After sitting on the President's Council of Economic Advisers from 1995 to 1997, acting as Chief Economist and Senior Vice-President of the World Bank from 1997 to 2000, and winning the Nobel Prize for economics in 2001, Joseph E. Stiglitz has clearly established his bona fides. As one of the leading economists in the world, his expertise has been sought after by policy wonks and power brokers from advanced economies and from developing nations alike.
In his previous book, Freefall: America, Free Markets, and the Sinking of the World Economy, Stiglitz argued that the financial crisis that began in 2008 was the result of structural changes made to the U.S. economy starting in the 1980s ? and that since the crisis, we have only made things worse.
In his new book, The Price of Inequality: How Today's Divided Society Endangers Our Future, he argues that over the past few decades, our government and our economy have become increasingly corrupt. The system has been rigged to shovel up the ladder as much of the country's wealth as possible, from the poor and middle class to the wealthy ? and, increasingly, to the super-wealthy: the "one percent." Ultimately, he argues, this will weaken the economy ? and the country ? for everyone.
Despite all this, Stiglitz is a remarkably pleasant fellow, warm, easy, professorial. When you imagine the men who go toe-to-toe with the president, you don't imagine Joseph Stiglitz. But he has gone toe-to-toe with presidents. He has taken on the Marie Antoinettes of the new oligarchy. And thank God: he is precisely the man for the job.
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C. P. Farley: Reading this book was one of the most depressing things I've done in a long time. [Laughter] I don't know if that was your intention.
Joseph E. Stiglitz: [Laughter] Not my intention, but it's one of those things: as you write, your views get crystallized. And it was a pretty depressing story. In the end of the book, I have a section where I ask, "Is there hope?" And I talk about the hope that the one percent will realize that it's in their self-interest that everybody share, that the top of the pyramid won't do well unless the bottom ? the foundation ? is strong.
The other hope is that more of the 99 percent will begin to understand that they've been sold a bill of goods, that certain things they've been told, like tax cuts for millionaires or taxing speculators at a lower rate than people who work for a living, are not in their interest. I mean, it's hard to believe that people would believe that, but there are many in the middle who have been persuaded that having low tax rates at the top is good for the people in the middle. A very strange view.
Farley: The What's the Matter with Kansas? phenomenon.
Stiglitz: Exactly. And part of the point of my book is that a lot of the money at the top ? not all of it, but a lot of it ? comes from rent seeking, from distortionary behavior, which actually weakens the economy. So, the story that you could only have more equality by giving up something is just wrong, and I hope they'll come to understand that.
Farley: But if you're a millionaire who's gotten wealthy by rigging the rules or by fleecing the government, you're not going to worry too much about the long-term health of the economy. A bank robber doesn't worry about leaving some money in the bank so there will be some there for next time.
Stiglitz: Yes, that's true. The good news is that there are some among the one percent, like Warren Buffett, who say, "It's wrong that I pay a lower tax than my secretary. That's not the American way."
The other way to see an element of hope is to remember that in previous episodes in our history, when we have reached high levels of inequality, we pulled back from the brink. The Gilded Age was followed by the Progressive Era, the Roaring '20s by the important social legislation of the '30s.
Farley: What's been dispiriting to a lot of people, I think, is that after the economic crisis revealed how corrupt our system had become, many people thought Obama was going to step in like FDR and make the system honest again. And it doesn't feel like that's panning out.
Stiglitz: Yes, that has been a big disappointment. What was striking about FDR was that, even given the severity of the Great Depression and the abuses that were uncovered by the Pecora Commission, which was the commission that investigated the origins of the Great Depression, there was a lot of resistance to his legislation. Most economists, actually, argued that what he advocated would be a disaster.
What was so striking was that, having taken office after Hoover had failed and the economy was in the Great Depression, Roosevelt had to fight. Of course, the greatness of the man is reflected in the courage of his convictions and his willingness to fight.
Farley: And the delight he took in the battle.
