Extreme Inequality is Solvable

I'm sitting in a studio in Manhattan, which is home to many of the country's real estate moguls, media empires, and hedge fund billionaires. And I'm also just a few miles away from the South Bronx, which the two ten Census found to be the poorest district in the nation. Income disparities have become so pronounced that America's top ten percent now average more than nine times as much income

as the other ninety percent of US. It's more than ten years since the financial crisis that shook our world and caused enormous suffering, and in that time, the fortunes of the richest have actually risen dramatically. The number of billionaires have almost doubled, with a new billionaire created every

two days between twenty seventeen and twenty eighteen. Meanwhile, the official poverty rate for all US families has actually barely changed, with an estimated one hundred and forty million people in this country now counted as either poor or low income. Joseph Stiglett seized the US as an outlier amongst other wealthy countries, and he studies why inequality is much more severe. Here he works to understand why it is we're so

far behind other comparable countries. And really he argues that it's down to our policies, that the exercise of power in the pursuit of profit has left people behind, and he offers up as solvable for that. Here he is getting into us with Jacob Weisberg, Joe, inequality is one of the most complicated and interesting problems in the world and economics, and you've just written a book about it. But I wonder if you could describe what you think

the problem of inequality is in a nutshell. The problem of inequality differs, of course, in different countries, in developed countries and in developing countries. The problem in a rich country like the United States is that such a large fraction of the wealth of the country goes to so few, And that wouldn't be by itself, you might say a problem if it weren't for the fact that the people at the bottom really aren't don't receive a you might

call a bare necessity of living. So it's not only that those at the top have luxuries beyond anybody's dream, but those at the bottom are not getting the necessities of life. Their children are not getting the education, the health that would lead them to live up to their potential. Why is this your problem? Just when you talk about it, it doesn't sound like you're just thinking about this as an economist. Do you think of this as a as a social justice issue and a basic justice issue. It

is a moral issue, a social justice issue. It's also an economic issue, because I believe that it actually weakens our overall economy. But it's a particularly moral issue in two dimensions. There shouldn't be this kind of extremes of inequality in a rich country like the United States. There shouldn't be people. Almost one out of seven Americans go to bed hungry once a month, not because they're on the diet, but because they don't have enough money to stretch to the end of the month by the food.

There shouldn't be that extreme deprivation. United States is a rich country, yet life expectancy is in decline. And it's not because we aren't doing the most advanced research that has taught us how to extend life. It's not because there's an epidemic going on. It's because our economic and our social system is depriving large fractions of America are the basic necessities of life, including healthcare, but also adequate nutrition. It's also, to me a moral issue because of the

extremes of wealth. Not all, but some of the extremes of wealth originate from exploiting others. At the other extreme, some of the extremes of wealth come from exploiting people in other countries. The arms trade, where many Americans are becoming wealthy at the expense of the death of people

in other countries. The drug trade, and I'm not talking about the illicit drugs, but the prescription drugs, where you have families to become wealthy beyond anybody's dream, billions of dollars giving way money to charities like art, but causing

an epidemic of drug overdoses. In the United States by getting people addicted cigarette companies who develop cigarettes that are more addictive even than the natural addiction associated with tobacco nicotine, and becoming wealthy at the expense of suffering of other people. You know, it's not that this is new. We had the opium trade, and Western countries went to war twice with China to keep the market for opium open so that more Chinese would become addicted to our destructive products.

And we call that free trade in the nineteenth century. But what has happened is that what was you might say, an unusual thing in the nineteenth century has become a major source of income and wealth and inequality in the United States. So those forms of exploitative enrichment are a kind of exceptions to maybe what you said a minute ago when we were getting started, which is, if people on the bottom were getting richer and doing better, we wouldn't need to worry so much about how rich the

rich people are. But it's not really the case. Is inequality not a problem per se. If the tide is rising on the bottom, we don't need to worry about it rising faster or even more at the top. We do have to worry about it. A society that is more polarized, more divided, is a different kind of society. And there's been a lot of interesting social science research about the ways in which it differs. That people at

the top feel entitled. They'll go through stoplights, they'll act in other ways that are abusive of other people because they feel entitled. People at the bottom also feel that on the one end, they're being taken advantage of, and that makes them angry, and that makes them leads to social dysfunction. But others feel giving up that the system is rigged and and they drop out. Either way, it's

a socially dysfunctional outcome. So it seems to me that these extremes of inequality are destructive no matter how they originate. But I think that natural order of the economy would be that it would limit the extremes of inequality if it weren't for these abusive practices. That there is no inherent reason why you would have the magnitude of inequality that we see in the United States or we see around the world, were it not for the extent of

exploitation that we see. And I always say exploitation, I mean exploitation of market power, exploitation of the vulnerable. You know, when I look at the people at the top, it is really shocking the fraction of them who have gotten a substantial fraction of their income from exploitation. Not that some of them may have made important contributions somewhere along the way of making wealth, but then they've taken that

wealth and multiplied it through some process of exploitation. You and I are a few years apart, but we both grew up in America that was much more of a middle class society, and it had a few features which we sort of took for granted. One of them was that you could earn a decent middle class living without college education or without higher education. Another was that the wealth gap was just much less than it is now.

