Thursday, November 15, 2012

Stiglitz on Inequality

There is so much good stuff in Joseph Stiglitz new The Price of Inequality  that it is not easy to specify just why I keep wanting to throw it away with great force.

Start with something positive: he's on the side of the angels.  He's got the right friends and the right enemies and a generous heart.  But he writes a book that can make you just want to scream.

Part of the problem is merely structural.  From the title, you might guess this is a book that makes the functional case against disparities in wealth or income: disparities entrench elites, they undermine democratic values, they destroy trust in the system, and mutual trust.  This is an important perspective and Stiglitz makes many of the particular points well.  Which isn't to say they haven't been made as well or  better elsewhere but no matter: the case can bear repeating.

The trouble is, you have to work awfully hard to find it.  The narrow point--the point of the title--comprises maybe 15-25 pages of the entire book, scattered and sometimes camouflaged.  The rest of the book is a free-floating leftie talking points, loosely scattered as if he had dumped out his box of three by five cards--a bit like locked in a semi-dark room with a loop tape of the Rachel Maddow show.

Ironically, a giveaway as to the content is that Stiglitz spends far more time talking about fairness versus unfairness in distribution than he does about his "costs" argument.  This is telling: fairness functionality are both important principles: one might well want an economy to be both functional and fair.  But it's not clear that Stiglitz even recognizes the difference.   Quite the contrary: much as he cites as principle of fairness, Stiglitz nowhere spells out just what his principle of fairness is.  Rather, he falls back time and again by telling us what the public perceives as fair/unfair.  He never seems to notice that these references tell us nothing about fairness per se; a public might very well perceive a fair world as unfair or vice versa.

This is frustrating.Although I should stress I don't have a lot of trouble with content.  As to particulars, I think I'd sign on to somewhere between 60 and 90 percent of what Stiglitz has to offer (lot of nuances, but let that be).

But none of this is what is really maddening. I guess what really gets me is what I wrote about in passing when I was sizing up Chris Hayes a few days ago.  In the end, it is a massive exercise in preaching to the choir, telling his audience what they already know, beefing them up with soundbytes to annoy their relatives at the Thanksgiving dinner table.  In the process, it sidesteps or minimizes virtually almost any difficult or perplexing argument that complicate the case.

I could offer a number of particular examples but let me concentrate on a thematic difficulty:  Stiglitz' near-complete schizophrenia on the issue of "competition" and its evil twin, "economic rents."  You can probably guess he framework: competition good.  Rents bad.  Goal of policy, dismantle rents, restore competition.  

In individual cases, this is bound to be a beguiling argument. But it sidesteps the core paradox of the economic world-view: everybody wants free competition for others.  Nobody  wants it for themselves.  And who can blame them?  A competitive world is a grey, bleak and heartless kind of a place--a world in which as Albert O. Hirschman says, "every individual firm considered in isolation is barely getting by, so that a single false step will be its undoing."  Or as the fella says, absolutely the last thing you want in the world is a job where you get paid what you're worth.

I think this problem is pervasive in Stiglitz' book but it takes on particular poignancy for two reasons.  One: Stiglitz is in his own way a conservative or better, if there is such a word, a nostalgiast (id that a word?).  He's a sucker for the old ways, meaning particularly the old ways of the Roosevelt New Deal and the broad social compact that organized the United States from the end of World War II until the first Arab oil shock.  Strong bank regulation, good manly jobs and in particular, strong unions.t

Unless I missed it, he never once faces up to the stark fact that this entire model subsisted in a warm bath of economic rents and restricted competition.   American industry had a huge home market, protected from foreign competition by law and by the disaster of World War II.  There was a lot to go round, even for the low-skilled.  But the best jobs were in the most protected places: big auto, big steel, big telecom: these were the places where management and labor could agree to split up the proceeds, secure in the knowledge that they wouldn't be undercut.

Stiglitz' nostalgia for the Good Old Days carries over into what may be the weakest part of his book.Oh yes, he says, good thing, globalization. bit you've got to do it right and the financiers have done it all wrong.  Let's concede that big finance has committed great mischief in the pursuit of globalization.  Still, I see almost no recognition in Stiglitz that a newly globalized word has less starvation, less abject poverty and yes, more equality (between nations if not in nations) post-globalization than it did before.  As Paul Collier says, we used to talk about "the bottom five sixths;" we now talk about "the bottom one sixth."  And scandalized as we may be over the abuses of labor in the developing countries, I don't know of anyone who has ever made the explicit argument that our nation should be rich while all others are poor.

The problem of rents-versus-competition imbues his discussion of our own current internal agonies as well.   Specifically, I don't see any acknowledgment in Stiglitz that governments as well as private persons can be rent-seekers as well; that, indeed, our current politics may perhaps be best understood as a competition between two different alliances for control of the rent-seeking machine: young people and public employees on one side, old people and finance on the other.

I know.  Almost anyone who has stuck with me this far is sputtering that but, but I don't understand, there are various kinds of rents, and not all rents are alike, and we can have good competition and bad competition.  Well, very likely we can; I certainly hope so.  But any attempt to understand that point will have to start with an account of the present that is far more clear-sighted and yes, ambivalent, than what is on offer here.

That's my point.  Actually, I've got (at least) one more point I'd like to make about Stiglitz and his ilk but I guess I'll save it for a separate post (which I may or may not get round to writing).

Footnote:  I seem to have hammered on this particular guitar before.  See:  Link, link, link all of whom impel me to believe, in various ways, that I'm not crazy..

1 comment:

CrocodileChuck said...

An interesting post, I've thought about this the last few days. Agree with your point, but in the years since WWII most of them (rents) accrued to millions of US workers, many unionised. Today, after thirty five years of deregulation, globalisation, outsourcing corporate profits as a percent of GDP have never been higher-in history. Who's collecting the rents now? ;)