Stiglitz: Well, I think he would've preferred not to have to battle, but when he saw he had no choice, he joined the battle. Of course, every historical period is different, and we had been through a very divisive era under Bush. So, one could understand that Obama would want to have a period of reconciliation. You know, he was told by his Wall Street economic advisors that it's only through that kind of reconciliation ? don't beat up on the banks! ? that you're going to get recovery of the financial system.
Farley: Also, if politics is the art of the possible, what Obama was trying to do was...
Stiglitz: ...the impossible. [Laughter]
Farley: Yes. For example, many people have said that the stimulus was too small. But, the opposing view argues, in Obama's defense, that he got through what he could. What was possible. If he had tried for more, he would have gotten nothing. So, he was, in fact, very effective.
Stiglitz: Yes, that's what they say. My own feeling is that too many of his advisors came from that Wall Street mentality that says the only justification for large government spending is bailing out banks. The way I put it in one of my earlier books is that the fiscal hawks went on a vacation from roughly September 2008 until maybe the following March or April, when they had gotten out of the system all the money they could. Then they came back to the old mantra: Don't spend!
I think there's very little evidence that, in the end, he was not able to get Republicans to join the effort. And that means that good politics would've told him, as the attempt to reach a core consensus fell apart, that maybe he should've tried for something that was more ambitious and more targeted. So, rather than tax cuts, which have relatively little stimulus, focus on helping the states so they wouldn't lay off teachers.
Now Obama says we have a problem with layoffs at the state and local level. Well, I and many others told him, "This is predictable." I was writing and talking to people in Congress at the time, saying, "It's inevitable with the deep downturn that we're about go through that state governments will go down."
Farley: Do you think they didn't believe that what you were saying was true? Or did they not follow your advice for political reasons?
Stiglitz: I think that these ex-Wall Street kind of advisors ? not all of them were actually from Wall Street, but they had that mentality, you know, the deregulators that Obama kept on ? they didn't want to believe that they had messed up that badly. And because they didn't want to believe that they had messed up that badly, they wanted to believe that the downturn was a blip. They had all kinds of arguments, you know. They thought the market had "irrational pessimism," and it would quickly bounce back. We know for a fact that they underestimated the severity of the downturn. And because they underestimated both the severity and the duration of the downturn, they underestimated the need for stimulus.
And they thought the economy was going to come back almost on its own, that the stimulus was a temporary filler until the economy recovered. If you had that view, you might think, Let's not quibble over little details. Yes, maybe we could do a little bit better, but the real point is, bail out the banks, let the banks heal their weakness, and then the economy will go back to 2007, 2008.
My diagnosis was, there were a lot of fundamental flaws and weaknesses in our economy, including the problem of inequality that I write about in this book. And inequality is such a bad problem because people at the bottom consume 100 percent, 110 percent of their income, and the people at the top save a lot. But the problem today is a lack of demand. And when you redistribute money from the bottom to the top, demand gets weaker.
So, that inequality was part of the fundamental problem, but it was papered over by the fact that the Fed had created a bubble. When the bubble broke, that masquerade ended and left in its wake greater debt, excess capacity in real estate, etc. So, the original problem of inequality and what it does to demand was compounded by the effects of the bubble (combined with some other problems with structural reform, moving from manufacturing to service sector, globalization, and so forth), which is why my diagnosis was, this is a fundamental problem, and you're going to need a long-term approach not a one-and-a-half-year hiatus while the banks self-repair. A well-designed program would focus on the underlying problem, which includes inequality.
Farley: Here's a question: a handful of economists, including yourself, basically got it right. What I mean by that is that you made predictions about the economy that have come true. Are the people who got it right, who predicted accurately what was going to happen, being listened to now more than they were before the crisis?
Stiglitz: No. [Laughter]
Farley: Why is that? We're basically talking about you, Paul Krugman, Roubini...
