stacked to favor the plutocrats.
16
What Gives Rise to Growth and Societal Well Being should be asked daily around the world in education and businesses.
6
This is telling it like it is, big picture. People have been convinced that corporate and personal greed is good by an alliance between the business sector and a certain group of politicians. Labor unions were decimated, wages lowered, environmental conciousness rolled back, climate change denied, science undermined, government institutions attacked and dimished - all in the name of improving the bottom line of a relative few.
This must be stopped and reversed. People must be "disconvinced" of this harmful ideology and shown that different policies can restore our society and lead to progress for all.
16
Joseph E. Stiglitz writes that he is "...always asked: Can we afford to provide this middle-class life for most, let alone all, Americans?"
And I always ask every time I read in a Times column: "...the USA cannot possibly afford to provide Universal Health Care as do those 'socialist' countries like Sweden" why the self-declared richest country in the world cannot afford this and a more nearly middle class life for the majority.
Stiglitz lays out the essential elements of change to my satisfaction.
To date, there seems to be only one Democratic Party presidential candidate who has shown herself to be capable of laying out elements of policy change in more than slogan form, using her intellect and her experience to put them in writing.
Elizabeth Ann Warren
For these reasons and for her bravery in being willing to impeach (see Michelle Goldberg column) she becomes my choice.
Only-NeverInSweden.blogspot.com
Citizen US SE
16
@Larry Lundgren
If the new normal is real GNP growth of 2% pa this implies a doubling of GNP every 36 years, half a generation. Not bad and perhaps we should think of the post war world as exceptional not least because of higher work inputs.
A real challenge will be to maintain that 2% as the working age population declines and immigration is curtailed.
So improving productivity especially in services becomes a priority and here gradually increasing the minimum wage will improve demand, output and productivity.
The second need as JS points out is to restore the dynamic of capitalism by reducing monopoly and its close cousin oligopoly. Here public policy must be mobilized and this starts with reinvigorating our anti trust regime that reverses the Bork/Posner short term consumer welfare approach that has promoted monopoly with higher prices, lower outputs, higher profits and the proliferation of rent seeking.
Thirdly, we need a reform of our tax systems that has become the creature of these monopolists and rent seekers. It needs to be made transparent, efficient, understandable and fair to the American population and voter.
10
Maybe it is not a question between raw capitalism or socialism, it is more a question of embracing a modern future or fighting in the past with all its wars, greed and mistakes. The future is universal healthcare, a living wage, opportunity and encouragement for people of all ages to maximize their education and skills, green energy for the economy and our planet. The future is problem solving, preserving the planet, caring for one another. It is like a moon shot, challenging and fun.
13
For the biggest example of the exploitive capitalism that Prof. Stiglitz talks about look no further than payday lending and the disaster it has lead in it’s wake. That we are allowed to loan shark now to the poorest and most vulnerable is a spine chilling sign of where we are going as a country.
51
Unless the criminal negligence of denying global warming and its consequences is squelched and strong measures are taken very fast, we will reach a tipping point and none of this will matter.
14
With all due respect, Mr. Stiglitz, you sound like a voice out of the middle of the 20th century, not really speaking to the 21st.
The years after WW-II didn’t have emerging markets to compete with (talk about THEIR poverty!) and American expansion of the labor market through civil rights law. Looking back isn't useful. (But it was LITERACY and entrepreneurship that built modernity, not as such science and systems.)
We don’t need a regulatory state so much as an ENABLING state: facilitation of educational excellence, especially. Social entreprenurship, corporate citizenship, college education for everyone—that’s not about regulation.
Capital intensive progress is NOT capital-IST. This is the critical error: Investment is not inherently capital-IST in being highly productive for social good.
We need a conservative progressivism, in the sense of the best of American values enabling the prospects of our children through progressive markets.
We need a truly republican democracy, which was the Founders’ idea. We need to put the great tradition of American pragmatism—balancing idealism and prudence—to work for re-thinking what a good society is.
And by the way, ObamaCare couldn’t have gotten through Congress with a public option. It was not a “mistake” for Obama to be pragmatic.
3
@gary e. davis "conservative progressivism, in the sense of the best of American values " – You mean like the best American values practiced by Trump, McConnell, Jordan, Barr, Nunes, Grassley, and McCarthy et al? God save us. You say "Looking back isn't useful." I guess not, particularly where it shows the results of Republican mantras based on myth-making that are still being uttered and continue to still fail the electorate.
18
@gary e. davis
You mean unfettered capitalism, neoliberal capitalism, should not be regulated? Where then should the state get the money from for supporting education, health care..... if the immorally rich do not pay their share in taxes? Spending billions on banks that were on the verge of bankruptcy by the state is OK?
And who will ever deal with the trillions of debts accumulated by the Republicans?
11
“Facilitation of educational excellence “ as a panacea is unattainable as long as we have inter generational poverty. Look at the disaggregated data from achievement scores. Children from homes where poverty can be traced back generations suffer from malnutrition, poor health, trauma, PTSD and disrupted family life. Even one of these factors effects the ability to learn but a combination is lethal to a growing intellect. We hide behind the notion of “ineffective schooling” when we should be looking at and promoting those things that contribute to a functional community. I applaud Professor StIglitz for his article. As long as we have policies that focus on the market and neglect community, we are doomed.
2
"Progressive capitalism is based on a new social contract between voters and elected officials, between workers and corporations, between rich and poor, and between those with jobs and those who are un- or underemployed."
And how, Mr.Stiglitz, is this "new social contract" arrived at? Who is drafting it? Certainly not the workers, certainly not the poor. And why would we trust the rich and the corporations to set the rules of engagement for your new "progressive capitalism"?
It seems to me that income inequality and the disproportionate influence of billionaires in our political process has moved from an ethical, intellectual discussion to a deeply experienced reality for millions of Americans who cannot afford housing, education, health care, and retirement.
The one percent is beginning to feel the push back, and they're nervous. (See my previous post from today's Washington Post). Stiglitz' "progressive capitalism" sounds much like Pete Buttigeig's "democratic capitalism", sounds like Robert Reich's "saving capitalism".
That so many defenders of this voracious, extractive, and ultimately dehumanizing economic system seem suddenly so keen to modify it in the form of a "new social contract" with a brand new name (marketing!) should tell us something.
Perhaps we should ask: is this proposal really intended for the common good, or is it just an attempt to repackage the same old product in an attempt to quell the rising tide of anger from the 99%.
6
A great article for a change. The essential element of progressive capitalism to save the planet is one rule:
We must move to circular production. You must account for all your externalities.
8
Bravo, Joe! The issue is not a phony “socialism”, but a more discerning use of capitalism, regulation, and a commitment to values necessary for the perpetuation of a productive economy and a democratic, just, and fair society. This should not be beyond our means. But it is also not ours for the taking. Those who benefit from our insanely unjust distribution of economic rewards will fight to retain their privileges. The rest of us need to coalesce to build a more just society.
11
Since progressive capitalism forces actors to consider other things besides their own bottom lines, it forces them to act contrary to their nature and is therefore a variant of socialism. For example, it is the nature of financial businesses to try to make money in market collapses; preventing these collapses is foreign to their nature. They see this prevention as an interference with their freedom and a business obstacle to be avoided or bypassed by any means that works. Progressive capitalism has to be imposed on them by external forces, including market manipulation, and this means that it is no longer capitalism but rather capitalism being used as a source of energy by socialism.
5
Maybe yet again, socialism will save capitalism. Or what we (often incorrectly) describe as “socialism” and “capitalism.”
Whatever is going on, we need a correction. Universal Basic Income (UBI) may be the answer we need to keep people economically active while their basic needs are met, especially in an era where automation is taking over jobs and at the same time we don’t know what to do with buggy whip manufacturing-type jobs (e.g., coal miners).
Imagine the potential if we freed people from desperation and deprivation, if people didn’t have to worry where their next paycheck was coming. Sure, some would decide to stop working if their basic food, rent, and healthcare were covered, but most would want to go beyond a basic income, which wouldn’t likely cover travel, big-screen TVs, or going to the movies.
At the very least, we owe it to ourselves to experiment with this, perhaps by turning some counties or even states (I vote Arkansas and West Virginia) into economic laboratories for a few years.
And if UBI is not the answer, then let’s find what is, because clearly the status quo has stopped working.
5
70% of our GDP is still consumer spending. Imagine the economy if those 70% of spenders were living with higher wages.
Henry Ford created the social contract when he paid his workers the unheard of wage of $5.00 per day. Ford knew if he was to be successful in mass producing automobiles, workers had to be able to afford to buy them.
It worked for decades until Reagan decided trickle down was the way forward, and corporations decided they owed their sole responsibility to shareholders.
Our corporations have abandoned their responsibility to the nation that made them successful. Why?
We can and must do better. Pay workers. Protect unions. Buy American. WeatherTech, as an example, is a very profitable company that manufactures domestically. It can be done. Corporate greed sadly has replaced corporate responsibility.
19
American capitalism is like an out of control car careening down the interstate. Sooner or later, as in 1929 and 2008, there will be another horrible smash up. Then the car will be repaired (the repairs paid for primarily not by the wealthy but by the middle class) and it will take off on a wild ride once again, destined, of course, for another smash up.
6
@Hubert Nash
And this, my friends, is the economic system made in heaven!
Is time the real issue between socialists and capitalists? Do socialists for some reason need everything to happen at the same time in some pre-agreed orderly fashion--for everything and everyone to move at once (or nearly so) or not at all? What is the advantage of that? Capitalism allows for the passage of time, it allows sequence, some can move, some can benefit before others--yes, some can be left behind. Some things happen first, others follow. Just as markets allow for unplanned price discovery, capitalism allows for multiple (many failing) attempts at economic path discovery. When a successful path is found the information is telegraphed back through the ranks and more and more people choose it. Socialism requires discovery to be made in advance, one or a few paths agreed on by all, rewards determined up front, then everyone goes down that path together. Does this work? Only very slowly. Is it efficient? No. If only one path (or a very few) have to be agreed on in advance what method is used for finding new paths? Capitalism allows for multiple unplanned discovery efforts, socialism, I suppose, has to try to 'foresee' the future by means of 'theory'--are we now in the realm of 'Gulliver's Travels'? Is 'Zelda the Psychic' the goddess of socialism? Give me the capitalist tinkerer in his garage anytime!
2
@Ronald B. Duke
The problem has been that "innovation" and "entrepreneurship" have come to be thought of in the context of the profit system, with the common good as an afterthought, a by-product. We are living with the result of this thinking. It is up to the thinkers of the future to reshape our system to promote the general welfare, as was conceived by our forefathers, where the common good and innovation go hand in hand. There's got to be a better way.
2
Thank you Prof Stiglitz for writing this. And thank NYT for publishing this.
Thank you Prof Stiglitz. you have been one of my heroes. We are on the same wavelength. Its immensely reassuring to me that I share my opinions with someone of your stature. I have talked in Europe with "intellectuals" about issues confronting the world today 15 years ago and over. These people remember me!!!!!
I have read some of your books to
my delight. I have kept The Price of Inequality by my night stand for almost 3 years. I will put it back soon.
I am hoping to (may be) sneak if I can in one of your classes. just for a visit when I tour the US, again, with my backpack.
As I mentioned to you in a card "Thank you for visiting Retiro Park." I am one of the "indignados" and mi indignacion is growing stronger by the day. The level of greed as you pointedly said in the Price of Inequality has in the US a level far beyond any place else. It is mesmerizing.
History, though, has proven that this type of situation leads to warfare... So it will be interesting to see how it develops.
And--very important as well- wars (if memory does not fail me) have started over trade disputes. The US is dealing with very subtly cruel/controlling powers. I am worried.!!!!!!!
6
Do you want to be rich? If you do, you may be part of the problem. If riches and wealth and property are our motivations, then we are doomed.
Easter weekend, where many will profess admiration for the poor, homeless, loving soul of Jesus. But on Monday that's a joke; it's all about money. We fight like dogs for a larger piece of the earth and the United States' pie. Some, with great advantages of myriad sources, take and take. Their lawyers, lobbyists, moneychangers, politicians, Presidents, judges, etc. move stealthily and loudly. They take more, they leave less and ultimately the world lies in ruins.
Good to remember on Easter weekend that 'love' is greatest commandment. Love; not greed. Love.
7
@ttrumbo If you live in modern-day America, you are rich by the standards of most of the rest of the world and of history. Nations like Congo have a per capital ANNUAL income of less than $1,000 in purchasing power parity terms, ie unadjusted cash income is even lower. And if you’re able to afford a subscription to the NYT, you’re almost unimaginably rich compared to at least half of the world’s population. So you may also be part of the problem.
Please understand that you have this enviable standard of living because people wanted to become rich and in the process lifted millions of others up with them.
I hope you remember this as you profess admiration for the poor on this Easter weekend.
Here's what "conservatives" hate about "progressive capitalism": they fear that all their suffering and hardship in order to obtain a little bit more money and as a consequence security in life, will have been in vain, as "the left" wants to "reward" all citizens, regardless of how much suffering they inflict on themselves.
By sticking to their "I made myself suffer so I deserve money" conviction, they only show one thing: they don't want to actively change the laws in this country so that life becomes easier for most citizens, simply because doing so confronts them with their own, useless suffering, inflicted by a fundamentally unfair system that they didn't choose but had to learn to live with.
So instead of learning how to accept that indeed, society has treated them unfairly, they prefer to artificially maintain an unfair society, where their suffering at least makes sense, and allows them to feel as if they deserve their own wealth whereas others "deserve" to be poor.
Hating them for systematically voting for "savage capitalism" politicians won't help us move forward. Only teaching GOP voters how to meet the injustice and suffering that society has inflicted on them with deep compassion and kindness will ...
7
@Ana Luisa
There is not much evidence of conservatives suffering. Can you care provide some?
I think you mean it IS an oxymoron. (ie, a cruel kindness).
What it is not; is a contradiction.
3
@Fenn
An oxymoron is an APPARENT "contradiction in terms".
"Progressive" and "capitalism" might seem contradictory and incompatible, in the minds of some people. In other words, they might seem a contradiction.
What Stiglitz claims here is that it actually isn't a contradiction at all, and that progressive capitalism is perfectly possible.
6
@Ana Luisa
In its infancy it was possible. In its senescence it devours nature including those who feed it through their labor, changes climate regardless of consequences, and could care less about life. The bottom line reigns supreme. It has separated production from credit. The latter becoming autonomous and oblivious of what makes it possible. Financialization has detached from living labor and fosters delusional behavior like the one we see among ruling politicians today
2
“One of the structural and inherent moral weaknesses of capitalism as a system is that the creativity, inventiveness, and questioning spirit that make it dynamic have a moral downside and impose a heavy human cost, sometimes even on top executives and investors. This is not a morally commendable aspect of capitalism” Michael Novak, a well known American Catholic Philosopher.
We confused the hard work of wealth creation with wealth-grabbing and too many of our talented young people followed the siren call of getting rich quickly.
Most important, our exploitative capitalism has shaped who we are as individuals and as a society. The rampant dishonesty we’ve been seeing is to be expected in a society that lauds the pursuit of profits.
Socialism of Karl Marx and Frederick Engels assumed greed to be caused by capitalism. Greed could be extinguished, they thought, if social institutions were organised along collectivist lines proved to be disastrously wrong.
Perhaps ideal solution may lie in volunteer devolution of big states. Whenever something is wrong, something is too big as per Leopold Khor in Breakdown of Nations.
The guiding principle of Kohr’s work was, like that of his friend the economist E.F. Schumacher, “Small is beautiful” In 1941, while working for the Carnegie Endowment for International Peace in Washington, Kohr wrote, “We have ridiculed the many little states, now we are terrorised by their few successors “
2
Thanks for this. The ‘trickle down’ nonsense has long been disproved. The endless money promoting this and other deregulation myths by the Kochs and others has been shown to be just greed and selfish exploitation of the planet as well as people. We have seen that our inner character can tend to be destroyed by hoarding of money.
So let’s knock the devil off of the shoulder whispering in the ears of the powerful, and put in some needed brakes. We could start with realizing that Citizen’s United was one of the biggest mistakes in SCOTUS history.
7
We have another side to exploitation that is not even mentioned here. The great wealth that has been acquired has often been amassed because the wastes of production were outsourced to the earth with no thought of pollution. For example, China has killed four of its major rivers with pollution. We have polluted the atmosphere with fossil fuel burning to the extent that we have destabilized the climate and made it drasticaly unpredictable. Business has to start factoring in the real costs of production by including the costs to the planet. Economic theory generally totally ignores the costs of pollution.
19
"The result is an economy with more exploitation — whether it’s abusive practices in the financial sector or the technology sector using our own data to take advantage of us at the cost of our privacy. The weakening of antitrust enforcement, and the failure of regulation to keep up with changes in our economy and the innovations in creating and leveraging market power, meant that markets became more concentrated and less competitive."
This paragraphs plus subsequent paragraphs remind us that markets are not fixed static entities, but rather that they evolve. Markets change to meet new conditions. And markets can be hijacked. Markets can be inefficient when they fail to recognize externalities which impose social costs. We need to be learning a lot more about markets - how the develop, how they work, how they are governed, and how they succeed or fail. Professor Stiglitz's excellent article is truly an education in economics.
2
Another left-wing article that does nothing to answer the challenge that, since the inputs to wealth and success are unequal, the outputs of wealth and success will also be unequal. Some people are smarter than others. Some people are harder working than others. Some people are more diligent than others. Some people are more disciplined than others. Some people have minds better at recognizing opportunities.
When someone starts railing against inequality, what they're railing against, at its heart, is the idea that effort and smart decisions carry a reward.
As if that weren't inviting a massive moral hazard. But no, we'll end up taxing the college graduate to oblivion so the burger flipper can get by on 20 hours a week...
2
@Matthew Kilburn, you appear to be missing the point of Professor Stiglitz's article. This is about the hijacking of markets, not about how some people are more deserving than others because they are smarter or whatever.
11
@Matthew Kilburn
Are you saying that the reason why all other Western countries have a capitalist system that allows them to have much less inequality, better healthcare, and better education, should be explained by the notion that by chance their populations are less diverse when it comes to being "smart" and "disciplined" ... ?
If yes, any evidence to back up such a weird hypothesis?
No, of course.
Which means that what you're actually saying is that you support using new laws in order to actively create a system where people who are less "smart" get to have no access to healthcare or a decent education, a decent salary, etc.
Question: why would we deliberately inflict this kind of pain onto our own citizens? Obviously, if you actively make people suffer more, you'll increase violence and crime, whereas the state's first priority is national security. So your proposal doesn't make any sense.
It is based on the false notion that if as an individual you want to be at ease in life, you have to make yourself suffer first. And once you do, the reward is money.
Yes, different people have a different IQ - fortunately, as we do need janitors and people flipping hamburgers. But neurologically, the deepest form of "success" happens to be aligning your talents with your daytime job all while being able to raise a family, have HC and social security etc. That means building a society based on our compassion instinct, rather than on our ego-driven instinct ...
12
@Matthew Kilburn
".....since the inputs to wealth and success are unequal, the outputs of wealth and success will also be unequal..."
And Matthew, no one is denying that should not be the case. What is being said is that in the last 30 years, workers' pay has stagnated and hasn't even kept up with inflation. Workers haven't had extra money to fund their own 401-Ks. 50% of Employers used to fund pension plans, now pension plans rarely exist. And these are two big reason why social security returns to retirees need to be increased. We had an enormous tax cut that went to line the pockets of the rich, and as a result McConnell is making the news-talk shows saying social security needs to cut to pay for the skyrocketing deficit. Just what we need to drive middle-class retirees into poverty.
Certain groups have worked really hard to kill unions; which was the last pillar that let the employee stand with the same power and strength as the employer. College and home ownership costs have skyrocketed. Output per worker has significantly risen, but the benefits have not gone to the worker; it's gone to the 1%, just as the tax cuts have.
A country such as the US is founded on a democracy. It is democracy for all, not just the rich. A country such as the US is founded with equality for all, not just for the rich.
It is high time to reinforce the Constitution of the people, rather than institute a constitution for and by the wealthy 1%
3
Our government of Oligarchs have enshrined the practice of the exploitation of working people as the first rule of getting rich.
It is little different than reinstating slavery, except that it makes it look slightly more legitimate.
Exploitation on this level should be illegal, but as long as the rich control the government, it is safe from scrutiny.
