On May 12, Joseph Stiglitz and the Roosevelt Institute published a new report titled “Rewriting the Rules of the American Economy: An Agenda for Growth and Shared Prosperity.” You can download the report and watch a two-hour presentation and panel discussion on it here.
Guest speakers at the report launch were Senator Elizabeth Warren and Mayor of New York city, Bill DeBlasio, along with a slew of really interesting panelists. I started watching the event over breakfast, thinking I would turn it off after I finished off my smoothie, but I kept watching—all two hours of it! Stiglitz offered one of the best explanations of what went wrong with the economy I have heard to date. And he offers a clear path for making it work for the majority of Americans.
Bernie Sanders entering the race for president and Joe Stiglitz launching this report on how to fix the economy are truly hopeful events. I’m talking real hope here, something I have not felt in a long time. There’s been no shortage of ideas on how to fix the economy—break up the big banks, raise the minimum wage, raise the cap on Social Security taxes, raise taxes on companies that offshore jobs. But this slingshot approach is inadequate to what is really a systemic and structural problem. Stiglitz offers a fresh look at the causes of our economic downturn, and puts forward a comprehensive list of solutions, all of which have to be addressed, if the economy is to work for everyone.
Stiglitz’s list of the causes of growing income inequality:
- More market power, less competition
- The growth of the financial sector
- The ‘shareholder revolution,’ the rise of CEO pay, and the squeezing of workers
- Lower taxes for the wealthy
- The end of full-employment monetary policy
- The stifling of worker voice
- The sinking floor of labor standards
- Racial discrimination
Stiglitz’s solutions for rebalancing the economy:
- Make markets competitive
- Fix the financial sector
- Incentivize long-term business growth
- Rebalance the tax and transfer system
- Make full employment the goal
- Empower workers
- Expand access to labor markets and opportunities for advancement
- Expand economic security and opportunity
The report, clearly written and easy to read, goes in-depth on each topic. It refutes the idea that there is a mysterious market force, or “invisible hand” or “natural” business cycle, or changes in the global economy that is causing unemployment and stagnant wages. The economy is in shambles, Stiglitz says, because, for the last thirty years, the rich and powerful have written the rules that govern the economy. Both Republicans and Democrats have participated in this orgy of “rule making for the rich,” which has resulted in the systematic destruction of the middle class, and the increasing impoverishment of the working poor.
Inequality has been a choice, he says, made by the few and foisted on the majority who were sold a bill of goods. It is within our power to reverse those rules. Here’s an excerpt from the report, my emphasis:
Rules are the regulatory and legal frameworks that make up the economy, like those affecting property ownership, corporate formation, labor law, copyright, antitrust, monetary, tax, and expenditure policy, and other economic structures. They also include the institutions that perpetuate discrimination, including structural discrimination—an entire system of rules, regulations, expenditure policies, and normative practices that exclude populations from the economy and economic opportunity. Unequal socio-economic outcomes for women and people of color are rooted in this kind of structural discrimination, in addition to other forms of bias. . . .
Our challenge, then, is to rewrite the rules to work for everyone. To do so, we must re-learn what we thought we knew about how modern economies work. We must also devise new policies to eliminate the distortions that pervade our financial sector, our corporate rules, our macroeconomic, monetary, tax, expenditure, and competition policies, our labor relations, and our political structures. It is important to engage all of these challenges simultaneously, since our economy is a system and these elements interact. This will not be easy; we must push to achieve these fundamental changes at a time when the American people have lost faith in their government’s ability to act in service of the common good.
The problems we face today are in large part the result of economic decisions we made—or failed to make—beginning in the late 1970s.
The changes occurring in our economy, politics, and society have been dramatic, and there is a corresponding sense of urgency in this report. We cannot afford to go forward with minor tweaks and hope that they do the trick. We know the answer: they will not, and the suffering that will occur in the meantime is unconscionable. And, as we explain, this is not just about the present, but the future. The policies of today are “baking in” the America of 2050: unless we change course, we will be a country with slower growth, ever more inequality, and ever less equality of opportunity. Inequality has been a choice, and it is within our power to reverse it.
The good news is that Stiglitz’s report is not just an intellectual exercise. Along with the Roosevelt Institute, he will be releasing a series of specific proposals to help rewrite the rules of the economy in favor of ordinary Americans. As the presidential campaign heats up, I have no doubt that Bernie will be onboard, but will Hillary or Jeb Bush? Joe Stiglitz is one of many official advisors to the Clinton campaign, but I’m not holding my breath that she will embrace the kind of changes he envisions.
We are entering an interesting time in history, when the majority of voters are aware that, despite cheery statements from the Obama administration to the contrary, there has been no economic recovery for ordinary Americans. Also, the majority of voters know that banks and corporations will be spending obscene amounts of money to elect Hilary Clinton, or the GOP candidate, who will continue to write rules that favor the elite.
The time is ripe for genuine progressive ideas to take hold because, for once, they have a chance to resonate with people across the political spectrum. Bernie Sanders and Joe Stiglitz, together, offer real solutions to an economy, and a country, gone off the rails.