Stiglitz: Well, there were differences in our interpretation. Roubini put more focus on exchange-rate disturbances. Rob Shiller at Yale and I put more emphasis on problems in our financial sector, domestically, and imbalances in our economy, not the global imbalance.
But we were right. There was one bank economist that got it right, as well. So, there were a few people that got it right. But one of the criticisms of economists who say they "got it right" is, Yes, you predicted 10 out of the last five recessions... [Laughter]
The point is, that we got right the mechanism, what was wrong. It was the whole structure. It was our diagnosis not just that the economy would go down but also the reasons for the weaknesses, and that this was going to create more inequality and that would weaken the economy.
The data that came out on Monday ? I don't know if you saw it from the Fed ? shows how devastating the downturn was for the average American. They lost two decades' worth of savings. Their net worth went down by almost 40 percent. An amazing result. In a period of 20 years their net worth would have normally gone up maybe by 75 percent, just with growth. And there was growth, but it all went to the top.
Farley: There was a graph going around the Internet today showing GDP over the past 100 years. It's been going up steadily the whole time, including the past two years. The implication was, What's everyone worried about? America's doing fine.
Stiglitz: It just shows that GDP doesn't measure what's happening to most Americans.
Farley: Yes, if Bill Gates walks into a bar, the average income skyrockets.
Stiglitz: But you don't feel any wealthier. In fact, you may feel poorer. [Laughter]
Farley: And yet this crisis seems to have changed few people's minds about how our economy works or how it should be managed ? or by whom. Most Americans are still getting their information and their analysis from the same sources they were before the crisis, even if those sources basically got everything wrong.
Stiglitz: I think it illustrates a concern ? again, one of the motivations for the book ? that, to a large extent, economics has become ideologically driven and not scientific. One example in the work I got my Nobel Prize for was to point out that when information is imperfect and markets are incomplete, then the market is not efficient. The pursuit of self-interest does not necessarily lead to the societal wellbeing.
Here you have theorem. You have empirical support ? in a dramatic instance. It's taught in every graduate school in the world. But when they make pronouncements about the virtues of unfettered free markets, conservatives just forget these results.
That's because economics has become for these individuals a handmaiden for the adequacy of a particular political position. One can understand the argument that government often doesn't spend money well. But if you want to make that argument, then you would have to have the whole debate, because the private sector often doesn't spend money well either, like the allocation of finance to the bubble.
Then you say, "Well, are there example of countries where government has spent money well, or where our government has spent money well?" Social Security transaction costs are lower than any private insurance company! What can we learn from the successes? What can we learn from the failures? And let's have a reasonable debate.
Nobody would say that the government always succeeds or that it always fails or that the private always succeeds or always fails. I could understand that kind of pragmatic, reasoned debate, with the philosophical goal of trying to understand what the limits of the private sector are and when markets fail. But that's not what the conservatives are about. They're really interested in pursuing a political agenda. One of the concerns I described in the book is that they've pushed a whole set of ideas, like, markets work well.
Another idea that's really deplored in this book is that the only way you can reduce inequality is by giving up a lot of growth. The single sentence of what this book is about is to say that's wrong.
Not only does America have the highest level of inequality and the least equality of opportunity, but we shape the market forces in ways that lead to more inequality. And, unfortunately, the way we shape inequality actually hurts our growth. So, we can have more growth and more equality.
Farley: I never understood why, when we were designing the stimulus, why it made sense to give tax cuts to wealthy people. They may or they may not take their newfound money and throw it back into the economy. But if you give that money to people at the lower end, we know for a fact that all of it will get put into the economy. I'm not an economist, but it just seems obvious.
Stiglitz: That's what I think. It's obvious. And it's the same thing if you give unemployment benefits to people who, not because they haven't looked for a job ? there just aren't any jobs ? but if you give them that unemployment, you not only prevent misery, but that money feeds back, 100 percent.
Farley: The Right does worry about people getting on unemployment and getting comfortable living on the government. In a theoretical sense, that's a real worry.