5
@Grove
Except that we can vote them out ... ;-)
The problem in a democracy without obligation to vote is that the more the state fails to protect the middle class against savage capitalism, the more people become a victim of cynicism: either they are wealthy, but they become so afraid of loosing their wealth that they use politicians to work for them alone, thereby rigging the system ... or they are still part of the middle class, but they feel more and more on their own, and as a consequence no longer trust "politics" in general, rather than understanding how real change is obtained and how engaging is more important than ever in times like these.
Saul Alinsky called this "political illiteracy": ignoring that in a democracy all real, radical, lasting, non-violent democratic change is step by step change, improvement after improvement, election after election, so we HAVE to be in it for the long haul.
Fox News' fake news has, just like Putin's meddling in the 2016 elections, only one goal: to make people believe that those who could truly improve things are actually "evil", and to make people believe that politics is "tough" and needs you to cheat and lie as much as possible.
By doing so, it actively increases political illiteracy, thereby firing up conservatives to systematically vote against their own interests.
The only solution is for us to have real, respectful debates with those conservatives and progressives who became too cynical to be well-informed and act effectively, so that FN's grip looses its power...
5
We should certainly try, but in the end justice - and now the long term survival of the human race - requires a revolutionary overcoming of the capitalist order.
1
@Christian Haesemeyer
History has shown that the only positive thing about revolutions is that at least all of a sudden a majority starts believing that radical change and improvement is possible, after all.
Apart from that, no revolution ever "revolutionized" a system. After the revolution, the hard work starts, which always takes decades.
And if you know that most revolutions end up being extremely disruptive and violent, whereas in a democracy, change through voting is always possible, imho we don't need any more revolutions. Instead, we need real, democratic - and as a consequence step by step - change.
4
Runaway positive feedback to wealth concentration will eventually culminate in chaos.
3
The victims of the economic inequities that you describe are well aware of the reasons for them, if only because economists like yourself have been pointing them out ever since the days of Ronald Reagan. Their votes seem to indicate, however, that as long as they are gainfully employed, economics is not nearly as important as strong leadership. How much difference can economic policy make to the 40% of the population who cannot cover an emergency $400 expense? For many people, living in debt without any savings is not nearly as disturbing as having to watch an ineffectual Jimmy Carter or Barack Obama on the daily news. Let’s not even mention Hillary.
The inability of liberal intellectuals to understand the philosophical and psychological mindset of the working poor — respect for religion, racial pride, reverence for the military, professional athletes, and successful people in general, and a craving for authoritarian leadership — is what brought us Donald Trump. This disconnect may yet bring us the nomination of Elizabeth Warren, surely the candidate who would make the greatest difference in the economic lives of working people, and her decisive defeat by Donald Trump will only leave those like yourself blaming Facebook and the Russians, and pining for another chance to nominate someone like her again.
2
I guess the problem is should Dems try to improve lives of all Americans or just merely vie for power? If they want to improve the lives they should nominate Warren, if they want to win they should follow the polls and nominate one who will most likely beat Trump. It doesn't exclude nomination of Warren. It could be that her policy or policy of Sanders are most closely aligned with wishes of majority.
2
@kbaa
What brought us Trump was Republicans falling for Koch Brothers control and propaganda. People fell for a con man telling them he hated the same dark skinned people that they hated.
Don the Con does understand the mindset of the uneducated white man. He loves the uneducated.
Don’t we also need a citizenry that values education... parents who understand their children aren’t going to be famous actors, rockstars or elite athletes... respect for trade education, etc.
5
Most countries in Eastern Europe believed that adopting progressive capitalism after 1990, they would be better off. Now those who enjoyed the benefits of the old welfare state miss the education and health care provided by the state. They are now much indebted to imf or similar institutions that promote international credit. These poor countries provide cheap labor for transnational corporations but get little of the profit they generate. Not that I advocate state capitalism or any authoritarian regime, but progressive socialism or real democracy that distributes the social wealth produced by workers as needed.
3
There is very little specific here in how to prevent abusive exploitation while encouraging competition, other than a vague reference to regulations.
The central problem with this approach is the failure to distinguish between exploitation and healthy self interest that drives healthy innovation. The inventors of the personal computer, the IPhone, Google, and so on should legitimately be rich. The inequality there is one in which everyone is richer - their contribution far outweighs their unequal wealth. There is nothing inherently wrong with inequality. What is wrong is poverty, and it should be possible to reduce poverty without dis-incentivizing success. The question is how, and the author has no idea.
3
they should have reward but not necessary in the form of obscene amount of money. After all, there are a plenty of people who contributed to generation of the innovation-based wealth (workers, sale persons, and etc) and they should be fair compensated for that as well. Innovations are great but infrastructure is as much important as innovation, and people who runs the infrastructure should have a fair share of every innovation that uses the infrastructure.
3
@Michael
That is precisely why regulation is necessary, why a living minimum wage is necessary and why it is necessary for workers to unionize with interference from special interests.
In your parent's generation, over half the employers provided pensions. Now pensions hardly exist. Wages have stagnated over the last thirty years. Productivity has increased dramatically, with the returns not going back the the employees but going to the 1%. That is a solid reason why social security returns to retirees should dramatically increase.
Yes, we have an ideal how to democratize capitalism. It starts with more democracy to people, not just to the 1%
1
@Michael
If you are looking for specifics and methodics, I would highly recommend one Methodist US Senator from MA.
No mention of climate change or recognition that the "middle class life" as we know it in North America, with its crazy level of material consumption and demand on resources, is environmentally unsustainable and is in fact destroying the planet.
How can this analysis and proposal be taken seriously?
3
The fundamental problem is neither capitalism nor socialism, wealthy North nor improverished South. It is the human brain. It has evolved from species that have neither the experience nor cognitive wherewithal to live peacefully in large groups. From apes not antelopes.
That's basically it. We can't manage to behave nicely. Our ancestral mental processes overwhelm our more recent, more rational processes. We know we should share, be kind and patient with our neighbors, but we don't. We know we should take care of the earth, replace what we use, but we don't. Like poorly programed computers, our brains are simply not capable of generating the output that, in our better moments, we know they should. In the short run we can be fine, but in the long run, don't turn your back on us.
Check us out in another 50,000 years. We'll be better then.
1
With the current minimum wage level, we have come close to legalizing slavery.
As AOC recently stated, part of the reason that unemployment is so low, is that so many people have two or more jobs.
They often have to to try to keep a roof over their heads and food on the table.
Mitch McConnell has continually voted against raising the minimum wage, while also voting to increase his own pay on a regular basis.
Funny about that.
Republicans are only there to make the rich (including themselves) richer, and it’s destroying the country, and should be recognized as the crime that it is.
12
@grove
Likewise, the Democrats are only there to make the poor, poorer, to create dependency and ensure votes. It is a crime that should be punished as it has created this horrific inequity.
Stalemate. Register and vote independent.
4
And what independents could offer to us? another 'free market fixes it all' mantra?
1
The exaggerated use of these terms could have a distorting effect on political discourse and elections. An important consideration would be the effect on voting in swing states.
1
Uber and Lyft are the most stark examples today of exploitation and rent seeking. They are part of the vast shift to a contingent workforce since the seventies with no benefits to cushion the day to day reality of being a living breathing human being. Even skilled and professional class workers are being sloughed off by corporations by the thousands with the result that many of us do the same work we used to do as employees, but from home at less pay and with no benefits, no healthcare and including no workspace. Basically no future. Just like Uber drivers who have to use their own cars we must supply our own computers, desks, chairs, heat and air conditioning, and everything that the corporation used to provide. We’re also expected to be just as dedicated as when we were employees, but with no ability to plan ahead as work is doled out like crumbs just enough to keep you going, and the rates for our work dictated per piece, take it or leave it. What a bargain those in the C Suites are getting!
15
Exactly.
The love of money and material wealth fuels the cruel juggernaut of unrestrained capitalism. Undoubtedly a free market with entrepreneurs creating innovation is a very good thing. However, the destruction of society occurs when there is no restraint and no moral commitment to the general welfare of society as a whole.
When capitalistic greed and reaches extreme levels and inequality becomes unstainable, revolution and social unrest disrupt the functioning of the economy.
American is entering an era of such disruption because the average citizen is losing ground. In spite of Republicans joyous reports of low unemployment, it is a barren statistic that is meaningless in the face of the exorbitant costs of healthcare, higher education, student debt, and crumbling infrastructure.
Republicans care not for the present of future of America; their only goal is the accumulation of wealth for the white ruling class. America needs to break out the yellow jackets.
8
I think it is very helpful to consider capitalism as an optimization algorithm, similar to linear programming. It is neither good or bad, it is a mathematical means of solving a problem.
Capitalism is very efficient in finding solutions to daunting problems -- consider the electric vehicle, renewable energy, medications, etc.
The issue arises when the cost-function for what you are optimizing doesn't include all externalities. Any good optimization algorithm will find the optimum given all the constraints placed in the cost function. If environmental degradation, workers rights, safety, etc. are assigned a cost of zero in the cost function they of course will be "optimized out" if there is any benefit to the other cost function variables to be gained at this expense.
This is how we end up in a bad place
The solution is regulation; this ensures these externalities are included in the cost function.
Don't blame capitalism; blame societies' choice for the constraints we decide to place on this great optimizer...
12
@Mark The exclusion of externalities has been a terrible omission for as long as I can remember. If factors like environmental degradation, etc. are simply ignored, we can expect nothing other than what we have now. It has taken a long time for the consequences to be felt strongly enough to even start a discussion about change. The lack of regulation and oversight is a disgrace, and I don't believe that will change very soon, sad to say. Whole generations have been raised in the quest for unfettered wealth. Dare I say that a moral component needs to be restored?!
6
I am not so sure that capitalism is efficient in the solving problems, considering how much the Government contributed to research and promotion through subsidies and grants of electric cars and renewal energy. Capitalism is very shortsighted and will not put money in something that is not promising profit quickly.
6
@Mark Regulation is the enforcer. What is needed first is the wisdom and knowledge to recognize all the constraints that matter to the optimization, plus the political will to regulate them. When some externality is recognized but not included in the set of constraints, has the market not then been hikacked?
Where to begin?
To the extent that Mr. Stiglitz seeks to abolish crony capitalism (i.e. rent-seeking by business) -- that is terrific.
To the extent that Mr. Stiglitz seeks to double down on fraudulent conduct by business -- that is terrific.
And yes, we certainly need thoughtful, data-driven, non-political regulation of markets, precisely to ensure that "rules of the game" are followed.
However, most of this metaphorical argument is a transparent apologia for socialism. We can see from the long-term history of collectivist governments how that turned out.
Here is one (of many) counters to Mr. Stiglitz: the abject failure of K-12 education in the US, whether measured by international norms or by observing college students who cannot read, write, speak, or think critically, is a primary cause of economic decline in the US. And let's see: who runs K-12 in this country?
Nearly every paragraph in this piece is flawed.
4
@Joel Sanders
Anyone with a sense of history could tell you that publicly funded education is in trouble from efforts to make it commercially profitable.
There was no mention of socialism.
8
@Spence
Thank you for the comment.
While the exact word "socialism" may not have been used, the strategies advocated by Mr. Stiglitz clearly fall into the conceptual category of socialist / collectivist thought. I was just waiting for the "five-year plan" to be mentioned.
1
I am not sure what do you mean by the 'collectivist government'. one will think that Democratic government is collectivist one because it is chosen by people, and they are not doing so bad.
"We are now in a vicious cycle: Greater economic inequality is leading, in our money-driven political system, to more political inequality, with weaker rules and deregulation causing still more economic inequality."
Excellent article, although still quite depressing given the dynamics of our current politics.
Restoring the social contract between employers and their workers, as well as citizens and their government, could be done if there were a will to do it.
But as trite as it seems, when those with great wealth and power have zero interest in changing the rules that got them there, how can one expect renewal of the social contracts that formed the basis between that more equitable, halcyon time of the poorer, post-war fifties?
6
So-called impersonal market forces that have mostly benefitted the "hard working" few are actually controlled by those few through our politicians.
One reason I support Senator Warren's campaign and her eschewing Big Money donors.
5
Reading the pro-capitalism comments in general, it strikes me that these people see capitalism as akin to a religious dogma that cannot be violated, rather than a pragmatic model for structuring production and consumption. As such, it benefits from constant reevaluation and positive tweaking to make it work better. Maintaining its purity for its own sake is just a recipe for decline and irrelevance.
3
Capitalism is a belief system, a secular religion of sorts. And with religious beliefs, you don’t get to disregard or jettison them when they don’t go your way.
1
Capitalists use metrics to measure progress and risk.
Wrong metrics sometime gets used that doesn't accurately reflect risk. Wall Street's over-reliance on VAR that did not measure the outlier risk of interconnected financial products is an example.
Our unemployment rate as mentioned by other commentators is a such a measure. The rate began improving after the crisis but our economy is not benefiting the majority of Americans. The metric to better measures the economic system performance is nearly 60% of people live check to check. This and other inequality metrics: Health Care, Education, & Mobility show we are behind other countries. These are metrics that truly show our economic progress and we are losing to other nations. That is a fact.
In the same way that the wall street financial firms did not understand their risk, we do not understand the inequality risk in a society as technologically advanced & connected via social media. The 1920s gilded age, and subsequent failure, is no longer good comparison.
Depending on which metric a person values will determine if you believe an outside influence is needed to influence capitalism. From the metrics I value, I believe it does.
Lastly, we have one earth, with no back-up plan. Not actively doing anything is burying our heads in the sand. This is infinite risk and no successful company would abide this risk. That is why we have corporate governance to address these risks. Capitalism needs that governance now.
6
A couple observations on the framing Prof. Stiglitz employs in his comment on "democratic capitalism."
First, the constant use of "us" and "we": Although this is presumably intended to be avuncular, the result is that the discussion is embedded in the frame of "the U.S. vs. the world." The needed clarification is, "What you mean 'we,' white man?"
Second, the framing of capitalism as the market mechanism: Capitalists hate free markets (as Adam Smith explained), but Prof. Stiglitz's language (despite the nod to behavioral economics and game theory) mainly seems to follow the Walras-Samuelson-Arrow-Debreu framework of "capitalism" without capitalists. In that framework, all agents are the same and firms are guided by mathematical necessity, not by persons. The needed clarification is to see that capitalists exist and that they use their control of firms as an instrument of distribution, not just production. Control of the firm is to economics what voting rights is to civil rights. It's more than just a policy parameter.
It's gratifying that Prof. Stiglitz ratifies progressive goals once again. But we need to be realistic about the context.
2
Thank you, Dr. Stiglitz. Well put.
I would add that the exploitative practices allowed because of the free market myth have disproportionately abused Black and Latino households.
The zip codes targeted with subprime lending should receive access to the public option in mortgages. This would be some form of reparation for the recent decline in home equity wealth these households experienced.
4
Adam Smith's "invisible hand" only maximizes the TOTAL wealth produced.
This"invisible hand" is not concerned with how the aggregate wealth is distributed.
That is the flaw with unregulated capitalism.
7
"There is a broader social compact that allows a society to work and prosper together, and that, too, has been fraying."
And markets are supposed to keep us in a "social compact" so that we can "prosper" together?
Or maybe we need places/forums where we can go to see and talk about life with our fellow citizens, a place to NOT just buy and sell things. Places where I don't know, people can commune together?
We have markets already. What we need is something ELSE to focus on, if you want to restore a "social compact."
What do you this it is? The newspaper? Or another "enlightened" market.
And um, who is it focusing on rent-seeking? Just the bad ones, the bad capitalists? As if the good capitalists are only "wealth creating" while the bad ones are "rent-seeking." I'm sorry but go to ANY board room meeting for ANY company even remotely involved in technology, and they're going to be calmly discussing how they can extract rent from their users or subscribers. How should they be "creating wealth" without "rent-seeking" operations?
2
The problem and chaos of economic as well as political problems in US and Europe in some degree are analysed and debated by experts for some time. But nothing is being done to resolve the present issues. This chaos comes from the long peace since the world war II and in some degree after the collapse of Soviet Empire. Most of American and European public are pulled away from each other with individual selfish greed and prejudice.
How can the public produce the common resolve to overcome this centrifugal tendency? We are in a world wide crisis,including US. It is difficult to conceptualize in concrete terms in public mind.
1
Used to be government and labor against capital. Now it's capital and government against labor.
Yes, we can adjust, but we can't trust. Money ruins politics.
15
Government shouldn’t be taking sides but if it must, it is only logical and prudent to side with society’s makers and not the takers.
3
The reason why financial institutions made, and continue to make, risky investments is not due to a deficit of governmental intervention but due to an excess of it. If companies were forced to bear the costs of failure without government bailouts and CEOs and Boards of Directors could be held personally responsible for the financial consequences of their decisions; safe, long term investments would be much more likely to occur.
Instead, large companies rest secure in the concept that they are "too big to fail" and the decision makers know that they will still get their salaries and bonuses no matter what; and if by some chance they are forced out there will be a fat golden parachute to cushion the blow.
Moral hazard is a term that has fallen out of favor with political economists these days, and that is the cause of many of the problems in the economy.
5
You can’t have both ways. Deregulation and a permissive anti-trust environment created these entities that were they allowed to fail would have literally destroyed the US economy and monetary system. The market will ALWAYS use capital to consolidate power, (both pricing, and cost) and drive out smaller competition. So the question you need to ask where do you sensibly apply the guard rails for the benefit “we the people”. Take your “moral hazard” argument to its logical end. Power accrues to capital unchecked through consolidation, risk taking becomes systemically existential, failure not only destroys the offending entity but creates massive externalities which are then forced upon the populace through run away inflation, currency devaluation, widespread unemployment and asset devaluation. Those with excess capital, particularly cash (which the average American can not afford to hold) i.e., the wealthy, then purchase said devalued assets for pennies on the dollar. It happened in the 30s and it happened in ‘08 - and would have been much worse without government intervention.
2
Mr. Stiglitz is right on as was Thomas Picketty. Both men see rampant capitalism for what it is. A morally corrupt system.
Until Congress goes back to what their job is in Government, that is to level the playing field, this is going to continue to drag our country down even further than it it already is.
The Boeing fiasco is the most recent proof of how bad de-regulation is for the the country. To allow a company to assure the FAA that their planes are safe, with no inspections from the FAA, is to court the disaster that has happened. This is but one example of Capitalism and Government run amok.
We can look to the Great Recession as another example of what happens when you get rid of the Glass-Steagall act was erased and replaced by weaker laws to help the Financial Industry.
Not to mention by dissolving it, that caused millions upon millions of Americans to lost pensions, home and jobs.
So long as we have the Republican Senate as the majority nothing will change in the United States for anyone except the wealthy.
Which is a lousy way to feel. I have never antipathy towards wealthy people or Corporations until the recent Tax Reform Bill. It started with Reagan and it has been downhill ever since. But the outrageousness by this Administration's acts towards Justice, Education, Health and Human Services, the Supreme Court manipulation by McConnell, and everything else they have done makes it clear that we need to take our country back.
38
The “conservative” solution for the Max-8 fiasco will probably be “Liquidate Boeing!”
Bravo, Mr. Stiglitz, bravo!
The bosses have always know that if they can get one group of workers to fear and hate another group of workers they can steal more easily from all. They have used race, religion, regional customs, and more to convince the less sophisticated voters among US to vote against their own economic well being in purfuit of mythology.
That myth might be the rugged individual; or the evangelical elevation of abortion to the top of the sin category; or the pointy head liberal of their imaginations.
Americans need to be reminded that 40 years after the New Deal the Nation was humming right along. We built infrastructure here and abroad, we built a solid middle class thanks to the G.I.Bill and other government functions, we sent men to the moon.
40 years after Reagan we cannot fill our pot holes.
I think the debate we will be hearing from democratic contenders for the next year and a half should reacquaint at least some voters with the ideals of American liberalism. The liberalism that led US to reject the king and form a democratic republic.
29
Capitalism is a powerful tool but it is a tool that can be adjusted to fit the needs of everyone. We need capitalism to be reformed from the Reagan era "greed is good" to a 21st century model wherein "all must share" is the catch phrase. To do it we need politicians who are not dependent on and corrupted by wealthy donors.
20
Many commenting here attribute some much of America's success to the belief system that the individual is so much more than the important than the whole.
It inherent in our country's DNA that making money is the greatest end all for human achievement and synonymous with true liberty and freedom.
The facts on the ground since our country's inception have continually contradicted that narrow belief system.
The United Sates is not bound to this for in perpetuity.