People who work in working class jobs, fundamentally unskilled jobs, their salary was a larger fraction of the CEO of the company they worked for. So, looking at this first as an economist, what do you think the key drivers of that change? The key drivers of inequality have been There are many, many drivers of the growth of inequality, but the ones that I focus on a great deal are precisely this increase in exploitation, including exploitation of market power.

Included in that description of market power is the fact that we have weaker unions. We've gone through a period where government has not played the role that's played in the past in curbing market power. Our corporate CEOs have learned how to exploit the weaknesses in our corporate governance. There's been a systematic attempt to weaken the systems of checks and balances, including labor unions, which are important ways of making sure that ordinary workers get a voice and

economic relationships. So let me just illustrated by a couple of examples. If we look at the concentration of market power, evidence is overwhelming that it's increased enormously in the last

twenty years. The antitrust laws that were absolutely essential one hundred and some years ago, incurbing the market power of standard oil and tobacco monopoly and a whole set of monopolies, they've been eviscerated by fifty years, especially since the so called Reagan Revolution, well with Robert Bork, who came up with the theory of antitrust that we basically still live with, which it's very narrow definition, and the irony of that was that came up exactly at the time where economists

were beginning to understand the nature of market powers, and so he was putting forward an idea. A lot of people in Chicago put forward this idea that markets are naturally competitive, and the economics profession was showing that that was wrong. And my own work was on imperfect information and showing how imperfections of information are a real barrier to the operation of the so called ideal of perfect markets that Bork and a lot of the Chicago economists

focused on. Another example, though, is what's happened to CEO pay. Ceo pay has increased like a thousand percent in the last forty years, not because they've become that much more productive, and it really is undermined the underlying theory that neoliberalism and standard economics, which is based on pay being related to productivity. It really shows its power that determines productivity.

And the CEOs had the power to raise their own compensation and they've taken advantage of that and they realize that the constraints aren't there. And a third example that brings out the visration of the role of government in this area is that the minimum wages wages at the bottom, adjusted for inflation, are today the same as they were sixty years ago. Now can you imagine getting no pay race for sixty years in what is allegedly one of the most prosperous countries in the world, where the one

percent see their income soaring. You look at the TV set, you see how others are living doing well. Today. You work full time at the minimum wage and it's not livable. You can't even pay your rent on what you get paid as a minimum wage. Some economists look at inequality and think technology and trade and returns to education are at the center of the phenomenon, and that policy is at the margin for good or for ill. You tend to see policy as at the center rather than these

tectonic factors. Is that right. That's right, and those factors are relevant. I'm not denying their relevance. Those factors themselves, of course, are a part of our political process, and politics reflects the inequality in economics. So when you have the extremes of inequality economic inequality, you're going to get

a political inequality. So the way we've governed globalization where we've left the results of which have been to put downward pressure on especially on skilled wages resultant, and these large parts of America that have become de industrialized, with the deaths of despair that are leading to our skyrocketing incidents of suicide, drug overdose, and alcoholism. All those are

political nature. But the reason that I emphasize that it's policy more than these exogen factors, more than technological change, is that you look around the world and the United States is an outlider among advanced countries that we have more inequality and less equality of opportunity than other countries. Those other countries have the same technology. I mean, we're part of advanced countries. They have even more open markets,

so even more exposed to globalization. Why is it the United States is so much worse than these other countries. And it's our policies, and our policies are driven by our politics, which is this vicious circle that I describe before. And you know, this has been really one of the th ust of my recent book People, Power and Profits, Progressive Capitalism and Age of Discontents. It's precisely that it's the exercise of power in the pursuit of profits that

has left our people behind. So we're dealing with the consequence of at least forty years of policy fanning the flames of inequality. Do you think now reversal in some of those fundamental policies around taxation, around regulation, around investment can actually reverse this trend and produce not only diminishing rate of increase of inequality, but less inequality more equality.

Very much so. And I put at the flip side that if we don't do those things, things are going to get worse and worse that we have not seen the end of this increase inequality if we don't do something about it. Next. One of the reasons why I think this is a solvable problem. We know what we need to do to bend the curve to reduce inequality.