Stiglitz: That's a worry when the economy's at full employment. It's not a worry when for every job there are four applicants, when McDonald's advertises for 50,000 jobs ? not the best jobs in the world ? and one million people show up. Having one million and one show up isn't going to create more economy. The problem is not lack of search, not lack of people trying. The problem is lack of jobs.
That's an example of a kind of myth in the area of inequality. It says, those at the bottom are there because they deserve it. And those at the top are there because they deserve it. They've made larger contributions to the society.
One of the points I try to raise is, look at the people at the top. They're not the people who have made our most important contributions. The people who discovered DNA, transistors, lasers... They are people who figured out how to game the system better.
Farley: It's the same with books. Don DeLillo has made a lot less money as a writer than Jackie Collins.
Stiglitz: No matter what field you name, the people who have enriched our culture and our technology are not among the top. Ask the question, do you think Watson and Crick, who discovered DNA, would have worked harder if they had gotten more money? They weren't doing it for money. They were working as hard as they could.
Do you think that a CEO of a company is a peculiar sort of person that will only give half his effort if you only pay him $5 million? But you have to give him $10 million if you want him to give a serious effort. If he's that kind of person, you probably don't want him to be your CEO. These salaries gave lie to the notion that this was all based on performance, because the pay continued even when the performance disappeared.
Farley: Again, it begs the question, Why aren't we able to approach economic problems with the same practicality as we do other problems? I think of those traffic lights they put on freeway onramps during peak hours that regulate the flow of traffic onto the freeway. No one has a problem obeying those laws because we all agree that a properly regulated freeway is good for everyone. We'll all get where we're going faster, even if we have to let the government tell us to stop and wait here and there.
Stiglitz: There's another traffic metaphor just like that for people who don't believe in regulation: imagine driving in a world with no stop signs and no stop lights. You couldn't move.
Farley: But you'd be free! You'd have greater liberty!
Stiglitz: But, in fact, nobody would be free, because you would be worried about somebody hitting you, or you hitting somebody. The fact is our traffic moves much more beautifully when we subscribe to regulations.
Farley: Although if you took all the traffic signs away, a few really skilled drivers would get to where they were going faster. Everyone else would be in a massive car pileup, but a few people would make it through.
Stiglitz: That's really what's happened in our banks. The bankers made a lot of money, and we had a car wreck.
Farley: As a nation, we haven't always been so allergic to regulation. The idea that regulations were harmful was introduced by Ronald Reagan.
Stiglitz: That's right. I think that's a real dividing point. You can see empirically in the data that from the end of World War II until the mid to late '70s the country grew faster than in the decades after Reagan.
Farley: But people don't believe that to be true, do they? The average American feels that Reagan made the economy strong.
Stiglitz: They just forget that the decades after World War II had much more rapid growth. But the other interesting aspect of that was that the country grew together. Everybody participated in the growth, every quintile. And the bottom grew more than the top. Since Reagan, the top has grown the most, and even the middle has not done very well. The middle income is back where it was in 1997, a decade and a half ago.
All of this was both understandable and predictable ? and predicted. One of the interesting things about the post-war era was that much of the growth was based on government programs. Take the GI Bill. People had fought together, and it brought the country together. We gave them education, which was absolutely essential for the transformation of the country from an agricultural to an industrial economy. Eisenhower ? a Republican ? had the Federal-Aid Highway Act. So, we did a lot.
What is also striking is that at the end of World War II we had a debt-to-GDP ratio that was around 130 percent. That money was spent not to invest in America, but to protect America, to save America. But Eisenhower was a reasonable Republican. He didn't say, "Oh, we can't do anything because we have the debt." What he said was, "We have to invest in our future, in infrastructure."
The fact of the matter was that we had these very important government programs at the same time that we had a debt-to-GDP ratio of 130 percent.
Farley: What changed in our values after Reagan? And how much responsibility can we lay at his feet? I think, immediately, of his famous quote that today is gospel on the Right: "Government is not the solution to our problem; government is the problem."