We intentional limit the growth, and fullest potential, of our nation and citizens by adhering to a economic system that was created in the Middle Ages.
With a world population of nearly 11 billion, and over 330 million of which reside in our country and who consume nearly 50 % of its resources it is clear that the future of Capitalism is in great jeopardy, as it rightly should be.
The greatness of human achievement is hampered by the simply minded notion that making money and having it all for yourself is the pinnacle moment of human existence.
Talk about being hoodwinked by an self inflicted illusion.
It will come down to human consciousness, and not an economic system, that will vault us into the uncharted territory of the 21st century.
It is our choice if we simply continue to make the same mistakes, but with much more broader and immediate impacts, or surrender to the worst bad habits of human nature and leave neoliberalism and free market capitalism in the rear view mirror.
7
@shiningstars122
World population is 7.7 billion
https://www.worldometers.info/world-population/
1
Right on, Mr. Stiglitz.
There is no doubt that an unregulated (or falsely, corruptly regulated one, such as we now have) capitalist market system is just like the game of 'Monopoly' : all players except one will end up penniless over time, unless war or total mayhem interrupts the game.
But we do need the freedom and creative power of markets: correctly regulated markets.
6
markets, markets, markets...it is like a Johnny-one-note tune that resolves with finance rising to the top of economy, vastly rewarding people, often leeches, who push money around for their own viggorish and contribute nothing to the actual commonweal. imagine if we rewarded scientists, teachers, or artists so lavishly while forcing bankers to live a squatter's existence on the shunned perifery of society.
Stiglitz for President! "Progressive capitalism" is a phrase that can catch on across the political divides. Another good phrase is "regulated capitalism" as mentioned in a comment by referring to how the Danish describe it. I also like "social democracy," and still another way to put it is "capitalism with a human face," a phrase used in France a generation ago. Those who oppose these terms will always say that they are disguised forms of "socialism." They are nothing of the sort.
6
Why isn't the collapse of the natural world - climate change - at the core of this argument? The madness of a system of 'development' that depends upon expansion for its health:- surely that's the fundamental reason why capitalism is finished - except its death-throes momentum is destroying the planet.
5
I believe that if you go back and read commentary from Reagan's time you will find that there were economists who correctly predicted that we would end up where we are. At the time it could be clearly understood that his policies were designed to transfer wealth to the upper class. Three decades in, from the point of view of the oligarchs, the program met its goals. Our dystopia is their utopia.
Of course the question raised by the highly reasonable prescriptions in this column is will our political system apply the remedy. Today we are actually trying to decide if it will be possible to impeach a president who obviously should be removed from office. The evidence is overwhelming, yet we aren't sure how to move forward.
31
Thank you!!!! I’ve been longing for these words.
I will vote for whomever Mr. Stiglitz is advising, and whoever can carry this message clearly out to Fox voters and the rest of the country too!
This, NYT, is the message voters are longing for. Not identity politics. Over and done with that.
7
Capitalism per se is not the problem...at least it wasn't a problem when corporations remained on a human scale. The massive multinational corporations that exist now need to be reined in. They are "persons" who have turned into monstrosities with more power - and more rights - than biological people. They can cross many borders (simultaneously!) without the hassles of immigration law, they often pay no taxes, in part because they can be "headquartered" in one country, while operating and affecting lives and draining resources in many others, They have no loyalty to any community or country and they are essentially and overwhelmingly held unaccountable for harm to others. As a matter of law, their only obligation is to shareholders. And they exist in perpetuity: they don't die - unless, of course, it happens to be convenient for them, for example to avoid liability,. Then they reincarnate under another name having shed their obligations. In short, corporations have incrementally obtained what actual humans have fantasized about since the dawn of time - immortality, vast wealth without obligation to contribute, and vast political power beyond any border. They - and we - have forgotten that the corporate structure is merely a fiction. We need to remind them.
18
@Laurie, and the people at the top of these corporations have convinced us that their donor largesse makes up for evil doing or tax avoidance. Poster child for that is the family behind the Purdue opiate company. NOW the museums don't want their donations? What took them so long to say no? Or are they infected with the same greed (winning at any cost, bigger is better, etc.) as the corporations are?
6
@Laurie Yes, we need to bust the trusts. Just like in the early 1900s, during the Republican administration of Teddy Roosevelt. You are nailing it on the head.
is that what AG Barr was doing those years between government jobs as a corporate lawyer for the entity now
known as Verizon?
Will well-reasoned arguments in favor of progressive policies do the trick? Historically, only pitchforks and the guillotine have given the rapacious rich a pause, sometimes massive strikes or the threat of. I've noticed that workers have no problem striking in France or Portugal and putting their leaders, mostly all claiming to be progressive politicians, on notice frequently and with good reason. Killing unions, fear-mongering, debasing labor, and capital flight and snakeishness above nation in the international banking sphere leaves most people behind. The good thing about strikes, even though they are so costly to workers, is they cause disruption and unfavorable publicity to the wealthy and their politicians. How else can you get someone with all the cards and politicians in their pocket to deal in good faith or deal at all? In truly despotic or ruined countries the only business or leverage left is kidnapping the children of the rich. So the only other lever when selfishness is the main religion of the owner class is political revolution, back up to the 90% tax bracket, nationalized health care and education, socialization of areas needed for life such a s food security and housing. We live in unbalanced times.
13
This essay’s assumptions are demonstrably false and are used to justified a state controlled economy. The first line, despite record low unemployment our economy is failing our citizens, paraphrasing. Not only is the unemployment rate at historic lows, wages are rising, the workforce is expanding and it is the direct results of the Trump tax cuts and deregulation. Please admit reality, it makes discussion of serious issues more productive. You advocate for European style control of the economy. The EU’s growth is anemic, their young have high unemployment and are grossly under employed, and their economies lack innovation. The US leads in technologies of all types, internet, medicine, oil and gas exploitation, finance. Capitalism with minimum government regulations produced these results. You propose to redistribute income to solve inequalities. Who will make those decisions in your knew “progressive capitalism” , academics and bureaucrats? God help us. And by the way, those concerned about the environment, only countries with strong economies can afford to address those concerns.
2
@Mark V
Yes, there is lots of employment. And people on the bottom are getting food stamps and Medicaid.
In European economies, people are paid enough to buy their own food and own medicine. Europeans believe that a business should pay living wages and their share of the infrastructure that supports their business in taxes. Crazy crazy stuff.
3
@Mark V
I'd like to know what world you live in. I recently met a woman with no health insurance who paid over $20,000 out of pocket for surgery to repair an aneurysm. The roads are crumbling and falling apart here as are water and sewer systems.
This wonderful economy you speak of reached this region, exploited its labor and resources, left a collapsed economy, then moved on to Mexico and other low labor cost countries. In its wake, it left behind a shattered landscape of empty factories and houses and desperate people moving from good paying jobs with benefits to jobs at Dollar Tree.
You can have this economy, It doesn't work for very many of us regular Americans.
2
@Mark V
These are not false assumptions. The data confirms that what is happening in the world today is because Capitalism is out of control. And in particular in the United sates of America. When you have huge Corporations who were founded in America not paying their fair share of taxes, hiding money in overseas accounts, raiding their employee
pensions there is something grossly wrong. And that is just the tip of the iceberg. And then we have a corrupt Administration and members of congress who are corrupt.
Is that what you think is right in this country?
And most of the job growth is actually from people who now have to hold 2 or 3 jobs to make ends meet. Wages have not climbed except in Executive positions.
You need to open your eyes. You are living in a bubble.
1
Ever heard of the law of unintended consequences. Let's examine some of the likely unintended consequences of "socialism" as proposed by the Democratic left.
Wealth taxes and 70% income taxes (Warren) will simply cause people who make that kind of money or who have that kind of wealth leave. If you take up residence is Costa Rica, the government guarantees you a maximum income tax rate of 15% for the rest of your life.
Medicare for all (Sanders). The only way to pay for this is how the social democracies in Europe pay for this - with a 25% (or more) national sales tax (a VAT). Do we really want to make everything 25% more expensive when this falls most heavily on low income people?
The Green New Deal (AOC) - forgetting about the cost, do we really want to make energy more expensive, less reliable, make everything that requires energy more expensive, destroy the jobs of everyone in the oil, gas and coal businesses, cause energy intense industries to leave our country all to have a negligible impact on global warming (because our share of CO2 is less than 15%).
In all three of these cases, the purported problem can be much more efficiently solved than by a massive government takeover of our society.
1
@Bernd Harzog Dear, just stop allowing money to be the end of everything. New technologies always stimulate money (Facebook) eg. China is leading the world in solar technology, while you cling to your oil. Africa is way ahead of you in clean energy.
Rake some of that over-inflated fat cat profits from BigPharma, and look at how other countries do healthcare for a third of the cost of the USA.
3
@Bernd Harzog
In case you haven't notice our Government has been taken over by the GOP and the Administration . And they are the only ones who are profiting. Free Health care? Congress has it thanks to the taxpayer. Paid vacations and plenty of it. The Congress and the Administration get that too, thanks to the taxpayer.
If these wealthy people choses to go to Costa Rica it appears to me that they will be at least paying 15% of their taxes. They get away with paying a lot less here between loop holes and the new Tax Reform Bill.
2
US health care costs double that of other first world nations, and public health here is worse.
Americans have the amazing capacity to reinvent the wheel and then marvel why the rest of the world, long used to this contraption, is not in awe of their ingenuity. There is no “progressive capitalism”. There are only two economic systems currently in existence: capitalism, in which the means of production are privately owned; and socialism, in which they are owned by the state. Socialism has been tried many times and failed repeatedly, generating only misery, poverty, violence, propaganda and lies. This leaves capitalism that has many shortcomings but is the only system capable of producing enough wealth to sustain a technological civilization. This is it; take your pick. What Prof. Stiglitz describes is a version of social democracy, which is capitalism plus a welfare system for the poor. It has worked pretty well in Europe but is fraying at the seams, strained by immigration and globalization. The US already has a welfare system, which is inefficient, underfunded and bloated. If may be improved and I am opened to suggestions as to how. But if the alternative to the current state of American economy is socialism, count me out. It has destroyed every country in which it was tried and it will destroy the US as well.
3
Scandanavian countries are a hybrid and are not fraying but are thriving.
17
@Mor
You present the choice as a completely binary one, where either all means of production are privately owned or all are in the hands of the state. Why does it have to be all or nothing?
Also, you don’t address or even acknowledge the role that the state can play in regulating how the system operates in a system where the means of production are privately owned. We have never had completely unfettered capitalism, and over the years we have had periods of tighter regulation and periods of looser regulation. Isn’t the most important question where we draw the boundaries?
12
@Mor
It is the ruse of the Republicans who call these proposed programs Socialism.
The word is used very loosely and only to strike fear in the hearts of the well to do.
Social Security and Medicare work just fine, yet the Republicans are always trying to either do away with the programs or privatize them. Because there is money to be made by the private sector. The very reason they ere designed the way they were was to keep Capital markets hands off of them. Because the Capital markets do not care about taking care of people's interests, only their own.
Which is why they cannot be trusted to do the right thing.
It was most recently proven in the Great Recession of 2008 and more recently by the Boeing fiasco. I think a little socialism and regulation is what needed right now.
3
ONE OF THE BIGGEST PROBLEMS IS THAT WE HAVE LOST SO MANY FULL TIME YEAR ROUND JOBS. I KNOW THAT IT IS CLAIMED THAT THERE ARE SO MANY JOBS NOW-BUT MANY OF THOSE ARE PART-TIME AND SEASONAL. COMPUTERIZATION AND GLOBALIZATION (OFF-SHORERING) ARE BIG FACTORS. CONSIDER HOW MANY JOBS SUCH AS CLERICAL JOBS AND MIDDLE MANAGEMENT HAVE BEEN LOST DUE TO COMPUTERIZATION. INCREASED RENTS AND HOME PRICES MEAN THAT PEOPLE CAN'T SAVE FOR FINANCIALLY SLIM TIMES - FINANCIALLY MEDIUM AND BELOW CANNOT SAVE TO PROTECT THEMSELVES AND PASS MONEY ONTO A NEXT GENERATION.
5
I am appalled at the lack of NEW IDEAS in this well educated world. No New Religion, No New Economic Systems, No New Political Systems. No New Definitions or Terms. Our Intellectual Ability must have been Frozen for the past four or five centuries!
Why should be beholden to the three agenda driven definitions of Economic and Political Systems? Why shouldn't we create New Systems for Economies and Politics? Why should we abandon the nonsensical terms of Left, Right, or Center or Moderate and Extreme or Revolutionary and Reactionary.
In place of Capitalistic or Socialistic Economies, We should create Humanistic Economy. In place of Democratic and Communistic Systems of Politics, we should create Goodwill System of Politics.
Humanistic Economy is one that Allocates Resources, Regulates Economy, and Protects Environment for the benefit of ALL Humans (includes other creatures of Nature).
Goodwill Political System Governs the Society by Developing Policies, Legislates Rule of Law, and Manages the Nation with the central objective of Harmony - harmony with each other, harmony with Nature, harmony with other Nations. Goodwill for ALL will be the Obejective, Philosophy, and Goal!
1
the problem with creating and introducing something new is that those heavily invested in the old, those thriving now, those with the power, will always fight it tooth and nail.
1
@Subhash Sounds good! What does it mean?
@Subhash it's because although we have good things to say about ideas that led to a paradigm shift, we really abhor new ideas and loath paradigm shifts!
Even when we say we want to change, we mostly end up replicating the old model in the alleged new one. We're just not as "rational" (a word we coined, btw) as we think we are.
Honestly, most of us would rather electrocute ourselves then spend time in our thoughts!
https://science.sciencemag.org/content/345/6192/75
My Danish friend describes his country's system as "regulated capitalism," which seems more accurate than "socialism." Many of our current difficulties seem to flow from deregulating capitalism. Capitalism is good at providing goods and services and keeping a vibrant economy. It is not made to avoid doing something that hurts others if doing that will save money, unless there is some form of regulation. Our current setup for public corporations is also focused on quarterly results, so that things which will hurt others and damage the corp. in the long run are tempting if they boost quarterly returns.
13
While I agree with most of Stiglitz ideas, I am disturbed that he, like Trump, points to the postwar period as some "golden age" we can return to. In that period a) the US was much poorer and that poverty was focused on our African-American, children and elderly; we are far richer now when you consider the progress those groups have made since the passing of the Great Society legislation in the 1960s and b) the US had no economic international rivals which meant we could have high wages and low value added without being out competed and c) in material terms, the US was far poorer. What would have passed as middle class in 1960 (own a car, small 1500 ft2 house, a b/w TV, one fixed line phone) would be working class or lower in 2019 America. Finally, all humans are rent-seeking. I find those who protest the economic distribution today are rent seeking against those who have successfully acquired those rents. It then becomes a question of POWER, not economics. Stiglitz's remedies will take TIME and COMMITMENT and therefore is fundamentally politically impossible in the current "I want it all and I want it now" political environment.
4
@OneView
I don’t think “rent seeking” means the same thing as “income seeking.”
“Rent-seeking is an attempt to obtain economic rent (i.e., the portion of income paid to a factor of production in excess of what is needed to keep it employed in its current use) by manipulating the social or political environment in which economic activities occur, rather than by creating new wealth.”
The key difference is that “rent seeking” is the “manipulation of the environment” to one’s advantage. In our system, it means using the influence that money can buy to try to tilt the playing field in one’s advantage. I don’t think all humans consider that to be appropriate behavior. In fact, according to studies I have read about, Americans are more likely to “color within the lines” than is the case in many (but certainly not all) countries.
5
I think one mistake we make is to assume that how our economy presently functions represents capitalism. In many cases it does not. If true capitalism was operational, CEO salaries and compensation would be one tenth of what they actually are. If true capitalism was operational Wall Street would value greater long term gains over lesser short term profits. If capitalism was functioning properly we would be spending more on infrastructure, education, and basic research. It is not capitalism per say that is at fault, but the ways in which we allow capitalism to be manipulated and distorted.
16
you seem to be describing true capitalism as the economy under Ike. and, even then, for millions, life was no bed of roses.
@W.A. Spitzer Capitalism simply follows the money - however that's made.
Capitalism by definition is answerable only to shareholders and is measured strictly by the bottom line. Unchecked capitalism fosters Life nasty, brutish, and short - and examples abound.
Our constitutional Democracy is our genius and our patrimony - answerable to our citizens (if diluted by 'Citizens United') and measured by the sense and the will of citizens as expressed through elections. Compassionate Democracy encourages Life worth living - striving toward the goals expressed in our Constitution's Preamble and our Declaration of Independence from an intolerable monarchy.
Whatever priorities one has in personal life, capitalism must be separate and guided in our public society - as should be religion.
10
Corporations are billed as democracies of shareholders, but in usual practice people sell the stock if they dislike management enough to vote against the board’s slate of directors.
1
Well said,but there is another important development that created the turning point in shrinking the middle class. It is the sharp decline in unions power and membership as a countervailing force to corporate power and unbalanced market forces which also picked during the Reagan administration.
20
Is the purpose of the economy to serve society (democracy) or is the purpose of society to serve the economy (neoliberalism)?
We have opted for the latter. It is misguided for two reasons. The first is practical: it can’t be sustained, not only because we live in a finite world, but because the inequality it creates can’t maintain a functioning society. Secondly, there is an ethical issue involved here in which “market fundamentalism” invests, not in people, but in a self-serving Hobbesian profit motive.
The first reason is obvious, but too little attention is paid to the second. Neoliberalism redefines what it means to be a human. It relegates humans to functions of the market in which all relationships are business ones. Everyone is either a business partner or competitor. This requires everyone to calculate risk and advantage to someone else’s disadvantage. It turns life into an exercise in exploitation and strips humans of basic attributes like empathy and cooperation.
Ethical education is essential. In our business-driven, STEM obsessed educational environment the humanities are disappearing. And, what “ethics” do business schools teach? Whatever it is, it is woefully inadequate. Business ethics must challenge the idea of sole obligation to stockholders that corporations hide behind, and shift the focus to societal obligation. They need to teach the ethics of long-term profit and not just short-term.
Nothing will change without a shift in ethical education.
7
Thank you Professor Stiglitz for your insights and for sharing them with us. Those of us who studied your work so many years ago appreciate your contributions to our American democracy which now needs a major course correction. And as citizens we must retake our role as participants in government.
8
Stiglitz proposes a new, more acceptable, term for what Sanders and other progressives correctly label democratic socialism. His progressive capitalism goes for the most part undefined, but we are provided glimpses of policy (the public option in healthcare, tighter market regulations).
Can progressive capitalism resolve his critical issue of "machines (artificial intelligence and robots) replac(ing) an increasing fraction of routine labor, including many of the jobs of the several million Americans making their living by driving? The seriousness of this threat (vast numbers of jobs replaced by bots) is compounded by the sluggish and ineffective response or understanding of educators and policymakers.
How does one train new cadres of workers for jobs that are disappearing on one hand , and have yet to be developed on the the other? Or new work products that are readily available from competitors once maligned as backward and illiterate (India, Asia, Eastern Europe) at prices that cannot/will not be matched by US business functioning globally?
The end-game, paying workers who have been displaced, for not working is, rightly, anathema in this country. Solutions are needed, not new labels.
1
@Rick Spanier Very basically, Capitalism should not be recognized at a level in governing our society equal to Democracy - any more than Religion should be. Progressive Capitalism makes no more sense in defining our Society than Progressive Religion. Not to downplay the concept - but these are personal, or 'association' adjectives.
1
It seems to me that a fundamental premise of this critique is that people should be permitted to "discover and assess the truth" about how economic policies actually affect us. But capitalism is built on exploiting differences in information, the space between truth and lies. It is impossible to generate profit if both parties possess truthful, accurate information, which is to say capitalism fails in the face of truth. The deregulatory impulse, the false promises of prosperity by lowering taxes on the "producers" beginning with Reagan and continuing apace with Trump, is a lie sold as a benefit to all when it manifestly and historically only benefits capital. Unregulated, unrestrained, free-for-all capitalism is guaranteed to produce misery for workers and is fundamentally immoral. In the current climate we are witnessing the early evidence. I hope we can correct course before it's too late.
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@Allan This would only be true if you had a crystal ball that told you the future. Capitalism works because there is uncertainty not a "space between truth a lies". The future is uncertain and therefore risky; taking that risk requires a promise of some kind of return (profit). How you measure that risk and what information you have to evaluate that risk does vary and does give some an advantage over others, but in pure form, uncertainty will always exist.