And if we begin with something that I think almost all Americans would agree with is, you know, every American child should be able to live up to their potential. You should get an education and health that is not a hindrance to them. But the reality is that one in five American children are growing up in poverty, and part of that poverty is they're not getting adequate nutrition. And we live in a more economically segregated society than

we were thirty years ago. And with our local education system, it means that if you are living in a poor community, you're going to get a poor education, not always, but on average, and that means your life prospects are going to be diminished. And that's one of the reasons why you know the marriage. I've said in some of my books that the American dream is a myth that the

look at the numbers. The numbers tell you that the life prospects of a young American are more dependent on the income and education of experience than in almost any other advanced countries. You might say, that's an American but that's where we are. But we could reverse that. We are the only country among the advanced countries that doesn't recognize the right to access to healthcare as a basic

human right. And that's solvable. There are so many other aspects of our economic and social organization that have led to this perpetuation of inequality. Is limited equality of opportunity that is leading to the kind of despair and large fractions of a country. So you talked about healthcare, Let's

talk about education from anute, particularly higher education. One of the interesting debates, say inside the Democratic Party, although not always articulation it is, first of all, whether the goal should be for everyone to get some higher education, which I think Barack Obama stated as a goal at one point in his presidency, although it's not one he made a lot of progress towards, especially given how much more expensive college has been getting or as opposed to that

make everything better for people who are never going to college and accept that reality. Do you think the goal should be for all Americans to have higher education of some kind? Well, my view is one wants to have the education that allows everybody to live up to their potential and that leaks to a more efficient economy. The fact is that we are so far from that goal that that's what we should be focusing our attention on.

You talked about the expense at the end of World War Two, when we had a debt GDP ratio that was much higher because we have borrowed money to fight the ward. We didn't say would we afford we fought

the war. We wound up with a duck GDP ratio of one hundred and thirty percent, and we said, at that point, everybody who fought in the ward, which was at virtually every man a lot of women, you could get as much education at the most expensive school for which you are qualified, we could afford it then, I think we can afford it now. It's a matter of choice, and we chose to say this is your return for

having fought for your country. But it also facilitated the transition from a rural agriculture economy to a manufacturing what made us dynamic in the second half of the twentieth century, and we're not doing that now. And what is very clear is that we have now fallen behind other advanced countries who have made one form or another of opportunity available, you know, some day, whether it's technical education or college education, you know, trying to design a system that's appropriate to

their economy and to their circumstances. European countries, particularly the Northern European countries, are far more equal, and they have higher rates of happiness that seem to reflect simply, among other things, that they are more equal societies. People sometimes

make the argument, well, those are homogeneous societies. They have maybe higher rates of immigration now, but there are people their countries that haven't had the range of life experiences and types of people that we have in the United States. You don't buy that I don't buy that at all. I mean, first of all, they have more diversity than we often give them credit. For seventeen percent of the people in Sweden our immigrants, so they've they've actually opened

up their doors, brings things to Iraqi refugees. We cause the war in Iraq, they picked up the pieces when we refuse to do that. But the question of homogeneity may affect the design of the system. You have to have a system that's maybe somewhat more complex if you have a very heterogeneous population. But I'm absolutely convinced that we can have a system that provides more opportunity within

a very diverse society. There's absolutely no reason why you can't have access to healthcare for all, Why a rich country can't provide nutrition, adequate nutrition for all, Why we can't have adequate housing for all. If it goes to the extremes of inequality that we have in the United States and the forms in which inequality arises. When I say that is the extremes of the wealthy United States

is held by the top one percent. That's twice the number as in other advanced countries, including countries that are growing just as fast or fast in the United States, and obviously you have a higher sense of well being than in the United States. So in my mind, I don't see any reason why diversity is any reason for an impediment for providing an embeddiment. If we were very poor,

that would be another argument. But there the argument would be, well, if you're a poor country, you provide housing for everybody, but a lower standard than you are when you're rich. But what is remarkable by the United States. We're a rich country, and we really don't provide even a lower standard of housing and food and education than countries that

are much poorer than US can provide. So maybe it's not homogeneity in an ethnic sense or even social cohesion, but what does countries have at least one point a political consensus that those things should be run. And even as political conflict and polarization the same phenomenon that we've experienced have increased there, they've maintained that consensus. I mean, in Great Britain, the consensus that the national health service is something that kind of everyone supports at some level,

or that the vast majority of the country does. That's been maintained in the United States. You know, it's it's been a fight for seventy years, and we've never had an overwhelming majority in favor of the right to healthcare. Well,

some of those things are changing now. But part of the problem in the United States is this disconnect between what people want and our political system, and that comes I attributed that partly to the way we have extremes of economic inequality and we have a political system that helps translate those extremes of economic inequality into political inequality. So if you look at some of the major issues that our country faces, gun control, vast majority believe there