Stiglitz: I think there were many things. Financial deregulation let loose a whole set of abuses ? which interestingly came to roost even in his own administration in the form of the Savings and Loan crisis ? that really set the underpinnings for the crisis that we have today. It was the beginning of our unbridled deficit, interestingly, because you had to have a tax cut beyond the ability of the country to afford it. He talked fiscal responsibility, but didn't practice it.
Farley: Which was fortunate, right? Isn't it true that under Obama public sector jobs have decreased dramatically, and it's been terrible for the economy? But under Reagan, these jobs actually increased, which is one of the things that helped pull the country out of recession in the '80s?
Stiglitz: Exactly right. If it hadn't been for government spending during the Reagan administration, particularly given the mistakes of monetary policy, we would have had a very deep downturn.
So, there were a whole set of things that happened at that critical moment that caused the rich to start pulling away from the rest of our society. Not only did we get more before-tax inequality, we also then did less and less to correct it.
Farley: And, psychologically, the Right and the Left began to pull apart at that point.
Stiglitz: Yes. And that's not a surprise. As income inequality increases, you begin to live in different worlds. The one percent doesn't need public parks. They don't need public schools. They don't need public transportation. In their world, they don't need public health. They live in a different world.
As society gets more and more divided, they talk only to each other, and they create their own reality. And then they worry that if we have a strong government, it might use its powers to redistribute income. Because they become so distant from the rest, they lose a sense of what I call in the book "enlightened self-interest." They become narrowly selfish.
Farley: Although, I immediately think of people like my father, who was not a wealthy man and was not a greedy man. He was an old-fashioned American who believed in hard work and family. But, boy, did he worship Ronald Reagan and watch Fox News religiously until his dying day. He accepted that worldview. But for him it was never about money.
Stiglitz: But this goes back to the thing that we hinted at a few minutes ago, which is: I think the Right has succeeded in selling the rest of the country a bill of goods. I have a chapter in the book in which I talk about this, that modern advances in marketing and behavioral psychology have taught firms how to sell anything. Cigarette companies can sell Americans the idea that there's no credible risk that cigarettes cause cancer ? when we know from their own files that they knew that was not true. They knew that the risk was there. But if you can tell a lie with a straight face, you can make money.
Farley: And they throw out liberty, freedom, patriotism...
Stiglitz: Yes, they know the key words that evoke certain emotional responses. And if you can sell products, no matter how toxic, you can sell ideas, no matter how toxic.
Farley: You wrote about the fact that once someone has accepted an idea, it's very hard to dislodge. And that's where I'm kind of stuck. What can we do about that?
Stiglitz: Yes. My favorite good news is that the numbers are so stark, it's very hard to deny. The bad news is that some on the Right will deny them... Truth doesn't inhibit.
Let me give you one example: Paul Ryan. When the statistics came out talking about how unequal America was, he said, "Oh, we're not interested in equality of outcomes. We're interested in equalityy of opportunity," seeming to suggest that America was a land of opportunity. But the data say that, among advanced industrial countries, we are the country with the least equality of opportunity, where a child's prospects are more dependent on the income and education of his parents than any of the other countries for which there's data.
Farley: It is so ingrained in our psyche that we are the land of opportunity, to lose that idea of ourselves is, psychologically, pretty devastating.
Stiglitz: That's an example, again, where good manipulative work is effective, because people can always think of examples. You know, a picture is worth a thousand words. Well, an example is worth lots of data. But you don't prove anything by example. When you say a child's chances are more dependent on the income and education of his parents, that doesn't mean that there's a zero probability. They become noteworthy because they're so rare.
But because they exist, we remember them. They have names; they have faces, and so they are what we remember. We don't remember that the statistics say that that was an extraordinarily unusual case.
Farley: We remember Zuckerberg, not the kid who is trying to get one of those jobs at McDonald's.