1
Umm, Mr. Stiglitz you are the kindest of economists, but where is environmental degradation and eventual desertification (oceans, water, soil, air) in this vision of an equitable capitalism based on now-stalled but infinitely possible growth that further accelerates ecological loss? The impoverishment of most human beings and of the ecosphere are increasing linked, about which from the humane economists like you and Krugman and Shiller we hear not a peep.
5
The middle ground has worked pretty well for a century or more.
3
@jimi99
50 years ago more people could afford their own food, medicine, housing, vacations and more on one salary.
They could count on rising incomes and job stability.
If you think then is the same as now, more power to you.
1
A column about the victim-hood of the masses at the hands of evil market. Yet it fails to note that the proportion of tax returns below the median income is falling - not because the middle class is shrinking into to poverty but because incomes are rising and there are more households with higher than median incomes.
The column fails to point out that things provided by a capitalist society have continued to fall in price and morph from luxuries to necessities. Computing, energy, telecommunications, air travel... these were all once-expensive luxuries for many. Free market innovation and product improvement have made these necessities and they are available with better quality & safety & lower cost than ever before.
The things where government is heavily involved though such as higher education and health care have become unaffordable luxuries for many whereas they were once affordable. Government controls roughly 50% of US healthcare now - we know what a mess that is. Higher ed's costs spiraled out of control with the government's expansion of student loans & aid.
The answer is simple. Minimalist government regulation - I'm not suggesting total laissez-faire - but government minimalism. The problems with government 'help' are all too painfully obvious. We've expanded the size & role of government tremendously in my 55 years. The experiment to make it larger is over -- it's a failed idea.
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@Once From Rome You mistake "large" with effective. We may have a "large" Gubmint, but it's effectiveness has been blunted by Big Money's political power and Big Money's Market Power. Humans are not perfect, Markets are not perfect, and Gubmint is not perfect. Nor will any of these ever be. We do need the effectiveness of all three to keep our society and economy in balance. You can have wealth in the hands of a few or a Democracy, you can't have both.
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I’m not confusing large and effective. Many of our largest corporations are very effective & efficient. What I am saying is that large & effective government is an oxymoron of the first order. The larger government becomes, the worse its ability to manage anything well. They have no profit motive and since the money they wield is not their own, they have no incentive to be responsible stewards.
Government derives the money it spends only two ways - current taxation or debt. It spends nothing that is not first taken or borrowed from the private sector. More money kept in the hands of the private sector ensures more available money for government taxation because the tax base is larger.
1
@Once From Rome Government is not monolithic, existing at many levels - and at what levels different functions are best performed is always subject to debate. Different centers/levels of government are no better nor worse than different small businesses or global corporations - and suffer from the same drawbacks. And both private companies and government spend money first taken *from the public*. The one distinguishing characteristic of government spending is that the objectives do not always 'pencil out' (eg the Post Office, or schools, or pensions) - but the Citizenry of this country deem such objectives to be worthwhile.
1
The problem I see is that there is an over abundance of unskilled labor in the world and that globalization is an inevitable force of nature. A key I believe is to recognize that there are certain jobs that cannot be outsourced over seas. When we build and improve our infrastructure, everyone in society benefits, and this requires jobs which cannot be outsourced. When we improve the level and availability of education we make it possible for more people to become skilled workers and contribute at a higher level. When we invest in basic research we promote innovation and greater productivity. In our blind rush to limit government and cut taxes, these are the things we have forgotten how to do, and that is why we are where we are now.
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Excellent essay, sir. It seems to me we must make a choice between being ruled by an economic system or a political one. Each constitutes the individual's worth differently. Liberal Democracy grew out of the idea that each individual in a society has inherent value, from that rises the idea of organizing around the common good. Capitalism, at least as it has evolved in this country, places value only on those whose accumulation of wealth individuates them from their fellows and that all government should organize, become subservient, to these anointed few. Any Randian text that modern conservatives seem to biblically drool over is just one expression of this thinking. They justify this narrow interpretation of the individual by suggesting that all blessings will flow (trickle down, more aptly trickle on) from these blessed individuals, these modern Sun Kings. This idea was overthrown in the revolutions that rocked the western world in the 18th century. It has been experientially debunked over the past 30 to 40 years. Bush senior blasted the notion in its Reagan infancy, but fell in line in order to gain the Presidency. Unfortunately, this extremist view of who constitutes a worthwhile individual comes from the hands that feed many of those in Congress. They will continue to flog this dead horse of an idea to the detriment of us all. It will be up to us as voters to decide who is the best guardian of our fates.
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Any system of any kind, from solar systems to the human body, from telecommunications technology to listening to music on your stereo system, cannot properly function without regulations and control. We try to keep our blood pressure and sugar levels regulated, the orbits of the planets are regulated, the placement of your stereo speakers is regulated. Yet, when it comes to the critical components of our society we strip all the regulations that help to make them function properly. Regulation is not the enemy of the free markets but the lubricant of them. Unregulated competition, unregulated capitalism quickly degenerates to runaway capitalism creating many of the ills we face today.
Regulation, proper taxation, social priorities, and collective wellbeing are the components of a healthy society. Greed got us into this rut and we need to bootstrap the society once more for a better future.
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The author states that “standards of living began to improve in the late 18th century for two reasons, the development of science... and the developments of social organization.” He left out the third (which is a direct result of the first two), our ability to extract enormous amounts of energy from the biosphere, mostly in the form of the burning of fossil fuels. It astounds me that any economist could talk about the future of the economy without even mentioning the planetary emergency of climate change. We obviously cannot continue to have a economy based on infinite growth on a planet with finite resources. It doesn’t matter whether capitalism is progressive or not. As long as it continues to be extractive and not sustainable, we are doomed.
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Stiglitz refers to a short period of Keynesian capitalism, from the mid 1930s to the late 1970s when things got better for the majority, (but not all). Let's look at the overall history: capitalism became a world system through slavery, brutal colonialism and genocide against people like native Americans. Industrialization brought huge environmental costs that we are now paying, horrible inequality and desperate working conditions for the majority caught in the "Satanic Mills." The first part of the 20th century brought us two world wars and the Great Depression. Then, finally some relief and general progress, most reforms initiated by left progressives and socialists. Since 1980 we're back to the old story. Progressive capitalism is only possible with a continual political and social battle against the internal logic of capitalism that drives it towards exploitation. Is the light at the end of the tunnel more capitalism or ecosocialism, I think the latter.
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@Jerry Harris, but we may be stuck with the former.
For years, Republican party ideology pushed the false, and in their case, hypocritical idea that the state has no role to play in the operations of the market, except, and until, a public bailout is required. Progressive capitalism sounds like a great idea until you consider Mr. Stiglitz's own observation that in our "money-driven political system," money rules. How do you get those who have money and political control, cede their political and financial advantages to adopt progressive capitalism? So far they have used their political control to wring more and more for themselves out of the system. What's going to make them stop and reconsider?
Karl Polyani observed that capitalism left to its own devices, would, "physically destroy man and transform his surroundings into a wilderness." Capitalism is not a self-regulating system, with the inherent danger that leaders of the system have so throughly captured the state that regulation, balance and equity among social groups is no longer possible.
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Stiglitz uses the terms "exploitation" or "exploitive" -- by which he means various "abusive practices" carried out by corporations, banks, etc. -- 7 times in this article. This meaning of the term, however, ignores the fact that -- "abusive practices" aside -- capitalism, as an economic system, is INHERENTLY exploitative, as Marx demonstrated more than a century and a half ago. As G.A. Cohen has noted, "the means of subsistence consumed by capitalists and the means of production which they use productively are all produced by workers. And there we have the essential fact of capitalist exploitation..."
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@David Siar No exploitation occurs among the masses in communist countries. The proletariat are abused equally, live in poverty equally and usually with no say in what they do for their lives. The beauty of a capitalist society is people work for whom they wish, they have the ability to start their own business and become the capitalist, and the rising tide lifts all boats.
@David Siar Better to have the states exploit people as in the Soviet Union or China for sure... it is the nature of any system to "exploit" the resources at hand. There is no future where nothing is "exploited" unless you want to eliminate life from the planet.
Everything that Dr. Stiglitz says here is true and important. His points are all the more important because, without a strong "progressive capitalism", our chances of minimizing climate change and its effects are much too low. The question is, how to get Dr. Stiglitz' message to the great majority of voters in all countries in a form that they not merely can accept, but can embrace. The presidential election this year in Slovakia gives reason for hope, but unfortunately the U.S. has a much more robust machine in place for smearing "decent" candidates and distorting their messages than Slovakia has.
1
There is no such thing as a free market. Markets are driven by multiple forces, among them supply and demand, cultural preferences, emotions, the actions of individual actors, and the actions of government.
All this talk about free markets really means let's free them from the restraints of government. They will be no more free than they were before, but powerful individuals and organizations will be free to do as they please. Without the countervailing force of the rule of law, the big dogs will be free and the small dogs will be lunch.
If you think the market is free now, buy a piece of property and try to build on it. If you want the market to be free, try to imagine what your neighbors might build on their property if the government butted out and declared the market to be free.
We should be discussing where to draw the lines and how to manage the competition. We don't need fewer rules, we need better rules, to curtail cheaters without placing an undue burden on honest players. We need a clear consensus on what we do as individuals and what we do in common. Instead, we have the phrase "free market" and the dualism between capitalism and socialism. These intentionally bias that discussion towards the libertarian viewpoint.
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Stiglitz presents his bias, assuming he knows more than he writes.
He claims that life improved for most people in the late 18th century because of, paraphrasing, science and democracy. Many other economists agree but highlight the third pillar: the free market. When people could actually benefit materially from their own efforts, enhanced by technology and defended by honest government, they prospered.
Many of the ills Stiglitz lists are not inherent in free market capitalism, but rather result from crony capitalism. When government puts more than a finger on the scales, favors get exchanged, dishonesty gets entrenched, and both trade and politics get distorted.
Admittedly, the roots of economic disagreement reach into philosophy. Are your biases more towards individual choice and responsibility, or towards collective mandates and enforced compliance? But saying that capitalism fails people is not quite accurate--in any free system, people can only fail themselves.
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@Bob Krantz In any free system, when people only focus on themselves, civilization loses and darwinism ensues. The current trend among our conservatives is an almost complete rejection of any collective other than the banding together of those that are already rich in order to keep themselves there. Whether your ascribe our woes to free market capitalism or crony capitalism, it is clear that there has to be a countering force to the direction we are heading in.
Your last sentence fits neatly alongside the commonly used one that guns don't kill people, people kill people....
@Bob Krantz Sorry Bob, we are not left to our own devices. When you have a business, Obama was correct, you did not build it. You did not build the roads and highways to move your product, we all did. You did not build the electrical grid to power your business, we all did. You did not build the sewer system to take away your workers waste, we all did. You did not build the internet to communicate and buy and sell products around the World, we all did. You did not create clean air and water to survive, we all did. We no longer survive in separate hunter and gatherer society. We are all integrated and intertwined in this Global Society. You have to give up your mirage of the "individual" going "boldly" alone.
@Bob Krantz
It just depends what you mean by free market. The most free of free markets destroys itself because it clears the way to crony capitalism. The free market needs rules of the road, which can only come from government. And when crony capitalism buys government those rules are eroded. Get it?
10:40 EDT, 4/20
Reform that preserves the system from revolution was the response to the crises of the 30s in Canada. Red Tories and oxymoronic Progressive Conservatives a still found, in greatly diminished numbers, here.
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Prof. Stiglitz remains one of my favorite professional economists. I focus on three points he makes: (1) wealth-grabbing (aka rent seeking), (2) anti-trust regulation versus unfettered capitalism, and (c) the social contract.
"Wealth grabbing" strikes me as the more aggressive form of rent-seeking where landlords push out tenants, corporates pile on minute patent improvements, lawyers and bankers encourage tax avoidance, lobbyists tweak our laws, and the list is no doubt almost limitless.
The need for anti-trust regulation today strikes me as creating limits on the oligopoly power of increasingly mature institutions (banks, pharma, even big tech) and extending the definition of corruption to those corporations, wealthy individuals and others who unduly influence legislation, as Zephyr Teachout pointed out in her article in Daedalus last summer)
The new social contract needs in my view to be a return to the FDR second bill of rights to counter decades of claims by ideologically tainted consultants who harp on the demographic challenge of an aging society and then endorse leaving the majority of people out in the cold.
We have a society that can provide fairness and does not need to be not predicated on low wage work. As my other favorite economist, Vassily Leontief, once said :In Paradise, we are all unemployed".
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Adam Smith warned about the possibility of government getting into bed with corporations. And what have we seen in the last 40 years? Just that. From union bashing (Reagan) to NAFTA and the repeal of Glass-Steagall (Clinton), to Medicare Part D (Bush) to the ACA (Obama), successive governments over the last four decades have proven Smith right.
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The preamble to the Constitution makes clear that a key idea behind the founding of the country is "to ... promote the general welfare." The Founding Fathers established neither a state religion, nor a state economic system (even if today, some treat Capitalism as a State Religion). But capitalism has shown itself to comport with at free society, and it's clear that it is a powerful economic engine. But it lives in a society of people, the welfare of whom the Founding Fathers emphasized. So, it's certainly right and proper to have laws channeling the power of capitalism to the serve the social good. In the real world we need laws to accomplish this. This requires a balance and we are today out of balance: increasing inequality and too much power wielded by large corporations and wealthy individuals. It's way past time to re-assess balance!
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I believe the political elites have applied so much economic pressure on most citizens that people simply don't have the luxury of paying attention to the hidden agendas of neo liberals (on both the Right and Left).
It's false to believe that the markets are SACRED and that any unnatural impact on them is wrong, as neo-libs believe.
Unions are necessary. Regulation is necessary. Otherwise the human propensity for greed takes over.
The two most crucial areas of middle class life--education and healthcare-- have been almost destroyed by these neo liberal values.
It's as shallow and simultaneously meaningful as looking at the language now used: Calling school principals "CEO's"? Calling patients "health care consumers"? Promoting the legalization and monetization of "sex workers"?
All human interaction IS NOT transactional.
Lionizing profit and 'wealth creators' must be challenged.
In fact, I blame the neo-liberals for Trump's presidency. At least he identified the anger of many in the middle class; even if he manipulated that anger at least HE identified it, unlike Democrats.
Our middle class has been systematically attacked with policies that have hurt them and manipulated by hidden agendas. Thank you professor for highlighting these unfair policies.
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A sizable middle class is not a natural occurrence in capitalism. It only comes about via oppressive regulations which eventually crush all incentives and punishes success. The idea that this is a beneficial result of too much government is yet another in the long list of entitlements desired by the left.
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Capitalism as we have defined it is destroying us..
Negative external costs and positive incentives need to be built into every investment decision. They are not. These costs and incentives need to be applied to every human economic activity from the mine to the chemistry lab to the assembly line to the opera house to the athletic field to the hospital at the time of entry into the market. Economic outcomes with negative social and/or ecological value must be recognized. Negative Externalities need to be measured and priced in up front so as to discourage, temper, or at the extreme eliminate investment.
In our present world, none this is happening.
www.InquiryAbraham.com
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@David Anderson, you are 100% right. Look at the huge trend in grocery stores towards single serving snacks. There is a huge cost to society in terms of production (energy used) and waste (throw away packaging.) Why is this unaccounted for?
1
The coin says it all: "in God we trust" .
But the "trust" in God has been supplanted by the "trust" in money. The idea is that more and more money will do more to improve your life. The uncontrolled pursuit of money is what religions warn against. It is what leads to corruption by the rich and deprivation of the poor, which in turn leads to cycles of revolution and bloodshed.
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Wealth, as capitalism’s scorecard, is the only true measure since all others are subjective. Which makes Jeff Bezos ($130 billion) more than four times better than Charles Koch ($30 billion) and Koch thirty thousand times better than Bernie Sanders ($1 million).
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"We can save our broken economic system"
There's nothing "broken" about a politco-economic system which guarantees the rights of every human being to succeed or fail based on his own talent and ambition.
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@Ed]
While true, it is not what we have. We have a system rigged for the rich. Look at the results.
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@Ed...But what kind of society do you want to live in? Do you want homeless people in the streets? Do you want to to live in a gated community? What are you going to do about that?
I know, let's destroy capitalism by calling it 'progressive'! Capitalism is progressive, the author proposes socialism which is regressive. If the ship has to take on not only the paying passengers, but also all the well-wishers and disinterested onlookers, it never sails, it sinks at the dock, nobody goes anywhere. The basic premise of socialism is that on one goes unless everyone goes--free if necessary, that's not how nature works. Nature dictates that progress is made first by the intrepid few who, after the path is cleared, are followed in time by the many. Capitalism has the undeniable advantage of imitating nature; socialism seeks to re-create in reality the philosophical daydreams of 19th century crackpots. If you want real lack of opportunity, social regimentation, static incomes, socialism is for you.
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@Ronald B. Duke
Very bad thinking. You missed the whole point of the article. Nature does not work the way you note. It automatically adjusts for "externalities." In capitalism, externalities are he cost or benefit that affects a party who did not choose to incur that cost or benefit. Externalities often occurs when a product or service's price equilibrium cannot reflect the true costs and benefits of that product or service.Nature allows for the externalities - it has to because of the "laws of nature." Overall energy equilibrium and environmental damage are corrected for in nature. Not in the horrors of capitalism as described in this article. You have an ancient definition of socialism and second those excellent thinkers like Sanders are democratic socialists. They do not want to control the economy like "Soviet Socialists" did. Democratic socialist want what is properly described in this article. You are confused.
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@Ronald B. Duke: The dualism between capitalism and socialism is what has us stuck where we are. We own some things in common and some things as individuals, and how to manage that mix while preserving freedom is a valid discussion. Demonizing the commons side as socialist is a cheap rhetorical trick.
"Capitalism has the undeniable advantage of imitating nature"
Newsflash: The nature of civilization is to improve on nature. If we weren't civilized we would be living like the other apes.
We already have social regimentation and static incomes for the majority of Americans. What you describe as socialism is a system that is biased beyond balance into the commons. This tends to happen in places where capitalism fails, and the people revolt. Capitalism tends to fail when the bias swings too far away from the commons.
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@Ronald B. Duke
"Socialism is regressive."
All very nice in your theoretical structure. But we need to live in the real world.
Having lived in Norway and Sweden where people get a living wage, 4 weeks paid vacation by law. Healthcare, education, retirement secured. No one goes into bankruptcy due to medical bills. Entrepreneurs can start new businesses without thinking about their families medical insurance, but they do have to ensure employees get a living wage and 4 weeks paid vacation. And these countries are constantly rated "happiest places."
So, this is the modern, real world expression of your theoretical construct.
3
Excellent summary ... Our first step is creating a countervailing political force. In our two-party system, both parties are funded, and thus controlled by corporate interests. One party must break free and adopt a progressive agenda. Capitalist where capitalism works ... i.e. providing most consumer goods and services. And supplementing Capitalism by Government ensured health care, environmental protection, retirement security, and equitable distribution of incomes and wealth using progressive tax policies.
In the 1930's, FDR's leadership established the Democratic Party's New Deal. In the 1960's, LBJ's established Civil Rights for all Americans and created Medicare.
The first step is reforming the Democratic Party by pitching Clinton, Pelosi, Schumer & Company - The Wall Street crowd - to the back of the campaign bus in 2020 by nominating a progressive presidential candidate.
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With Medicare and Social Security on the brink of insolvency, FDR is the source of much of which ails us. If not for his cousin who set the standard fur attacking success and confiscating wealth, he’d be the worst president of the 20th Century.
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@From Where I Sit
I am sitting a six hour drive north of Gotham. We are less than 50 years into our experiment with liberal democracy
Our Quebec government provides the mechanism for medicare for all, a solid social safety net, full employment and education to all those who can use it.
Our Caisse Populaire is among the best if not the best run financial institution in North America. Our Electric utility is publicly owned and is acknowledged to be run by our best and brightest.
Our government ran a 4.4 billion dollar surplus in Fiscal 2018. We are healthier, more secure, better educated and have a higher standard of living than our American cousins.
What is it about empirical evidence that makes conservatives so distressed that they must lie to themselves rather than acknowledge reality?
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@From Where I Sit Ok, and undoubtedly you must believe that our last true president was Calvin Coolidge. Here is to the gilded age as a model for society! Let's stamp down that middle class that is taking all the money away from the robber barons!