ought to be gun controlled. You talk about bank regulation, some seventy five percent of the people thought we needed stronger bank regulation than we got out of the crisis when we passed what was called the doct Frank bell Ink twenty and ten. Minimum wage seventy five percent or so. I think we ought to have higher levels of minimum wage. We can't get it through Congress. It's only through rass roots movements in Seattle and San Francisco and New York

that we're getting getting it. But if you ask what do people think, there's rocking census on non unanimity, but a brock in census on a lot of these issues, I could go down a long list. I don't think we have as polarized society. I don't want to say that we have a unanimity, but we have two thirds three four people. And if you focus then on the young people whose country this will be in the future,

you know, overwhelmed homingle. They think we ought to be doing something about climate change, which is a real threat to their future, and yet we can't get climate change of legislation through What country has the optimal system of taxation or level of taxation from the point of view of solving inequality or preventing the growth of inequality. Well, I don't know the optimum, but I think the Scandinavian countries overall have figured out systems that are working better

for their people. Their tax rates are much higher, but they get a lot for it. So you know, we often say, well, look at their tax rates so much higher than the United States, but we forget privately, we have to pay for healthcare twenty percent of GDP they put it, that's part of the government pensions. They get a lot larger fraction of their old age pension out of the government. People in the middle class and upper

middle class, say privately education. When you start putting all that together, you realize that they're getting a good deal in Scandinavia. And one of the reasons why they're happier. They don't have to worry about if their kid gets sick, are they going to be able to afford the doctor. They know it will be taken care of. They know if the husband gets sick and isn't able to say to send their kid to college, he'll be taken care of.

Their children don't depend on how well their parents are doing in order to get an education to live up to their potential. It really takes a huge burden off of them. And you know, in economics we talk about today the consequences of cognitive burdens and impairing ability to

make good decisions and being productive. One of the reasons why some of these countries are actually turning out to be more innovative and more productive across the board is because they don't have to worry about the silly things that we have to worry about just to survive. Joe, I love that you're hopeful about this, because so many people are despairing about this problem. Thinking as a kind of inevitability about it, and also that the political system

seems totally incapable of addressing it. I'm very hopeful, partly because of the young people I see every day at Columbia University, you know, and I see around the country. Overwhelmingly they believe in what I call the progressive agenda. Overwhelmingly they think we've lost our way and they think that we ought to be trying something different. So they know something's not working for them. They know that their

opportunities are constrained. And since we still have a democratic political system, it's been you might say warped, it's been undermined, but still has the potential of restoring power to ordinary individuals. And that's why the political system getting out the vote, making people realize there is an alternative. We don't have to be the way we've been. This problem is solvable. And when I don't know, Columbia undergraduates come to you and ask what kind of career they can have that

will help solve that problem. I know what you probably tell them not to do, which is maybe good at work on Wall Street, But what are some of the things people can do to try to support It's obviously such a huge topic. But to try to create a less unequal society, well, I think, as you say, you

partly begin by thinking about what not to do. And it is still you know, the inequality the ability to get a high paying job and whilst rate is very hard for many to resist, but I think a lot of them become more aware that that's not going to lead to their long term fulfillment, their long term happiness. The way one needs to think about it is this is a multi dimensional problem, and that's a good thing because there are many different ways that people can contribute,

both individually and through society. So when I say individually, you know when somebody goes into teaching and a poor community or even an ordinary community, you know they're addressing the problem of inequality in our society. When they go into become into medicine and they decide to practice in a place where there is a shortage of doctors, they're contributing individually to addressing the problem of inequality in our society.

In the end, public service is the only way is actually a central piece of solving the problem of our growing inequality. Joe, thanks for joining us Unsolvable. Thank you, Joseph Stiglitz's final words in that interview about finding an alternative and the energy that he feels today about that possibility. Well,

that made me think about the Poor People's Campaign. Maybe you know about it already, but in nineteen sixty eight, there was this effort, this march led by doctor Martin Luther King, to gain economic justice for poor people in the United States. It was a fight by capable hard workers against dehumanization, against discrimination and poverty wages here in the richest country in the world. Now, the past couple of years has seen this Poor People's Campaign back on

the road again. They're gaining momentum with the exact same spirit the Professor Stiglitz is calling for. Solvable is a collaboration between Pushkin Industries and the Rockefeller Foundation, with production by Laura Hyde, Hester Kant, Laura Sheeter, and Ruth Barnes from Chalk and Blade. Pushkin's executive producer is Neil LaBelle. Researched by sher Vincent, Engineering by Jason Gambrel and the

Great Folks at GSI Studios. Original music composed by Pascal Wise and special thanks to Maggie Taylor, Heather Fine, Julia Barton, Carli mcgliori, Jacob Weisberg, and Malcolm Gladwell. You can learn more about solving today's biggest problems at Rockefeller Foundation dot org slash solvable. I'm Mave Higgins. Now got solvas Turn