Stiglitz: Exactly. One of the most disturbing aspects of this book tour has been that, in a number of places, young people have gotten up and said, "What do I do? I can't get a job. I come from a family of modest means. I had to borrow to get through college. I can't afford to get the advanced degree. Richer friends' parents will pay for their college, but I can't take out more debt. Even public universities are charging huge amounts. The jobs are going to those who have experience, but the way you get experience is by taking an unpaid internship. But I can't afford to take an unpaid internship. What do I do?" It was more than one person, and it makes your heart bleed. But you realize what kind of society we've become.
Farley: And what do we lose for all of the potential Francis Cricks in that crowd that can't go on and get their Ph.D. and change the world?
Stiglitz: That's exactly another reason why societies with more inequality don't do as well. You're throwing away the next Francis Crick.
Farley: Correct me if I'm wrong, but in the United States one thing that has worked in our favor is that we have not only produced great scientists, but we've also attracted talent from all over the world to work in our great universities. And these immigrants have contributed so much to our country.
Stiglitz: One of the things that has worked to our favor is what's sometimes called our "soft power." People have looked up to the Miracle Land of Opportunity, to a country with a set of principles, you know, like justice... But as we've become a country divided, we seem much more like many of the emerging markets that are dysfunctional, you know, societies that are so divided. We aren't a role model.
If I talk to young people in many other countries, they say, "We don't want the kind of market economy that you have where most Americans aren't doing very well. We don't know what kind of society we want, but we know that's not it."
Farley: Have you seen those attitudes change over the decades?
Stiglitz: Oh, very much so, very much so.
Farley: Did it happen rapidly, or has it been happening gradually over a long period of time?
Stiglitz: Well, I think it's a period of erosion that began with Reagan, which, as inequality has grown over 30 years, and as those in the middle have done poorer and poorer, and people look at our financial sector...
Farley: ...and our militarism.
Stiglitz: Our militarism, yes. We spend more money on our military than all of the other countries put together. And many of our natural-resource companies, oil companies, exploit other countries. You have a company like Exxon that supports phony think tanks to subvert scientific evidence of climate change.
Farley: Yes, belief in climate change has actually decreased in this country over the past decade.
Stiglitz: Exactly, just like cigarettes: belief that cigarettes don't cause cancer was once very widespread.
Farley: You refer in the book several times to the Occupy Wall Street movement as a point of hope or as an encouraging sign. I'm curious how you're feeling about the Occupy movement today. It feels like it's just disappeared.
Stiglitz: In the United States, I think one reason for the weakness is that this is a political season. I think people who feel like they want change sense that if there is going to be change, it will have to be through the political process. So, that's obviously going to drain a lot of energy. Protests were just protests. When you're in the midst of having a choice, it's very different.
A second, though deeper problem, in a way, is that they distanced themselves from organization. I understand their skepticism, because formal organizations that they've seen haven't worked, but you have to have an organization to generate political change.
But, I think the Occupy movement did have some success. The refrain, "We are the 99 percent," for example.
Farley: Yes, they put the idea of the one percent and the 99 percent into the conversation.
Stiglitz: And it's different than saying, "Some of us are doing better than others." What they're saying is that we live in a divided society where most of us are together in the same boat. So, it was almost a call for unity, but also a statement that something is wrong.
They were really arguing that this is rent-seeking activity; this is predatory activity. They looked at what the banks were doing. That's why it was Wall Street that they focused on.
They said, "Here are all these people getting all these bonuses, but what is their societal contribution?" And in many ways, that wasn't radical. Paul Volcker said the same thing. So, it wasn't as if they were radical. But they were crystallizing a sense that our economic system is not functioning ? as you could see, obviously ? that the economic system was unfair, and our political system had failed to correct the problems.
Farley: So, they disengaged from the political system.
Stiglitz: Yes. So, they disengaged. But I think those messages, in the end, have become incorporated, and that, I think, is a contribution.