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The true cause of the loss of fairness in income in our country was the deliberate actions of Congress and our presidency (Taft Hartley Act), which destroyed the labor movement), and the deliberate sending of manufacturing jobs abroad. To say as Mr. Stiglitz does, “America arrived at this sorry state of affairs because we forgot that the true source of the wealth of a nation is the creativity and innovation of its people”, is to posit blame on a vague “America”, as though we all willingly participated in our decline..
The return to a more equitable society in America can only result, not by following the vague prescriptions of Mr. Stiglitz : “we must change course”, “we must be resolute in combatting power”, but by stating a clear agenda and supporting a candidate who espouses it: a minimum wage of $15, government health care for all, free tuition at state colleges, and control of the banks whose irresponsible behavior helped bring about the debacle of ’08.
5
Nothing in life should be given. Everything needs to be earned to be appreciated. No one should have to involuntarily fund healthcare, housing, education or wages for another. My parents couldn’t afford the cost of college so I didn’t belong there. My bosses family not only could afford the high school taxes of Long Island but also paid for him to get his undergrad and MBA at Columbia. Which is why he owns two houses, a huge boat, gets four weeks of vacation and has a wife, two sons and grandchildren. That’s the survival of the fittest nature of capitalism. As it should be.
1
Yes, you're right, effort should be rewarded, but clearly the greater number of the wealthy is made up of people who inherited it, were especially gifted. pr who knew the ropes to making better living. The crime of our society is, besides the maldistribution of wealth, the greater number of people is deprived of the means, the finances, and indeed the knowledge of how to go about making a better living. Shouldn't such people be helped by society to achieve a better life, to be informed how to be industrious or competent, and not scorned as lazy? There are 40 million people living below the poverty line in our country, and 1 % of the population owns more than 50% of the people. If you think this is fair, that such a disgraceful situation should not be worked on by the people living in such a society, I guess there's not much more to be said.
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@From Where I Sit..."No one should have to involuntarily fund healthcare, housing, education or wages for another."......The object of healthcare insurance is for everyone to pay a little so that no one is destroyed by a catastrophic illness or injury. That isn't paying for another's healthcare. It is paying for your own possible disaster. Funding education isn't something you do for someone else. It is something you do so you can live in a better society and others can earn more and help you with the tax burden. Wisdom is the ability to see past your own nose and be able to recognize what in a larger sense is really in your own best interest.
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It is not socialism. It is just legislation. Legislation to favor the rich, legislation to favor the workers. legislation to favor the society in which we all live.
5
As so often, Professor Stiglitz has brilliantly articulated the fallacies of the "free market" purists. We all learned in kindergarten that our rights end where the other fellow's nose begins. The right is correct to say that America has historically been a country founded on liberty and capitalism. Their fatal error is the refusal to recognize that American liberty has been well-ordered liberty, not libertarian anarchy. American capitalism has been well-regulated capitalism, not unregulated, robber-baron economic license. Both liberty and capitalism must be regulated to serve the public interest and the economic interests of all Americans. If liberty is construed as liberty of the wealthy to do whatever they please, no matter how harmful to the rest of us, if capitalism is construed as the right to do whatever you can afford to buy, no matter how harmful to the public interest or the health, happiness and political freedom of the rest of us, that's tyranny not freedom. The economic success of America was built on the belief of most Americans that American government and business generally was reasonably fair and served their well-being. Since Reagan that has been under attack.
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@KenC The rise of Reagan was a natural reaction to the manifest failures of the Carter years, characterized by 18% inflation, businesses choking in red tape, and a growing belief in central planning, driven by the political class's hubris, that led to things like the syn-fuels boondoggle. The rise of Thatcher in the UK was driven even more starkly by the failures of socialism to make good on its promises in that country.
It worries me that many of today's young people think of increased government control over the economy as something bright, shiny, and new without knowing any history. Geezers like me have a certain advantage, in that we have lived through enough of it to be all too familiar with its downsides.
2
Who would gainsay a Nobel laureate economist?
The regulatory actions Stiglitz demands could be accomplished by an intelligent tax code that encourages "wealth-creating" work, investment, and innovation, but penalizes "wealth-grabbing" financial manipulation and speculation.
Stiglitz's progressive capitalism and new social contract have a more familiar name. It is "social democracy" as described in the Preamble to our Constitution and practiced by countries like Denmark.
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@AynRant I agree!
3
@AynRant. Yes, yes, yes!!! As one who has gradually worked my way up into a top 10% annual salary I am very happy to pay a larger share of my income in taxes than one who is at the bottom of the salary ladder. But I would also like to see that hard-working laborer earn a living wage so I don't need to contribute my tax dollars to support her via the EIC.
1
This ought to be the position of the Republican party --use limited government intervention to correct the shortfalls of capitalism, while not throwing capitalism under the bus as advocated by the far left.
2
@Kent Kraus The far left is not advocating throwing capitalism under the bus. It advocates controlling the crooks from cheating the middle class.
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@Kent Kraus
The GOP believes the best way to maximize their own money is to hollow out everything that exists. That is their legislation. That is what their voters vote for.
BTW, there is no advanced country in the world that does "limited government" because all the money ends up in the hands of the rich.
2
@Kent Kraus where did you get the idea that the so called far left wants to get rid of capitalism?
We thrived under regulated capitalism from 1946 to 1970 plus and the built the middle class that we were so proud of along with the rest of the world.
I guess I am far left and I like capitalism but not the capitalism we've been following since Reagan.
I want a society where capitalism works for all. I want a livable planet and observant of nature and the connection between nature and humans.
2
It isn't much of a stretch to see 'unfettered capitalism' as just simple anarchy. The idea of a free market is, today, GOP dogma. Fettered capitalism, with regulations and anti trust, protects us from monopolies who extract monopoly profits from the economy and shift wealth to the top. Corporations, especially giant corps, are treated as 'people' (see Alito as SC Justice) with rights granted by the constitution. So, political contributions from them result in massive corruption at federal and state levels, today to get what these giants want for themselves and their owners.
The only dem POTUS candidate that sees this clearly is Sen Warren. She plans an attack on corruption and has the legal savvy to make it happen, if the Senate move to the D side.
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@Harold
Re: corporations as people: People acting together jointly
(i.e. corporations and many other groups) are protected by the first amendment, even if its Alito who says so.
1
@Harold Governments are, alas, just as subject to corruption (Brazil and China being object lessons), and the more power they are given, the greater the probability that corruption will occur. That the Scandinavian countries, by and large, seemed to have dodged this bullet (so far) seems more a function of their cultures and modest size than an example of a universal truth.
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@Harold Both Senator Warren and Sanders.
1
Economics, including the definition and study of capitalism, is often best defined by Truman's statement: "Give me a one-handed economist. All my economists say 'one one hand...', then 'but on the other..." I agree with Professor Stiglitz, but most folks don't discuss or concern themselves with economic theory or practice. They do, however, focus on money... on cash in hand. The too often used canard is that money is in short supply. It is not. Let's focus on money flow (not necessarily the same as monetary policy), who gets what and for what. People better understand this "cold hard cash" approach that in fact underlies practical concerns such as pay and benefits, retirement, education, taxes and the like.
1
Stieglitz cannot be a Nobel Laureate in Economics because there in no Nobel Prize in Economics.
There are five Nobel prizes and only five. Chemistry, Literature, Medicine, Peace and Physics.
This is a fact that cannot be debated.
1
From Wikipedia: Joseph Stiglitz is a recipient of the Nobel Memorial Prize in Economic Sciences (2001) and the John Bates Clark Medal (1979). The Nobel Memorial Prize in Economic Sciences, commonly referred to as the Nobel Prize in Economics is an award for outstanding contributions to the field of economics, and generally regarded as the most prestigious award for that field.
15
@Michael. It is snarky of me, but I note that Michael does not dispute any of the statements in this long and beautifully written essay. These days, alas, almost everything presented as fact gets debated, with more or less benefit.
4
From the Nobel Prize website:
“In 1968, Sveriges Riksbank (Sweden’s central bank) established the Prize in Economic Sciences in Memory of Alfred Nobel, founder of the Nobel Prize. The Prize is based on a donation received by the Nobel Foundation in 1968 from Sveriges Riksbank on the occasion of the Bank’s 300th anniversary. The first Prize in Economic Sciences was awarded to Ragnar Frisch and Jan Tinbergen in 1969.
The Prize in Economic Sciences is awarded by The Royal Swedish Academy of Sciences, Stockholm, Sweden, according to the same principles as for the Nobel Prizes that have been awarded since 1901.”
1
JFK used the phrase "a rising tide lifts all boats." Well we've learned that a rising tide combined with a full moon and a hurricane brings disastrous consequences.
In the Great Depression of the 1930s and more especially the Great Recession of the aughts and teens, historians have said our capitalist system was saved with FDIC, bailouts, and the banks even paid back the rescue moneys with interest. Back to themselves, perhaps, but not to the underclasses who swallowed the bait of no-doc mortgages, lost their homes, had their wages stalled, and survived to struggle in more costly retirement conditions.
I listen to AOC (Alexandria Ocasio-Cortes) and look forward to truly Progressive tax and health care reforms. Call it socialism, but I call it fair.
7
@Fran B. I agree, but it is called Social Democracy!
2
Our current form is a planetary cancer. I have long advocated slower growth in service of leaving more enduring measures of wealth to our descendants: enabling vibrant local ownership of capital, making walkable cities, minimizing income inequality by taxing great wealth as we once did, reversing global warming, colonizing the Solar System.
We are barreling toward the collapse of civilization now, so this article is most welcome!
7
I agree that income inequality is a big problem, but the reason why the middle class is suffering much more today than say 1960 is that the cost of for some critical basic needs have exploded. Take healthcare - in 1960 the US economy spent 5% of GDP healthcare and today it is 18%. Education is even worse, in 1960 we spent just 2% of GDP on education, and today we spend 7%. In 1960, we only spent 7% of our entire economy on healthcare and education combined versus 25%, today. This is why we could afford in 1960 to spend much more on infrastructure versus today.
Even if we did not have the level of income inequality that we do, the fact is that we cannot afford to spend 25% (and still rising quickly) of our economy on healthcare and education and have a vibrant middle class.
My worry is that we focus entirely on income inequality and ignore the fact that healthcare and education costs are devouring our economy.
4
@Sparky. In the version I am reading two consecutive comments illustrate our conundrum. On the one hand we are spending more on education. On the other, our voters are not well educated, duped by the media, by commercial and political interests. How about teaching necessary skills to see through the cognitive and logical errors being presented to us as truth. Regarding health care, how about payment based on value. How about rational rationing. Two main contributors to health care costs are greed and unrealistic hope.
4
@Sparky
The real question we never ask is, WHY is our health care 18% of GDP and so inefficient, leaving millions of people uninsured? Other advanced nations spend around 10% of GDP and ensure all their people with excellent health care?
Social Democracies do work. The USA the wealthiest nation on earth has the highest infant mortality rate compared to the wealthy Social Democracies.
Infant mortality rates tell a lot about the standard of living of a society.
1
@Sparky
The real question we never ask is, WHY is our health care 18% of GDP and so inefficient, leaving millions of people uninsured? Other advanced nations spend around 10% of GDP and ensure all their people with excellent health care?
Social Democracies do work. The USA the wealthiest nation on earth has the highest infant mortality rate compared to the wealthy Social Democracies.
Infant mortality rates tell a lot about the standard of living of a society.
In reality, the military budget is eating up the middle class.
1
An excellent summation of our economic problem from one of my heroes. He and we know, however, that none of this will come about now that money is considered speech, and as long as K Street is left to its devices. In addition, we are now hamstrung by our dedication to our principles, chief among them the First Amendment, in reversing the outright propaganda posing as journalism in today's US. Together those are formidable forces, perhaps too strong at this point to be overcome. The people, too many of us, have been thoroughly brainwashed, and now regularly vote against our own interests. Unless that changes, and soon, we are going to witness the demise of our nation as a functioning capitalist economy and also as a democracy.
21
The United States is a consumer economy. That is, the economy is driven by purchases of goods and services, rather than by exports. Our problem is that the owning class has been able to squeeze workers , the majority of the population, to the extent that they are unable to be expansive consumers. If workers got a larger slice of the economic pie, the economy would grow. Thus, business owners would have more while taking a smaller percentage. This is exactly what happened in the decades after WWII.
7
@Boston Barry
We also have an economy driven by debt. We can't afford to pay for the goods and services we consume nor can we fund the operation of our government without borrowing increasingly larger sums of money. A substantial amount of that debt is funded by nations favored by our trade deficit caused, in part, by our addiction to cheap imported goods with their "too good to be true prices".
1
It seems like a bad idea to criticize a Nobel laureate, but I feel like two things are missing from this analysis. First, as Eric Foner noted this week, David Brion Davis documented the critical role that slavery played in wealth creation in the US and elsewhere. Slavery's systemization in law coincides with the 18th-century growth Mr. Stiglitz notes, yet he chalks up our improvements as a nation to benign forces like science. Second, where is climate disruption in this analysis? Economists always seem to overlook nature. Otherwise, I enjoyed it a lot!
5
What Professor Stiglitz calls progressive capitalism describes the type of economy towards which the U.S. was evolving until the 1970's. Many of the laws and social programs instituted were to address the failures of the market system.
Since then, however, we have regressed and he points out most of the ways in which we have regressed. What I see as missing from his opinion piece is the problem of monoposony power in the labor market on the part of the extremely large firms in many industries. This coupled with so many of state legislatures weakening collective bargaining laws has played a large role in keeping wage rates low.
10
@J.Mike Miller - "monoposony"! Cool! Had to look it up.
Labor vs. Capital, and, alarmingly, Labor is down 50 points in the 4th quarter.
2
The issue is that the Democratic Party has adopted a neoliberal vision of economic regulation. That vision is that economic regulation should serve the interest of some of the people rather than all of the people. That was not so during the 25 years following the Great Depression. The Great Depression focused the attention of the Democratic Party on the issue of regulating the economy in the interests of all people.
The Democratic Party was a coalition of diverse interest groups in the 30's just as it is today. The severe impact of the Depression made the interest groups subordinate their agendas to the New Deal agenda of making the economy work for the people. Today the economic crisis is not so severe and today's diverse interest groups are not willing to subordinate their agendas to a common agenda of progressive capitalism.
8
@OldBoatMan I think this is a great summary of the problem in the Democratic Party.
3
@OldBoatMan The Democratic Party may be "a coalition of diverse interest groups", but those groups are not all equal. We like to think of the Dems as the "party of the people", but that has never been the case. Unlike the GOP. which is wholly owned and operated by the 1%, the Democratic party is also heavily influenced, if not controlled, by the elite rich.
Witness the recent declaration by the DCCC "that prohibits the organization from conducting business with 'political vendors' that support primary challengers to incumbents". The Democratic establishment wants the new energy on the left, but does not want it to get out of its control. So much for the "party of the people".
https://www.cnn.com/2019/03/31/politics/dccc-primary-challenger-rule/index.html
5
@rls
AOC and her wacky band of far-left so-called "Justice Democrats" who want to primary Dem House incumbents are not true Democrats and should be scorned by the party.
Corporations (big & small) are obligated to maximize return on capital for investors. Everything else is collateral to that sacred cow. And Management is typically compensated to maximize return on capital for investors.
That exclusive, uni-dimensional view of corporate mission needs to change.
No, I am not a communist. I am a realist. "Capitalism" - as defined by most people really doesn't exist anyway ... it was captured and twisted to their own benefit by corporations anyway.
Let's have the courage to change it.
50
@AP917 - Righto! What we observe is Predatory Capitalism that "capitalizes" on manipulating the system to "maximize return".
In 1960, corporate America's share of the federal govt's total income tax revenues was over 23%. By 2017, corporations had finagled to slash that by more than half, to 11.4% (the Welfare Deadbeats!!). BTW, that doesn't even include VeryGoodBrain's latest windfall handout to the Corporatocracy.
2017 Federal tax revenues were $3.3 Trillion. If corporation's share had remained at 23%, they would have contributed an additional $383 Billion in taxes!!
FWIW, the so-called "unaffordable" Medicare-for-all proposals from so-called "radical, socialist" Democrats are projected to cost $332 Billion/year. If corporate America continued to pay their fair tax share, we could fund health care for all citizens PLUS have enough left over to fund TANF (so-called "welfare") @ $14 Billion/year PLUS have $37 Billion left over for pocket change for our wholly-owned Congress Critters.
Return to Sane Tax Policies! Make American (Citizens) Great Again!
1
Great article. Esp if Stiglitz is trying to chip away at the elites still supporting neo-liberal solutions, which really started with Carter. But how do we present this to those who don't read the NY Times or even their local paper and don't know Stiglitz from Herman Cain?
Managed or progressive capitalism, like managed trade, requires effective govt regulation. And that's the real problem. The Trump base plus another 25% of US voters have bought the idea that govt is the problem, not the solution. So, they favor free markets and free trade, never understanding how markets and trade are not free, but are rigged to favor the wealthy.
I'm sure Stiglitz has dumbed down the economics for the general readers of the NY Times. How about dumbing it down some more and running the piece in shoppers in the midwest, south and southwest? (And if you don't know what a shopper is, that is part of the problem.)
25
@maqroll "how do we present this to those who don't read the NY Times or even their local paper"?
Easy. Give them what they want.
Your red state does not want federal dollars for ACA expanded Medicaid? Fine. At some point poor & working class people will notice that people in other states that expanded Medicaid have healthcare and they don't.
Your southern red state wants smaller government. Fine. Close all those military bases that are being damaged by climate change and move some of them to the midwest.
But, of course, the above actions would require a different kind of Democratic party in power - one that was willing to use its power to stay in power.
2
In science, politics and human nature every force is met with an equal and opposite force. The witless and greedy proponents of unchecked 1% capitalism are adding an energy to a system which someday will undo short-sighted pursuits. Trump and MAGA here, Brexit in the UK, are sure signs of brewing countervailing forces to 1% capitalism. Advances and achievements in civilization are not necessarily built on success. Sometimes they are built on rubble. If the 1% apologists take us to the rubble stage, let's pray it was worth it.
2
The exploitation of labor is the essence of capitalism. The only effective resistance to the dictatorship of capital has been made, not by liberals persuading capitalists to act humanely, but by the workers themselves, organized into labor unions and Socialist political movements. . . . This is the nature of the system that oppresses the vast majority of Americans. The capitalists must automate production and use less workers to maintain their profits. If they do not, their competitors will, and drive them out of business. But as a result, the workers have no money to buy the capitalist's products. There is no way out of this vicious cycle, the final crisis of capitalism. Only Socialism can save our country.
11
@Red Allover Power aggregates to capitalist. Richard Wolff points out that after every economic disaster we "reform" our capitalist system, but the capitalist start tearing down those reforms before the ink is dry. Eventually, they gain the power to re-rig the system, it blows up, reforms are enacted, rinse and repeat.
I don't know how you preserve the advantages of capitalism without power aggregating to capitalist? Maybe it is time for government to take over the "commanding heights"?
1
@Red Allover
The profit rate goes down when using less labor power relative to total capital. Labor is the only source of value (or profit in the money form). Machines and technology only transfer value (or already objectified labor) . Workers starvation is not sufficient although inherent in the capital for its own destruction or failure to reproduce itself
1
A tactical example showing how Professor Stiglitz is right:
Annual public spending on health care is approximately $1.15T in 2019 (CBO). A vast majority of this is aimed principally to service Medicare, subsidize corporate health care plans and fund Medicaid in its various forms.
Anyone who believes "health care for all" is too expensive simply hasn't done the math. Moreover, the issue isn't resource or capability driven. It's will.
Reallocating the current spend so that more expansive coverage is achieved, while simultaneously doing simple and socially productive things like transferring tax expenditure benefits from the least needy to the entire body politic and finding other monies by mining the unjustifiably large incarceration system and the bloated military complex can go a long way towards solving, among other things, the longevity gap and lessening the degree of desperation all, save a few pluto/kleptocrats, feel.
Heaven help us all. We need it.
370
@Weasel - A more relevant figure from The CBO is that we spent $3.5 TRILLION of health care in 2018. Making the ridiculous conservative assumption that health care costs will not rise that comes to $35 TRILLION in 10 years.
The highest estimate (from the Koch funded Mercatus Center) of the cost of Bernie's improved Medicare for All over 10 years is 32.6 TRILLION. Thus Bernie's plan with no co-pays or deductibles, dental, mental, etc., etc., etc., would be cheaper than what we currently suffer under.
