But Not All Countries Wait
As portrayed in the media, the economy is a kind of uncontrollable beast. Pundits watch it expand and contract. They scrutinize its stirrings, take its pulse, check its circulation, and try to assess its health. So they note the lack of jobs, the growing disparity between the rich and poor. But they confirm our sense of helplessness. We can try to prod the beast, or restrain it, feed it or starve it, but it has a life of its own. Essentially we are hapless observers.
But Joseph Stiglitz, the Nobel Prize winning economist, has noted that countries differ significantly in their gaps between the rich and poor. “Of the advanced economies, America has some of the worst disparities in incomes and opportunities, with devastating macroeconomic consequences. The gross domestic product of the United States has more than quadrupled in the last 40 years and nearly doubled in the last 25, but . . . last year, the top 1 percent of Americans took home 22 percent of the nation’s income; the top 0.1 percent, 11 percent.”
Worse: “Recently released census figures show that median income in America hasn’t budged in almost a quarter-century. The typical American man makes less than he did 45 years ago (after adjusting for inflation).”
He calls attention to the fact that “countries like Chile, Mexico, Greece, Turkey and Hungary managed to reduce (in some cases very high) income inequality significantly, suggesting that inequality is a product of political and not merely macroeconomic forces.”
The conventional explanations for this disparity, he argues, don’t work: “It is not true that inequality is an inevitable byproduct of globalization, the free movement of labor, capital, goods and services, and technological change that favors better-skilled and better-educated employees . . . . Some countries have made the choice to create more equitable economies: South Korea, where a half-century ago just one in 10 people attained a college degree, today has one of the world’s highest university completion rates.”
His conclusion: “I see us entering a world divided not just between the haves and have-nots, but also between those countries that do nothing about it, and those that do. Some countries will be successful in creating shared prosperity — the only kind of prosperity that I believe is truly sustainable. Others will let inequality run amok. In these divided societies, the rich will hunker in gated communities, almost completely separated from the poor, whose lives will be almost unfathomable to them, and vice versa.” Stiglitz notes, “I’ve visited societies that seem to have chosen this path. They are not places in which most of us would want to live, whether in their cloistered enclaves or their desperate shantytowns.” (See, “Inequality Is a Choice.”)
So entrenched is our conviction that we are helpless bystanders to the economic forces driving us that it takes a Nobel Prize winning economist to see and speak such obvious truths.
It is not that the beast is immovable, but we lack the political will to move it. We cannot intervene in “free markets,” because we have been mesmerized by the conviction that they are the secret to our success. We cannot create jobs because we have been told repeatedly that we can’t afford to, and we can’t raise taxes because we have come to believe that will stifle motivation.
Meanwhile the beast groans and twitches, and we continue to wait for growth.