And it would get better health care to every man, woman and child in out great country.
132
@Len Charlap
And better health for every man, woman and child. Which saves us unimaginable money over the long term with proactive medicine instead of reactive medicine.
48
@Len Charlap Depends on what you mean by "better health care." It is likely that it would lead to rationing by delay, and if compensation for medical professionals was reduced, it would also lead to a shortage of practitioners.
8
As inequality and political impotence grows, so does the myth propagated by the ultra-rich that higher taxes are public theft of their hard earned fortunes and a threat to personal freedom.
The rich define freedom as privilege and impunity. The rest of us define freedom as basic security: freedom from hunger, freedom from ignorance, freedom from exploitation, freedom from poverty, freedom from hopelessness and despair.
Most importantly, though, is freedom from the tyranny of the rich who insist on their privilege at the cost of our freedom.
They insist their wealth has nothing to do with government or anyone else, the consummate delusion that they earned it through hard work and greater merit. They're contemptuous of government and public authority, which they see as agents of the poor extorting the rich,
Aside from the obvious and egregious blind spots regarding universal literacy, the rule of law, courts to adjudicate conflicts, airports, law enforcement, hospitals, professional guilds like state bars and medical boards, consumer health and safety, patent and copyright, environmental protection, public health agencies, a muscular military, basic utilities, etc., the rich vehemently deny that public authority facilitates and protects their wealth.
In fact if not for the Federal Reserve, Security Exchange Commission, Federal Trade Commission, there would be no wealth for the rich to aggregate.
The rich get the most from government. They should pay the most.
693
If you look at the historical roots of modern capitalism and commerce, it started as a rebellion against the elites (royalty) continually plundering the masses. And, so, what do we have—again!—today? The rich plundering the masses. How is this possible? It all comes down to the propagandistic notion, successfully perpetrated by the ruling elite, that the average person is still susceptible to being plundered by a majority of even lower-economically-positioned (code words for minorities and immigrants) voters edging them out for jobs and benefits.
If there’s one enduring myth that drives US politics, it is the myth that the rich have earned their reward, whether according to their bank account or their seat in the front pew of their favored church on Sunday, through nothing but their own hard work and savvy. “Puritanism of the Rich” (aka “Prosperity Gospel”) is their malignant guiding principle. It’s always easier to justify a corrupt ideology with divine providence.
435
@Yuri Asian - The third paragraph from the end of your comment is the most concise and persuasive illustration of the oligarchs's self delusion that I have ever seen.
This should be shared widely.
Thank you!
22
@Yuri Asian A brilliant post! Well done. You exposed the paradox of neoliberalism is such an insightful and concise manner.
13
Bernie Sanders, and other democrat's, "Social Capitalism" is the antidote for today's viral, insidious, Vulture Capitalism, with its now dangerous imbalance of wealth, services and justice.
The vultures have brought us a Government "Of the wealthy, By the wealthy, For the wealthy". And they will use as much money as they need, to make sure You don't count, but They do !
273
@Getreal
I agree if we get as a president Bernie,
But I do not agree we can solve inequality problem.
The root cause of inequality is 320 million population and its contents which is vulturism.
4
@su
Taxes will force most vultures to pay a living wage (Which they will deduct from the taxable income). This will help bring back the middle class. Social Capitalism will enable college education, universal healthcare and infrastructure that doesn't depend on tolls !
49
@Getreal
“Social Capitalism”
Made up term.
Bernie hates capitalism. He has praised the Soviet Union and specifically denounced every socialist movement that attempted to accommodate rather than destroy capitalism.
3
Under progressive capitalism, companies would
1) Pay every worker a living wage
2) Be unable to outsource or automate jobs without proper compensation to workers
3) Produce within ecological boundaries, and pay for the environmental costs of their business
4) Have worker representation on their boards
5) Pay their fair share of taxes
6) Accept a universal healthcare system instead of insisting health insurance be tied to employment
653
@Ted B
Thanks a nice comment and I agree with your talking points. For me, the three defining elements that shape a sound and modern economic approach should be the Three E's:
1. Ethics
2. Equitability
3. Environment
But I don't hold my breath with the neoliberal die-hards buying into this construct!
49
@Ted B Nice distilled action plan. More practical than Bernie Sanders his followers would approve. As a moderate Democrat who has worked in many campaigns, as you know nothing gets done unless we either elect candidates who will do this, or politicians in response to this type of advocacy. So, how about if we call our Congressmen this week to recommend this?
11
Your talking points have been written about extensively many years ago. It was published in a book called the Communist Manifesto. The ideas contained therein have been thoroughly and repeatedly disproven.
10
This column misses a crucial historical and current day point. Inequality was lowest when workers united in unions and had the leverage to gain a fair share of the pie, which in turn grew the pie. Inequalities increased when the capitalist class (including "progressive" capitalists) waged an all-out successful assault on unions. If working people don't have that kind of power, all the nice theories in the world won't change the ongoing downward spiral.
822
@Richard
What progressive capitalist has opposed unions? People like Elizabeth Warren believe in capitalism. And unions.
As for Nordic countries, they are capitalist countries in most arenas. The governments don’t own all the companies. They use “socialism” for things like health care that the market cannons handle fairly. Our country does the same, just not in so many areas. My water comes from a county-owned system. My roads are built by the government. My Medicare is paid for by the government (which funnels the money to my private insurance company that handles my Medicare Advantage plan.)
Germany. Switzerland, Japan, the Netherlands and Belgium are countries that use private insurance for health care. Successfully because it is strictly regulated. Regulation of markets is the sine qua non of a healthy society and democracy.
122
@Richard
"If working people don't have that kind of power, all the nice theories in the world won't change the ongoing downward spiral." Agreed, but the odds of regaining "that kind of power" seem slim. There's far less need for labor. Capital has replaced much of it onshore with computers and robots. Offshore there are still people far from "middle class" willing to work for very little because they have even less. The only labor in demand is highly skilled and that requires education. That is where labor's leverage might come from, but if voters don't fight for that lifeline - a high quality public education, the working class will drown in poverty. The alternative is getting out the pitchforks.
36
@Richard ... Unions never worked well. There were strikes, bloody confrontations, and union graft.
A better approach is "social democracy" wherein the entire electorate is the union.
19
Unfettered Capitalism leads to an oligarchic form of governance.
Look around you--that's what you have.
1
Perhaps that is the natural outcome of a mature economy. Capitalism has never reached this level before, previously having been hobbled by the left. Maybe the invisible hand endorsers a situation where Walmart is the predominant physical retailer, Amazon the sole online vendor, Google a singular online source and Apple the exclusive provider of mobile communications.
1
Progressivism is completely antithetical to the Constitution and, therefore, capitalism.
Progressivism takes away freedom and liberty. Capitalism and our Constitution promotes freedom and liberty. The power of the individual over the collective.
Progressivism is merely Marxism sold and repacked to make it look palatable. It’s not. It is ultimately tyranny.
2
The lefts big blind spot is that the very freedom that allows Jeff Bezos to become the world’s richest also allows hundreds of thousands to be homeless. The free market that has rewarded my boss with a multi million dollar home and boat on the water with a summer home in the Bershires and Ivy educations for his two sons and five grandchildren leaves me as a 1099 contractor to supervise his dozen client sites for about $1,000/month. I don’t have the well funded Long Island public school education, college degree, aggressive personality or sales ability he does so I don’t get to reap the benefits he has. It really is that simple.
@Cjmesq0
If "we, the people" have so much power, then how do you explain all the issues that most people agree on, but Congress will not act on? Taxing the wealthy, gun control, ending Citizens United. And don't forget "Corporations are people too." Why can't we get "our" government to do what we want?
https://www.care2.com/causes/7-issues-most-americans-agree-on-but-congress-does-not.html
2
Name it whatever you need for the concept to be palatable to those who feel that “theirs” will not be shared, ever. The greed that has spread throughout the fabric of our present reality is disabling any possibility of progressive anything.
1
As many philosophers will say, we all live in our own fiction. With some quiet reflection, however, we may have a consensus that the purpose of government is to foster the well being and happiness of the people (and not just survival), and not just foster unfettered competition, which is a strategy and not a purpose or goal.
While we can debate the reasons, Professor Stiglitz’s point is that it does not need to be this way and that change does not require a wholesale tearing down of the system. I for one do not know of another system in the world that is doing any/much better (maybe some of the Nordics) and I don’t think we should “throw the baby out with the bath water”.
Words matter, narratives matter, and I applaud Professor Stiglitz for using the Progressive Capitalism term to lower resistance to his constructs. Obviously, given the connotation of the word socialism as learn in our education system - our collective fiction - using Progressive Capitalism as a label is wise.
6
Forgive my presumption, Mr. Stiglitz: you're somebody and I'm nobody. And the arguments set forth in this article have a lot of appeal to the justice-minded.
But...isn't this an argument for more growth (albeit a kinder, more equitable sort of growth)? And--given the very finite extent of natural resources on this tiny planet, and the extent to which they are overburdened by human development already--is any kind of plan calling for more growth deserving of the title "progressive"?
Perhaps a truly progressive economic policy would reward stasis or even negative growth. There seems to be enough natural resources (so far) for everyone on the earth to live in comfort and dignity. The fact that our policies, both economic and political, permit only a portion of humans to enjoy that comfort and dignity (or rather, grandiose luxury and compulsive over-consumption) while the rest struggle in grinding poverty is regrettable.
I would suggest that for a policy or scheme to deserve the adjective "progressive," this inequity, and the irrationality of infinite growth in a closed system, should be addressed.
1
@William Romp Science and smart regulation can reduce the negative environmental footprint without sacrificing real growth of material and intellectual wealth. E.g autonomous vehicles will reduce death and parking footprint enormously while increasing wealth. Thing are getting smaller with scientific advancement. e.g. Look at the computer size evolution - from massive room size machines to handheld supercomputers ...
1
@William Romp
It seems that the term "sustainability" has gone out of use. Maybe that is because we are so far from attaining it and so busy doing the opposite?
1
@William Romp - And why, pray tell, should we be restricted to this tiny planet? I think a glance at history would show you that the human race is at its best when it has a frontier and challenges.
And we have a huge frontier right over our heads. For all practical purposes, the solar system is infinite. If the defense and space budgets had been reversed for the 50 years, we would have colonies in near earth orbit, more energy than we need from solar power in space (https://earthsky.org/earth/space-based-solar-energy-power-getting-closer-to-reality) and perhaps even a vigorous mining industry in the asteroids.
All we need to do is to lift our eyes up from the mud.
Buisness needs to understand that a strong middle class provides the market for growth. Reducing the upper managements pay and redistributing this revenue to include all the members of the company, will put more money into the market place. Yes upper managements has less money, but it still retains the power. This monetary sharing and , more importantly, acknowledgment of the “worker Bee’s” contribution, creates a stronger bond within the company and through out the Country. This bond has disappeared and is key to revitalizing and repairing both our monetary and political ills.
2
There is plenty capitalism in socialist societies, it's just that the organizing principle of so-called capitalists countries is the maintenance and preservation of capital, where in socialist countries its the maintenance of societal health and welfare. How else do you explain socialist countries, on the capitalist-socialist spectrum from China to Germany, being such effective competition in capitalist competition?
6
Professor Stiglitz is right. Without rules and regulations markets cannot function. People need to be driving the capitalism not the other way round. If we don’t want to regulate markets, then let’s also not regulate crime or traffic. An uncontrolled market will lead to a society that is greedy, ruthlessly exploitative, unequal and short sighted. A failing democracy would only strengthen this vicious cycle.
7
Extreme economic inequality boils down to a failure in government. America was founded on exploitation and we can not still bring ourselves together to do whats right for society at large. Of course there can and should be sensible guidelines as to the percentage of profits individuals can claim as members of the interconnected systems of American society. But there is a flawed mentality baked into our DNA that is comfortable with economic exploitation; that actually equates it with freedom.
1
It isn't simply trade with developing countries that drove down American wages, it's so-called "free trade" that allows capital and commodities to travel more freely than ever before, while continuing to restrict the movement of labor across borders. That's simply a recipe for exploitation. But because capitalism only operates to grab as much wealth as possible (that's its function), don't expect to see needed labor reforms any time soon. We do need to reorganize the social relationships around work--that is to say, change the mode of production--but piecemeal liberal reforms are not sufficient to get us where we need to go, if we want our world to be a fairer, more just place.
1
The problem is not the system. The problem is the failure of the ruling class, the caretakers of our collective consciousnesses, to put in place mechanisms which regulate human frailties.
1
What happened to the "peace dividend" from the fall of the Iron Curtain? Doubtful the rise of China or the uncertainty of North Korea can explain a defense budget as large as it is. Did we really have to spend (borrow) 3+ trillion dollars for Iraq, Afghanistan, Libya, Somalia and Syria? More important, can our US democracy survive and our economy function if we aren't preparing for or waging a war? Is there truly such a thing as a "peacetime economy" in the US? Was Eisenhower a seer when he spoke of how captive our economy / democracy would become to the US "military industrial complex?"
3
@Rob B
America is truly the warfare state, with the majority of tax dollars paying for arms and warfare. Moreover militarism and the imperialist mind set dominate our society's mentality. . . . Every issue of this newspaper, for example, devotes several stories designed to arouse fear and hatred of various foreign lands--China or Russia, Venezuela or Iran. What ever country is scheduled next for attack by the US military, the American media can always be relied on to cheerlead the slaughter.
Too many people believe that "the markets will sort it all out in time".
Perhaps...If you have enough time.
Even with all the money in the world, that's the one thing the market can't buy.
Maybe we should all be praying for time.
Do you think we have time?
(Apologies, George.)
1
Pretty words, but probably too little, too late. The term 'capitalism', fairly or not, is now the term for how America arrived at our current desperate situation. The Capitalists have strangled the golden goose in their efforts to wring every cent from it's depleted bowels & keep all the loot for themselves, by hook or by crook. The term for the antidote to that is now 'socialism', accurately or not, & I personally applaud those fighting in that direction, whatever they call it. The new 'democratic socialists' may be in for a harder slog based solely on their choice of label, but they clearly have a vision of openness & fairness in society that has long been missing from our social & economic policies. If anybody asks me, I would advise the DSA to proceed carefully & deliberately, & to listen to thinkers like Stiglitz who know how things work. I would also advise Stiglitz not to splinter the progressive effort over terminology.
4
Sorry, but Progressive Capitalism in the USA (as opposed to northern Europe) provides a comforting, distracting fantasy from the coming disasters of climate change, rampant ecocide, more inequality, less legitimacy, and deepening fiscal crisis.
In such a context, capitalism can go rogue. Profits (the only driver of capitalism) will decline as consumption stabilizes with slow population growth and as more investment shifts to armoring cities against climate intrusion and cleaning up after floods, fires, etc. Social safety nets will shred for the sake of austerity.
Progressive Capitalism will become pretty fences on the expanding gated enclaves of the Social Darwinists who scoff at Progressive Capitalism.
Game over, Dr. Stiglitz. Nice try.
2
@Ken Wynne
OK, fine opinion, but what do you propose as an alternative? Stay the course, because, oh yeah, things are going so swimmingly well around the world right now?
3
I agree with your headline. Unrestricted Capitalism or welfare capitalism is wrong but not moderate progressive capitalism.
1
What's missing from this account is the significant challenge that climate change will present to our economics both today and in coming decades. the likelihood of catastrophic real estate crashes in places like Miami coupled with skyrocketing insurance costs for flooding and fires will be a hammer blow against traditional capitalism. The only question is exactly when and how hard the blow will be.
2
Capital is the wealth that used to be encompassed in real estate. I wonder why wealth is not taxed as we without a thought, let alone a second thought, tax real estate?
Also as to the issue of wealth moving freely around the world seeking the least regulation or control, I wonder whether the question is not who can come to this country but rather who must be forced to go elsewhere? Perhaps be required to live with their offshore wealth and forego the protection of the US military establishment?
1
The perceived high priest of unregulated markets, Adam Smith, actually expressed acknowledgement of a need for economic laws and regulations, as well as deep suspicion of the motives of businessmen. He recognized the difference between such particularized interests and a more general public interest and how they might threaten it. He did this in the very same book as the more recognizable "invisible hand" metaphor. It's a sort of case study in how complex and nuanced analyses get cherry-picked and then distorted to serve particular policy preferences.
2
Joe needs to go back and study the Enlightenment. The temptation to engineer "social justice" is not progress but an ill-informed, tiresome, and dangerous step backward. As an educated man he should know better.
2
Capitalism as we have defied it is destroying us..
Negative external costs and positive incentives must be built into every investment decision. They are not. These costs and incentives must be applied to every human economic activity from the mine to the chemistry lab to the assembly line to the opera house to the athletic field to the hospital at the time of entry into the market. Economic outcomes with negative social and/or ecological value must be recognized. Negative Externalities need to be measured and priced in up front so as to discourage, temper, or at the extreme eliminate investment.
In our present world, none this is happening.
www.InquiryAbraham.com
1
all of which is to say that Republican policies, priorities, and laws have been, since Reagan, pretty much a disaster for the country.
15
Stiglitz's concept of Progressive Capitalism sounds a lot like old- fashioned socialism to me, which is fine and dandy, especially when considering a country's moral obligation to provide certain services to ALL of its citizens, like affordable heath care.
Perhaps that's just what we need, reworked names for old but good political ideas, especially those which have tended to be demonized by our Corporatist Socialist central government, which saves most of its economic safety nets for the nation's most powerful minority...the wealthy.
5
'Progressive capitalism' is a nice effort to reconcile two independent forces: The social instinct on the one hand, and the profit motive on the other.
But in this argument, there is an addiction to a flawed method of reasoning: Economics.
'Economics' as a field of inquiry, excludes consideration of the environment, because it has no price and cannot be reliably "counted".
This misperception of scarcity, that the environment appears to be free, leads to a profit motive with respect to consuming the environment, as opposed to utilizing resources from the economy which cost money.
It is Adam Smith's "unseen hand" guiding the economy to destroy the environment. I call this, 'the universality of environmental market failure'.
So while I agree 'progressive capitalism' is an improvement over our current situation, where industries that need regulation have captured control over the regulatory process, this argument still for me misses the fundamental issue with which we must come to terms.
The environment cannot continue to be free, and still exist in a form that supports the diversity of life that has evolved since the dawn of time.
We are our environment, and its fate is ours.
4
@Oh I am not certain you are correct. The environment has more than a little value and can be priced in terms of the cost to clean it up. Professor Stiglitz is not advocating pure capitalism, but a progressive version that balances the needs of the many with the advantages of a capitalist framework. There is room in that framework for environmental protection and reduction of humankind's carbon footprint.
2
@G James: Yes, I agree and I'm glad you clarified this point. Thank you.
Any so-called American 'democracy' (I'll let the laughter subside) that allows a horrid decision like Citizen's United is basically handing over the keys to money. With the expected result as we are seeing.
Money has inserted an ignorant, mendacious vulgarian to sit in a seat once occupied by FDR and other serious men. The shame may be with us forever.
165
@Plennie Wingo. Really? Money go Trump elected? Hillary double the money and still lost. Trump’s election proved money isn’t everything these days in politics.
3
@Plennie Wingo
FDR was a privileged product of inherited wealth ( and by all accounts no less a bully and a misogynist than the current occupant of the White House). He exploited an economic crisis to impose socialist economic policies that would have failed had they not been supplemented by the extraordinary demands of a world war. No doubt he took brave and decisive action when it was critical to do so but the notion that he was a great thinker or a saint needs to be dispelled once and for all.
5
@FNL
From an economic perspective, WWII was a huge government employment program: Everybody had a job.
And it does not require a war to replicate that economic windfall. You do, however, have to think and act in big ways, not half-measures.
5
Capitalists are the problem with this world.
3
@Daniel . . . . .. & religious zealots.
What amazes me is most of the "Progressives" are making bank in the universities, STEM etc. if they really wanted to change the system they could. All their kids go to the best private or public schools they all have benefit from Wall St greed, etc. They just "say" they want to change the economic system because it make their little liberal minds feel better, but then they still eat the fat of the system. Liars and hypocrites
1
Basics of an ongoing civilized society 101.
2
Cooperative socialism is far preferable to trying to reign in the monster that capitalism has once again become forever, with war on the inevitable horizon.
2
In the era of Labor Arbitrage ?? Labor/Unions political influence is deader then the passenger pigeon. Pretty much anytime a union tries to make stand? Well I still remember take the wage cut or we ship the jobs to Mexico. We didn't they did. As for the Social Contract?? LOL It died along with the Middle Class. Today's Social Contract despite Sound Bytes and Pious statements from Politicians, Billionaires, and Multi-Millionaires is "I've got mine s-rew you jack!" And in era where capital can move to congenial regulatory environments around the world at the push of a button to get away from laws they don't like? It isn't going to change in labors favor either. Talking about strong Unions being able to change things or a new Social Contract? Well that's just as big a fantasy has the Arabian Nights or the Easter Bunny!
3
Every time I read an article like this, I find myself asking: who is “we”?
5
@Andrew M.
Preamble to the US Constitution
"We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America."
1
@Andrew M. The people. "We, the people". You're welcome ;)
"Progressive Capitalism Is Not an Oxymoron"
It will be inside 50 years when automation will be able to do every human task... How is a society built on jobs to exist when there are literally none? And do you think capitalism is going to forego advancements in labor cost reduction (automation) just for sheer societal benevolence?
Capitalism's days are numbered... so yeah, "progressive capitalism" is literally an oxymoron. You might be versed in economics... I suggest you crack a few tech magazines and see where that's heading.
2
@J Having recently seen skilled plumbers get themselves into impossibly narrow spaces to repair a failing drainage system in a 60-year-old home, I find it hard to imagine that automation will manage to do tasks like this, at least in the next 50 years. Skilled services that require constant creative problem solving in uncontrolled environments are going to be done by humans for a long time.
Witness also the current unraveling of the "self-driving car is right around the corner" meme; it turns out that this is a much harder problem than most people imagined, as is the creation of "general machine intelligence" that takes into account ambiguity and unfamiliar environments and challenges.
1
"The neoliberal fantasy that unfettered markets will deliver prosperity to everyone should be put to rest." And who brought this Neoliberal fantasy to its fruition? Every president since Carter both Republican and Democratic. I would like to boot the Neoliberals from the Democratic Party altogether. They've lost their way. The criminalization of the Republican party has left a void, not in the Democratic Party but the Republican Party. There is no place now for Rice, Powell, George Will, David Frum, David Brooks in the Mafia Party. They should get together with their long time brothers and sisters in corporate America the Clintons, Obamas, the Bushs, Biden, Pelosi and Schumer. Disavow criminalization of politics and take back the Republican Party. Get neoliberals out of the democratic party, we really don't need them anymore. The internet has changed fundraising, the little guy has a chance and there are so many of us little guys. If we let them (Neoliberals) stay they'll just keep doing what they did to Bernie last time. Dump him or whatever lefty has the momentum and assume everyone will still vote for them. It didn't work last time did it.
3
It is not an oxymoron. “Progressive Capitalism” is an empty marketing phrase intended to obfuscate, just like “compassionate conservative.”
4
Progressive Capitalism is being practiced by corporations, many of whom are now providing employees, benefits for new fathers, pay for an MBA, time off to take a sabbatical, work from home, etc.
For a government to do this for 350 million people will need a fundamental change in budgeting. It will need to wean away from investments in defense, introduce consumption tax, provide health care as a societal entitlement.
This will never happen, here. It can be discussed, debated, but the forces that defy will always win.
The reason is simple, we are the most diverse country in the planet, and with almost 60% now a visible minority, the minority does not think we need to "progressive" any further.
1
Nothing is forever. People grow old and die, and are replaced by others who set about repeating mistakes of the past. The population grows, we pollute everything we touch (What is the opposite of King Midas?), and people are more and more alienated from the rich and powerful and their puppets. Amidst all of that, hope lives, art lives, decent and inspiring people persist: in their efforts and by their example, we may survive and evolve to a higher state and earn our self-awarded title of pinnacle of creation.
1
Thank you, Des. I like this article very much. Mr. Stiglitz is a smart man and I read his opinions often. As I scrolled the comments, full of nay-saying doom and gloomies, I started feeling hopeless. And then, I read your comment. I feel the same way you do, so thank you. I can stop reading the comments now :)
1
We've slid too far down the rabbit hole, I'm afraid. The Right has morphed into Fascism Lite, with many adherents intellectually unable to grasp "Even Steven" as a concept. Fair play just ain't in their vocabulary. Their xenophobia coupled with their tribalism prevents them seeing anything than what their faith-based politics allows.
Also, economists on a whole seem to always ignore the elephant in the room; diminishing resources. The economy is going to face sooner than later vast shortages of basic raw materials, and we as a planet should be planning for that. The Market is going to get brutal, and then be obliterated when currency no longer matters. We could stave that off with proper management of population growth, resource renewal where possible, and conservation of non renewables. But we all know that ain't going to happen in THIS universe.
At any rate, a nice editorial, but human nature (the worst parts) have taken center stage, and won't be denied until utter disaster strikes.
5
Walter Scheidel (The Great Leveler) has documented 5,000 years of every civilization's tendency to concentrate wealth. From the invention of agriculture till 2019, every where, at all times, except when upended by war, disease, revolution, or state failure, EVERY system has created and increased inequality to the point of unsustainability.
Even in the more equal societies of modern Northern Europe it is only government transfers that bring inequality down to historically unusual levels. The underlying economies continue to steer market income (pre-transfer income) to the 1%.
Dr. Stiglitz is absolutely right that we need to create mechanisms to redirect the market. Free markets left to their own devices will always result in returns to capital increasing faster than productivity, which simple arithmatic tells us HAS to result in the owners of capital ending up with all the toys and cookies.
19
The macro-economic analysis and statistical arguments make the case for income inequality. Yet, the proposals to rectify the matter have their own limits. The most basic limitation is the assumption that a business or corporation exists to deliver equal income rather than to compete for economic success. Self interest and competition are hallmarks of human nature. Capitalism accepts this reality. Regulations and tax policy can and do help reign in the excesses of unbridled market capitalism (an idea that has been accepted in business since the 1930's). However a consequence of government as the referee it is that large sums are invested to lobby the referee to tilt the playing field. Businesses who don't benefit from tilted field then claim with some justification that the system is "rigged", and that the problem is government. From an individual tax perspective, dramatically raising the highest marginal tax rates will invoke strategies to legally disperse income. Progressive Capitalism alone with regulations and tax policies is at best a tenuous solution.
1
@Horsepower: "Self interest and competition are hallmarks of human nature." Sure. I once asked an American businessman what he thought of "enlightened self interest." An oxymoron, he said. It may be that there is no solution to human nature, tenuous or otherwise, but unless we try, we're left with a procession of disasters--the beneficial effect of which might be the solution of the human infestation of the planet.
1
Dr. Stiglitz, I am old enough to remember well those hope filled years just after WWII, that you mention. What I remember most is that virtually all items on store shelves bore the proud label Made in USA. I also remember that cities and town (the ones that I knew best) identified themselves by what was made there by their fully and proudly employed citizens. We actually even taught USA geography in school by labeling our cities by what they were famous for making. Remembering that makes one nostalgic.
2
@Penseur Welcome to 2019
Yet again, the "invisible hand" quote is misused. The phrase "invisible hand" appears ONCE in "Wealth of Nations":
"...he intends only his own gain, and he is in this [a specific matter under discussion], as in many ["many" does not mean all] other cases, led by an invisible hand to promote an end which was no part of his intention.." (Book IV, Chapter II)
Nothing in the book supports the way the phrase is generalized. I would have expected better from Mr. Stiglitz of all people.
1
"Capitalism poisons everything." With regard to the activities of players in an economy who are true capitalists, seeking after increasing profits and marketplace dominance, capitalism by its very nature means exploitive capitalism.In a representative democracy such as ours, the game that the capitalist players are playing includes influencing government such that its regulatory authority not only does not get in the way of their profit-making, but preserves their position in the marketplace with minimal inconvenience from competition and regulation.
Joseph Stiglitz rightly calls for a social contract that will demand the commitment of government to assisting the common good. That is an excellent proposal, for a long-needed reform. But it is not accurate to call it "progressive capitalism." In itself, capitalism is not progressive. This would be just an accommodation of capitalism to work well within limits to suit an essentially progressive arrangement that has the common good as a principal priority.
But even as contractors tell riverside or seaside homeowners, "Water always wins," one may well suspect that the capitalists in time would always manage to undermine even the finest-looking progressive arrangement.
5
As usual, Papa Joe nailed it. Thanks you New York Times for publishing this kind of material in this newspaper. In countries like mine, Costa Rica, we did have a highly acceptable level of progressive capitalism; however, due to lobbying, populism, and a tendency of local media to only publish the negative things our government does, we are losing it. Losing it as I write this brief comment.
11
Progressive capitalism is lead by progressive capitalists. Stiglitz is correct: we do not need progressive, democratic socialism if progressive capitalists stand up and assume leadership.
Today, archetypical capitalists descended from Charles Dickens' times and writings rule our political and economic landscapes. Most, including the one the Electoral College anointed our president, never got past the Classics Illustrated introduction of Dickens' novels. They never got to understand that a deregulated market system, while provided wealth for a few beyond imagination, will feed on itself, destroying the strengths of our lands, our labor, and our capital.
Capitalism, left to its own devices and without effective social control of those things that are social,those things that are public, will destroy the social, environmental, and financial structures it is built upon. Land, labor and capital, all public goods, all social goods. had to be legally and culturally transformed into as market artifacts to make the system work. We, present business and Republican leaders excepted, know from Charles Dickens onward what happens what destruction occurs when public and social are controls are weak.
We then know what path we will traverse with no new direction. We know what hopes democratic socialism and the Green New Deal offer. We have yet to see progressive capitalists congeal into a political movement and present us with a comparative and competitive vision.
3
I agree with everything Stiglitz wrote -except- the following:
One can get rich either by adding to the nation’s economic pie or by grabbing a larger share of the pie by exploiting others — abusing, for instance, market power or informational advantages. We confused the hard work of wealth creation with wealth-grabbing (or, as economists call it, rent-seeking)...
Stiglitz is being too charitable in saying that "we confused" wealth-creation with wealth-grabbing. This was not something we confused or even forgot about. This was deliberate. The late Supreme Court Justice Lewis Powell's infamous memo to the business community advocated business-class dominance of the political process - government for and by business. The late Milton Friedman's advocacy of shareholder capitalism - the idea that business existed solely for the benefit of shareholders, without regard for the interests of other stakeholders - e.g. communities, employees, suppliers - created and justified the wealth-grabbing Stiglitz describes. And the late President Ronald Reagan disparaged government as "the problem", setting the stage for its underfunding and incompetence.
Both Powell's political model and Friedman's economic model were simple and easy; they emphasized the dominance of one group and the importance of only one factor. They were factually wrong; America's society, polity and economy are more complex than that, and morally wrong; they encouraged and rewarded the exploitation of some by others.
139
@Aram Hollman,
Thank you for this excellent comment!
4
These crazy people will publish anything.
I'm joking - it's actually great to read Mr Stiglitz writing for the NYT. Thank you Joseph, thank you the NYT.
7
The time has come when we must understand that universal health care, affordable higher education along with free preschool for working parents, internships, apprentice opportunities, and an emphasis on meeting the demands of a workforce that will work along side AI and robotics is key to our 21st century. Alternate energy, repairing and rebuilding our infrastructure will create jobs as well as address the problems ahead.
It's very true that American innovation and entrepreneurship is vital to our survival. Focusing on the basic human right to health care without fear of unaffordability, education of our people is the foundation of a viable society.
Our priorities are skewed. Investing in people is what makes a great nation.
7
Always, small, optimistic voices have us consider a way to bail the boat. I'm not optimistic, because there has never been a way ("democracy" notwithstanding) to convince the men who hold power that they must mitigate their very desire for power. Isn't that really an impossible task for homo sapiens? As long as men have the toys of power, they will exercise them in a way that's hardly beneficial for the Commons. Perhaps it will take a gross revolution. But then, won't there arise from the ashes a new phoenix of tribal power whose "way" is the only way? Our late-stage capitalism is sucking the wind from the sails of humankind as the boat continues to be consumed by the planet's rising "waters."
5
Learning how to discern truth and how to guess where the most significant truths may lay is the core of the human condition.
Only an inspired, knowledgeable, wise multitude, as arises only from direct democracy, can foster truth maximally.
Experts In Name Only (EINO) oppress rather than liberate. Consider the 737 MAX, or Notre Dame (no fire for 856 years there… so modern experts are not up to Middle Ages standards!) Democratic experts were in power under Obama. Result: more inequality than ever, and the first multi year decrease in US life expectancy in a century.
Truth is the main industry of humanity. It always was. Truth has been humanity’s greatest wealth.
Weakening of antitrust enforcement, and failure to keep up with changes in our economy made markets more oligarchic. In the 1990s, the Banking Act of 1933 was demolished.
Our vicious cycle: greater economic inequality brings in a money-driven mental system, instigated, engineered, and managed by plutocratic media, to more political inequality, and thus more tweaking of laws and regulation to increase monopoly power, as happened under in the last few decades.
Since civilization exists, civilization has been organized as the state, defined by military force. Free markets are just freebees, led by the wealthy. When they are not, those few wealthy individuals end up controlling the state.
Thus complete deregulation leads to economic, political and intellectual fascism. From misunderstanding what civilization is.
2
“...America arrived at this sorry state of affairs because we forgot that the true source of the wealth of a nation is the creativity and innovation of its people...
Beyond outstanding, Professor – kudos...
You talk about what happened in the late 18th century (e.g. apex of East India Trading Co, and Adam Smith’s writings) – but it was a century later that communication became instant (telegraph, ticker, telephone) and energy became portably boundless (coal, oil)...
18th century globalization of commodity production begat the science of economics – because commodity availability had become boundless, but price collapse would be societally catastrophic...
In that vein...
19th century globalization of energy production – and energy-based transport – begat the science of thermodynamics...Though energy availability had become boundless, uncompetitive use would be economically catastrophic...
(engines needlessly big and fuel consumption needlessly high)
The punch line, Professor – math of economics and thermodynamics substantively overlap...
Yet, T tells us things tend to equalize over time – while E insists opposite...
You actually touch on the resolution...
In T, a construct creating inequality out of whole cloth (Maxwell’s Demon) understood to be impossible...
E is the T of systems entirely comprised up of Maxwell’s demons...
Need to renormalize...
Socialism not it...
Progressive Capitalism – getting warmer...
Less Claudius, more Clausius – you’d be on fire...
4
Thanks for having the good Professor in the Times.
Now we need to hear from Professor Richard Wolff.
1
Joseph Stiglitz is a brilliant writer who explain complex economic theories in lucid terms. In the "Great Divide," he says that Martin Luther King inspired his economic theories. It seems like his ideas reflect some of the ideas that Elizabeth Warren is proposing, like breaking up companies like Amazon. Before Ronald Reagan became president, our society was becoming much more egalitarian and we had a mixed economy with elements of free market capitalism and a social welfare state. The middle class was much bigger and there were much fewer destitute people and billionaires. I wish that the American public could understand that a strong and ethical government can bring about shared prosperity.
49
It began in the Reagan era with corporate executive pay increases, stock packages, and bonuses that became astronomical. Corporate boards turned into clubs of good ol' boys who get paid to show up for a few hours 4 times a year and approve insane executive pay packages -- with zero oversight. Plus, executive bonuses got tied to profits. As a result, these corporate "leaders" were incentivized to fire employees, setup shop in China, and minimize everyone's pay but their own.
In a nutshell, this is how almost all of America's economic gains over the past decades ended up going to a tiny number of people at the very top of the pyramid. And that's what it is -- a pyramid scheme that robs the entire population for the benefit of very, very few. It simply has to stop!
While we're at it, let's start by making an example of pro athletes. These people aren't worth 10 million dollars a year, either. Nobody is, right?! Meanwhile, we peons (i.e., sports fans) are paying higher and higher prices to attend sporting events. It's become impossible to take a family of 4 to see a game, unless earning a very high salary.
American capitalism: what a system!
The system isn't broken. IT'S FIXED!
26
The goal of capitalism is to produce excess.
Period.
Where the excess comes from and where it goes, these two factors, make a world of difference, quite literally.
Progressive capitalists will produce excess in a humane way and will apply it for the good.
Driving a 996 ethos and keeping all the excess for the 1% as bonuses, exorbitant salary, stock options, and dividends, will undermine capitalism.
Using cost-savings with labor, making the workplace highly desirable for workers by offering incentives and paying good wages for good work across the board is one formula for progressive capitalism.
1
Capitalism presided to the evolution of the genus Homo. Apes are naturally born capitalists. Land and its resources do not reproduce at will, yet species do. Survivors exist, because they have defended their land and resources.
The apparition of tools and weapons extended the notion of property crucial to survival.
During those millions of years of evolution, some limits to inequality were intrinsic, because the group could only survive if all worked for it, and that could only be done willingly. Force was not an option to insure collaboration, because force was needed against outside forces and enemies.
Civilization threw these evolutionary conditions off, as the increasing powers it yielded enabled the apparition of a superior class capable of fighting enemies, foreign and domestic.
The monopolization of the means of production by these superior types included intellectual capital, which, in turn, brought superior weapons. However, intellectual capital grew the more, the more intellectuals, scientists and engineers were at work. Thus oligarchic regimes, by monopolizing those mental powers found themselves less militarily inventive than democracies, which unleashed those mental creative powers (hence developed better weapons).
Therefrom, the old struggle between oligarchies and democracies.
How to create democracies? By outlawing runaway oligarchies. Thus the Roman Republic put an absolute limit on wealth. Enforcing equality is the fundamental reason for taxation
2
As regards the economics, Stiglitz pretty much nails it. Not surprising, given his impressive analytical powers.
But this is about politics. It's about power, not equality or economic efficiency. The political scientists model politicians and the rich in general as perfectly ruthless and selfish folks, which is a petty good first approximation to reality.
There's an interesting little book called "The Dictator's Handbook" that is worth a read if you're interested in why oligopolies like America are the way they are. Spoiler alert: It's about getting more the pie, not making the pie bigger.
1
An article here today states that Joe Biden is finally prepared to announce his candidacy after wrapping up a sufficient number of deep-pocket donors. As an individual, Joe seems to be a fine person, but he is seen by the flotsam of the Clinton campaigns as the last hope of the neoliberal agenda. If you are a small donor considering a contribution to the Biden campaign, think again. You are a chump. Roughly put, the corporate bundler who raises $100,000, has a 500 times better chance of getting Biden's attention than a schmo who donates $20 - if that. You can't mix small and large campaign donations and expect equity. Confine your largess to the candidates who are not taking PAC money or bundles from billionaires.
Of all the Democratic candidates, I believe that only Sanders or Warren would not give away the store, asking nothing in return, WHEN we have the next financial crisis; all the others are compromised to some degree, chiefly among them, Joe Biden. You can only coast on your hardscrabble Scranton beginnings for so long before it becomes stale and irrelevant.
5
... well, at least one other economist agrees: Me.
7
That's great! Thank you, Maggie :) I'm not an economist...but I agree, too :)
2
For a moment there I thought I was reading an OpEd by Andrew Yang.
There is one candidate not only talking frankly about the state of our economy, but coming up with viable solutions that could give hope and at least a modicum if comfort to Americans: Andrew Yang. His vision is bridging voters across parties.
2
Progressive Capitalism is the antidote to the unsustainable corporate/Billionaire welfare that the Republican Party espouses through trump and his cronies.
1
This article from Stiglitz is in essence enough to solve all ailings of todays America's economy.
such as
"The neoliberal fantasy that unfettered markets will deliver prosperity to everyone should be put to rest"
But we know it won't
Why?
Because there is a much deeper fundamental law is in place.
One of them society evolution in civilizational timeframe.
around mid 20th century USA was belong to advanced western nations club. (France, Canada, UK, Germany Benelux etc).
Even around 1940 we were teetering at the edge of entering another club and leaving advanced nations club.
This club called extreme population advanced nations. China, India, Brazil, we enter this club around 1980's and we cannot reverse this progress( not in the meaning of all positive progress).
But USA, China, India and Brazil are all advanced nations in terms of Economy, Science and Technology.
They all have same problem, immense inequality. So far none of these 4 nations has any solution for this particular problem, the reason for this desperation : population.
Stiglitz advice or lets call dream progressive capitalism is exist , Scandinavia is best example for that ( even though our illiterate Right wing people call Scandinavia socialist) .
We never achieve that dream, with this population , no chance exist.
1
Nice summary, but it stops before the interesting part: “How do we get there from here?”
I don't see the way forward, because:
— As the author points out, our political system is now driven entirely by money. The people who have most of the money have a very simple agenda: they want to secure themselves and their descendants as America's permanent, hereditary ruling class. That's not necessarily an evil ambition, but it doesn't have anything to do with the principles on which this country was founded. It's not our franchise.
— One of our political parties has completely sold out to this agenda and the other is too disorganized to resist it.
— The same people seeking this agenda also control most of the nation's media of public discourse, allowing them to channel debate in ways that rule out genuine change.
The result is the sham freedom under which we live now. It's a democracy version of the Hotel California: You can check out any time you like, but you can never leave.
So how DO we get out?
8
The radical right-wing selectively cherry picks Adam Smith's Wealth of Nations to suit its feudalistic 'free-market' views....completely ignoring Smith's equally or more important work in The Theory of Moral Sentiments which addresses the importance of morality.
Smith also warned in The Wealth of Nations about the collusive nature of the business interests:
"Masters are always and every where in a sort of tacit, but constant and uniform combination, not to raise the wages of labor above their [prevailing] rate....masters, too, sometimes enter into particular combinations to sink the wages of labor even below this rate."
Smith said business interests frequently engage in a "conspiracy against the public or in some other contrivance to raise prices."
Smith also portended that a true laissez-faire economy would be distorted by businesses and industry scheming to influence politics and legislation.
The interests of manufacturers and merchants "...in any particular branch of trade or manufactures, is always in some respects different from, and even opposite to, that of the public."
Adam Smith stressed the fact that everything in a free market depends on a moral foundation of trust and honesty, something completely lacking in winner-take-all Grand Old Plantationomics.
Adam Smith’s economic view was that the greedy, self-interested 'free-market' be constrained by basic morality.
https://www.psychologytoday.com/us/blog/the-fair-society/201202/adam-smith-s-psychology
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@Socrates
Since we've seen basic morality fail to constrain the free market's excesses, a good start would be to legislate protections for the 99+%: improving public education; limiting money in politics; granting employees more rights (e.g., limiting contract labor, non-compete agreements, and restrictions on collective bargaining); and having an income tax system that is truly progressive on both income from labor and capital. A different approach, consistent with Mr. Stiglitz's column, to Make America Great Again for the middle class and those who aspire to reach it.
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Morality is whatever somebody says it is! Often ridiculous. We're looking for civility Andrew respect.
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@Socrates
The GOP and their libertarian ilk have of course embraced Any Rand to give them some kind of moral cover for their greed and selfishness. Naturally, every addled schoolboy embraces Rand for a few weeks or so while in the vise-grip of puberty, but once things settle down a bit - they move on.
Not Trump of course. Or the horrid Koch brothers. Or the loathsome founder of Uber. The list of vulgarians goes on and on.
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Capitalism has to be made subservient to compassionate Democracy - which is truly what encourages Life worth living. VOTE!
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Great article. But Stiglitz is wrong about what Adam Smith says in “Wealth of Nations” about the “invisible hand.” See Professor Ian Simpson Ross’ books for the definitive Adam Smith.
Smith perfectly describes what has gone wrong in our country in “Wealth of Nations,” chapter 11, III, 3:
“...the rate of profit does not, like rent and wages, rise with the prosperity and fall with the declension of the society. On the contrary, it is naturally low in rich and high in poor countries, and it is always highest in the countries which are going fastest to ruin.”
“The interest of the dealers [those who are employers and/or live by profit] ...is always in some respects different from, and even opposite to, that of the public. To... narrow the competition, is always the interest of the dealers. To... narrow the competition must always be against [the public interest] and can serve only to enable the dealers, by raising their profits above what they naturally would be, to levy an absurd tax upon the rest of their fellow-citizens.”
“The proposal of any new law or regulation of commerce which comes from this order ought always to be listened to... not only with the most scrupulous, but with the most suspicious attention. It comes from an order of men whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even to oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it.”
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While I admire Mr Stiglitz and agree with many of his views...
I think it may be naive to think that we can transition to the kind of country he would have us be .....
without ..not only major upheaval ...but major conflict..perhaps akin to a civil war..
.between the "haves".. who now have spent generations..sculpting this society and economy to their liking
And the "have-nots"...who while they are in the vast majority
Of our population..have no power...and much worse ..have no cognisance ..of the situation they are in
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Mr. Stiglitz, call it what you will - the words have been played with alot lately. But if we don't correct the vast income inequality rampant today, we will see our brightest young (except for those with no conscience who seek wealth by any means) try hard to emigrate to a better country - one of the Scandinavian nations, perhaps. The problem remains that our government has been essentially bought by the very forces that fight against any sort of economic fairness. Both political parties are equally culpable in their own way.
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IMHO, I wish he would be more specific in his proposals, but I would pose that there is no such thing as a free market and to borrow an idea below about money is a common system to make trade easier than a barter. Anything else is some derivative of a trade and the easier we let money flow around the more that distorts the original bargain and if there is no cost to that those that run the capital markets gain money and power and with technology as it is its accelerated out of control. I’m not saying to stop it but free roads still cost to make them and the more travel the more cost is necessary. It’s not ever a pure market and government ignorance is a decision unto itself. The glow of capital must be taxed so with increased growth one can decrease deficits. Wealth must be taxed. Transactions as well They can all three be very low rates excluding small individual amounts but it can widely increase the base and keep rates down. People say market forces don’t work. They’ re wrong. It’s how you adapt to it that’s important and how you recognize and ride it. There is no such thing as a successful total free market any more than a totally controlled market is possible. You can’t ignore the market because it won’t ignore you. Yes progressive capitalism is possible. Not only that, it’s necessary. If Democrats can recognize that we’ll all be better off and Trump can then wear more than orange hair.
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"We are now in a vicious cycle."
The wealthy from the past, whether last week or the last century use the money to control the government to write laws and regulations to further enable their effort to concentrate wealth into their bank accounts, that is what they use government for. Then they get richer, have even more control over the government and at some point the economic system is under siege by the plutocracy and the government is under siege by the oligarchs.
I believe this was pointed out in the second half of the 19th century by some German guy...
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Right on! But good luck making the reforms needed for a healthy society, economically and politically. The right wing has a stranglehold on America, and that is unlikely to change. Sorry to say it, but that's where we are. The era of Eisenhower is gone, replaced by Gordon Gekko. God help us.
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We need some reality. And we need something better than somebody's 'god' to help!
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With the deepest respect, it seems to me, if you look at most economies, almost without exception, there are several trends observable over the past few decades.
1. Wages and salaries are stagnating.
2. There are more and more people living in an inert mass of tolerance, and helplessness. The divide is more clear between a small number who can get progressively more wealthy and an increasing number whose wealth is being degraded to some common mean.
An increasing number of people, families are suffering silent pain, in trying to meet the costs of living. It’a no wonder that helpless angry people lash out and support Trump caught in his hypnotic thrall, the grand emoter for the marginal in our society. They know nothing will happen to elevate their conditions, but can feel some personal power in Trumps outbursts.
One can observe the increasing number of mega rich oligarchs , who see themselves above and beyond any legal system. This is no theory. It’s happening now.
It is a return to feudalism in a different guise, at a different time. The so called middle class are becoming serfs, working and living on the goodwill of the Lords, the oligarchs. Remember one of the apologisers for capitalism, Greenspan called those who would be displaced by robots, ‘scrappage’ of the system.
There are a number of so called mixed economies in the world that function in a way congruent with the authors positive view, but are also deteriorating.The problems are endemic.
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Covers many bases, including some others miss, such as behavioral economics and its critique of the assumption that people are fully rational. I hope the Dem candidates and Repubs, quietly in agony over their party's direction (as I would like to imagine) and looking for ways out, are paying attention.
Three points, though.
I hope the Times stays on this. Follow the pick-up of what Stiglitz is calling "progressive capitalism." Editors should expect reporters to use the appropriate adjective in front of their use of "capitalism" or "business"--there are many now, that best gets at what they are trying to say.
Relatedly, we should be less hung up on a topic in yesterday's Ross Sorkin piece on Stiglitz: less caricaturing and weaponizing of what is labeled "socialism," as we might need elements of both it, and other "isms" and "ologies," as we mix, match, and blend ideas to try to creatively work our way through the murky challenges ahead. Less certainty would be helpful too, although that might not play well in campaigns.
Inexplicably, there is nothing here on the biggest change that needs to be made to capitalism: the environment. Fortunately, there are now many ideas to do that. Stiglitz can continue to call it "Progressive Capitalism," but these ideas can be found within sustainable business, corporate social responsibility, Purpose, B-Corps, social enterprise, regenerative economics, green design, etc.
The mainstream potential of these are being totally missed-by everyone.
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PJrogressive capitalism is not possible, because it defies the major forces in human nature. Human beings are both competitive and cooperative. The effort to restrain or "regulate" a structurally exploitive economic system will fail sooner or later. We need collaborative and cooperative economic systems, which can be competitive as well without being capitalistic. Words like collaborative and cooperative have disappeared from our conversations about econoomic systems, the closest descriptor, which is grounded in implicitly competitive relationships/structures, is "win/win".
As a physician I can personally attest that "for profit medicine" does not provide health care, I have seen up close the degradation of care in medicine by the "efficiency of the free market". If owners and workers are the same people in a "business", why not call it what it is? It is not capitalism.
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Stiglitz wrote, "If we had curbed exploitation in all of its forms and encouraged wealth creation, we would have had a more dynamic economy with less inequality".
If anyone could accomplish the above, I would say "Mazel Tov". Otherwise, we muddle through it. Congress relaxes regulation and we get our pharmaceutical mess. Congress tightens regulation and then there's no incentive to produce new medicines. There is no perfect solution. "Wealth creation" involves exploitation and unfairness, right or wrong. It's an inherent part of the human condition. The best we can do is to find some balance... yet when has that ever really, really happened?
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This changes when you participate in the democratic process. It takes work. At the very least, it requires citizens take care to inform themselves appropriately and vote accordingly. We do the very bare minimum, and that's only roughly 46% of eligible voters. The rest do not participate at all.
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More of earned income now so fluent in corporate interests needs to be filtered down to the worker. Taxes certainly need adjustment after the debacle passed by the GOP in 2017. The uber wealthy need more tax obligation. One big sign of warped economics is the gargantuan incomes in our corporate edifices. The jell of money at the top of our food chain needs reapportionment clearly.
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If I were an alien anthropologist studying capitalism would the below word salad be the gist of it?
Part 1 of 9,560:
I have learned that it is better to specialize in something and trade for other stuff someone needs. Generalists who do everything themselves are poorer than specialists who trade. But specialists have the additional risk of becoming obsolete and need an insurance hedge to buy time to specialize in something else.
To create a large number of trades, an economy trading specialists require capital to be a catalyst. For instance, craftsman A may need something from craftsman B but B may not need whatever craftsman A produces. We create a medium of exchange called money so a trade from B to A can happen without a double coincidence of wants requiring A tradeing to B. Then B can trade with whoever does produce what they need.
The government is in charge of minting the medium of exchange. Ideally the medium of exchange is inexpensive to create otherwise we waste finite resources like energy to mine gold and bitcoins. The medium should also be hard to counterfeit with has a stable value over time. However, the medium of exchange does not necessarily have to be scarce to have value. The threat of prison from a failure to pay taxes is enough incentive to give money value and force everyone to adopt a single currency for trade.
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The idea that the federal gov has to pay for things, good & bad, with taxes or borrowing is just plain wrong. The question "Can we afford this?" is the wrong question.
The gov doesn't need your money. It can (thru the FED) create as much as it needs out of thin air. Just think about where money you pay your taxes with came from in the first place. Unless you have a printing press in your basement, it originally came from the federal gov.
But there's a catch. If the gov needs to create too much money to do the things we want it to do, we may not be able to make enough stuff to soak that money up & will have too much money chasing not enough stuff, i.e. excessive inflation. This is usually caused by shortages, e,g, of oil.
That's where taxes come in. Taxes allow the gov to take back the excess money & prevent inflation. The purpose of taxes is to adjust the amount of money in the private sector. The more we can produce, the lower taxes can be.
So the way to run things is to spend money to facilitate production. Tax cuts do this, but in an inefficient way. If we cut Daddy Warbuck's taxes, he does not need to spend the money; he uses it for financial speculation. If we cut poor Joe's taxes, he spends the money on stuff--food, house paint, etc.etc. This promotes production of food, etc.
Even better if we pay Joe to fix a bridge, the money still gets into the economy, AND we get the bridge fixed.
Remember, the federal gov will run out of money when the NFL runs out of points.
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In "Wealth and Democracy." Kevin Phillips points out that there is a feedback in economic distribution because as the rich get richer, they use their wealth to get more power. They then use their power to get more wealth & so on. In the olden days they hired gangs of thugs called knights to extort money from the peasants & merchants. Today they buy politicians to pass laws that benefit them financially.
There seems to be a tipping point where this process becomes impossible to reverse. When inequality becomes bad enough, the country soon goes down the tubes. He gives several examples, e.g. the 18th century decline of the Dutch Republic.
According to Phillips, the great success of America has been that before the tipping point was reached, something has always happened that reverse the flow of money upwards, e.g. the rise of unions, FDR's reforms.
In his book Thomas Piketty defines a quantity, ß, which is the length of time it would take the entire income of a country to purchase the capital of that country. It is a measure of the relative importance of capital & labor, & roughly correlates with inequality. He shows that before WWI, ß was about 8 years in capitalistic countries.
WWI & II destroyed huge amounts of capital, and ß declined, to about 4 years. After WWII an increase in government ownership & regulation, especially in the US, kept ß from rising to its historic levels.
Piketty shows that this has NOT been the case. ß is trending inexorably back to 8 years.
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This is a very incisive article. We do have real world examples of this in other developed countries. The top countries in the U.N. Sustainable Development Solutions Network’s 2019 World Happiness Report all have a focus more along the lines of "progressive capitalism" than does the 19th ranked U.S.
A fundamental problem we face is the very aggressive, pervasive and effective right wing propaganda campaign that the U.S. is immersed in. It seems that our country is in a vicious cycle. Our ever increasing focus on material success results in increased frustration, self interest, cynicism, narcissism, etc. which in turn increase susceptibility to the ploys used by right wing propagandists.
My sense is that we will continue to head down this dark path until we fundamentally revise the American dream.
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Like fire, markets work best when well regulated. A fire in your fireplace: cozy & welcoming; when it races through the rest of the house: not so much.
It seems we have returned to the Gilded Age when it comes to markets; robber barons like Rockefeller & Carnegie hated regulation. The only thing they hated more was competition. When people talk about 'free markets' nowadays, what they usually talk about is deregulation, but they get awfully quiet when it comes to discussing ways to make it easier for new companies to enter the same market.
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Thank you NYT for this fine piece by Joseph Stiglitz who has always been a breath of fresh air in our our piratical capitalist. system.
The choice has never been between capitalism which when done wisely can be a driving force for growth and progressive socialist policies which create a framework for capitalism and the welfare of our citizens. Capitalism with its focus on profits and limited view of society will never create this framework while progressive ideals which focus on the needs of of individuals and the protection of society will not always create growth by itself. They are two hands working together and when we allow them to become 'invisible' we lose our ability to have any control over our direction as a balanced society.
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Prof. Stiglitz: "Progressive capitalism is based on a new social contract between voters and elected officials, between workers and corporations, between rich and poor, and between those with jobs and those who are un- or underemployed." In other words, it's based, or perhaps it only works, if there is truth and collaboration among members of society. Ain't this how evolution works? Societies/cultures descending into self-serving ways of life, mutual demonization, and eventual sectarianism would be well on their way to "extinction" as failed states. As an overall message, not agonizing about implementation at this very moment, Prof. Stiglitz article provides welcome hope and inspiration to me as an American citizen.
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A short history of why capitalism fails to address the needs of the people. The prescriptions by the author are not revolutionary or wild but sensible grounded in reality recommendations.
Hopefully change will come in 2020. Political will to make changes noticeable absent under the current administration. 2020 represents a pivotal election on several critical fronts. Voters should vote because it matters.
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The problem with this argument is that profit must eventually find its origin in the excess of value produced by the labor of workers over the wages they are paid. There is no way around this. Money does not grow on trees. Therefore, "progressive capitalism" can never be other than a further mythologizing away of this incontrovertible fact. For better or worse, somewhere, somehow, cheap labor is making it all possible.
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@Christian Strick writes. "Money does not grow on trees."
Sure, but where do you think money comes from, and how does it get to us?
The federal government (thru the FED) can create as much money as it needs out of thin air. It will run out of money, the day after the NFL runs out of points.
So unless you have a printing press in your basement your money originally either came from the federal government or you borrowed it from a bank that used money from the federal government as reserves.
This money gets to us by federal deficit spending since, obviously, it does not stay in our pockets if it is taxed back.
If you are worried about inflation from this new money, note that prices go down when the value of production goes up. So if the government spends the money in ways that stimulates production, we will not get excessive inflation. Excessive inflation is caused when we cannot increase production (oil embargo) or the value of production decreases (Venezuela, oil).
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the reason trump makes capitalism look bad is because most people dont understand what real free market capitalism is, and what socialism in its various forms is. the facts are that free market capitalism doesnt much exist in the US any more. there is too much government regulation, and subsidization for the economy to be called free market capitalism. that hasnt stopped the republicans from claiming that they are the true defenders of free market capitalism, and that the democrats are all socialists. in fact the opposite is true. For the last 30 or 40 years its the republicans that have been moving us steadily towards a socialist state. But the socialism they are purveying is National Socialism, or as it was known in WW2, fascism. Trump and the republicans may claim to be defenders of capitalism but they are fascists, and of course trump is an autocrat to boot. the inequality in incomes and wealth that we see today is not a function of rampant capitalism. the growing inequality is a symptom of a broken capitalist system. in a properly functioning capitalist economy there is an efficient distribution of wealth which also has the benefit of being much more equitable.
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This would be a much better article if it stated clearly and unambiguously that maximizing GROWTH should not be the main goal of economic policies.
Instead our main economic goal should be to create a just and ecologically sustainable society.
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@Philip Cafaro - I disagree. History has shown that the human race prospers when it is growing, when it has a frontier. We have a huge frontier right above our heads, For all practical purposes, the Solar System is infinite.
We only have to lift out eyes from our navel.
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@Philip Cafaro
Growth should be determined by one rule. Growth, is it need or greed.
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@Philip Cafaro
Maximizing growth has not actually been the main objective - it has been maximizing profit. It has been assumed that profits would trickle down, not only by Reaganites but by neoliberals in the Democratic party. Corporations were originally allowed only for public purposes, but they have become as powerful as government, but dedicated only to enriching some.
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The professor misses one important point about the growth. The colonizers and slave owners profited from rapacious looting as well. That slavery and colonialism ended by 1950s, this loot has come to an end. There’s more competition from the former colonies- globalization. It’s becoming more of a level playing field now. Much of the world has seen more growth in the past three hundred years than the previous two centuries.
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Markets work. Science works. But, like all human inventions, they can be used for good and ill. Lately, the former has been abused by rent seekers and oligarchs, and the latter has been totally ignored and denigrated to the profit of said oligarchs.
Remember that show, "The Six Million Dollar Man"? You probably don't. But there's a point in the Intro where the voice over says "We have the technology. We can rebuild him."
Well, that's the American economy and society. Really we have the money and technology to make our country a great place; we just need the political will. We need a Democratic candidate for President to take up Professor Stiglitz's banner here: it's time for a change, not just a generational change, but an epochal change.
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@David, I remember that TV show as an optimistic statement of our inherent capabilities, particularly those based on scientific knowledge.
Professor Stiglitz reminds us of the scientific advances of economics, particularly pointing out the growing understanding in “economic theories like information economics..., behavioral economics and game theory [that] arose to explain why markets on their own are often not efficient, fair, stable or seemingly rational....” These are the domains of knowledge based on scientific studies and rigorous observation. Not to use them to inform public policy has brought us to the catastrophe we face.
You are correct in saying that the issues transcend the current generations living. The denial and negation of scientific knowledge threatens our global future. The issue is not just that some are bending the rules or rewriting them contrary to the common good. The issue is the misuse of power to do so in the face of overwhelming scientific evidence of looming disaster.
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@David We've seen this before.
Capitalism and Democracy are inherently at odds. And in order to maintain anything like the lifestyle we've become accustomed to, vibrant capitalism is the only system yet discovered that is capable of creating the wealth necessary. But occasionally Democracy has to smack down Capitalism run amok.
I hope we are at one of those moments when Democracy re-asserts itself.
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