Farley: I went down to the Occupy Portland encampment a couple of times to check it out. And one thing that struck me was that not only were there a lot of anti-Obama signs, but there were a whole lot of pro-Ron Paul signs. I thought that was interesting, that this supposedly liberal movement was more attracted to a libertarian than a Democrat.
Stiglitz: It means our system is not working. I think where they joined with Ron Paul was a sense that the Federal Reserve had played a key role in causing the crisis, and the Federal Reserve having caused the crisis went to the aid of the banks without appropriate conditions, that it was throwing money at Goldman Sachs, that it was not transparent, that it was violating democratic principles. And Ron Paul has become the symbol of the idea that something is wrong.
Now, he is wrong in that a modern society can't work without a central bank.
Farley: He seems to want to drag the country back to the 19th century.
Stiglitz: That's right, and you can't do that. But where he is right is that you need a central bank that's more representative, accountable, transparent. So, you need one, but you need one that's really run very differently.
Farley: I think his ideas about foreign policy also really resonate, that we need to get out of other countries' affairs.
Stiglitz: Yes, and again, there he goes a little too far. There's no justification for us spending as much money as the rest of the world put together. It's not like the whole world is going to gang up against us. We're, as I put it in one of my books, we're wasting a lot of money spending money on weapons that don't work against enemies that don't exist.
Farley: To prevent Sharia law in Oklahoma.
Stiglitz: Yes, it's bizarre. And the way we conduct the war is actually, again, counterproductive. Just today, I read an article about how we are generating people who are enlisting in Al-Qaeda and the opposition. Because when we kill their families, it's not ideology; it's revenge, or anger.
Farley: Yes, most people will consider you their enemy if you kill their family, even if your goals are otherwise compatible.
Stiglitz: We say, "Oh, it's just collateral damage. We didn't mean to kill all the members of your family." You're still not going to look with favor on them, especially these drones that seem like an unfair advantage.
So, I think Ron Paul may carry it too far. I think Americans might think we do have interests that we have to protect. But we've gone well beyond a rational assessment, and it's clear that military special interests play just an inordinate role, with Halliburton being the quintessential illustration. And, it's the quintessential illustration of rent seeking, to bring it back to the book. You know, you give a $7 billion contract with no competitive bid? You're giving away money. Money that goes right to the top.
Farley: At the end of the book, you talk about hope. But you sounded kind of tentative. How hopeful are you feeling that we'll pull back from the brink?
Stiglitz: We have a vicious circle in place where economic inequality breeds inequality of political power, which is then used to perpetuate economic inequality. We set rules of the game for the economy that lead to poor performance and more inequality. But we set rules of the game that have led to more imbalances in political power, as well: Citizens United, campaign contributions, revolving doors... all of that.
So, the question is, can you break into the circle? And that's why I made the reference before to the Gilded Age, the Roaring '20s. We've been here before. We still are a country, in principle, with one person, one vote. And, in principle, the majority, the 99 percent, could take the country back.
Will things have to get much worse before they do that? Will we risk that rather than moving to a balanced center, whether there will be groups on the far right, you know, neo-fascists, like the kinds of groups that are rising in Europe? Those are real worries. So, the answer is, I think we could, and that's the sense of hope.
Farley: It's not impossible.
Stiglitz: It's not impossible, but it's certainly not inevitable. If you look down the road, you can see two very different visions of America in 25, 35, 50 years. You can see America increasingly divided and much more like some of the other divided societies around the world, where people live in gated communities, where the two parts of a society don't know each other. Or, you could see a world in which people have said, "No, we have to live together. That's not the route we want to go down." I think there's hope, but the jury is still out.
Farley: There's a temptation among many on the Left to give up, to lose faith.
Stiglitz: In the book, I point out that 80 percent of young people didn't vote in the last [mid-term] election. You could understand their feeling. Obama didn't do what they had hoped. He said Change you could believe in. And, clearly, a disappointment. But that shouldn't make us fail to recognize there are very big differences in the candidates, and that one is more likely to start changing the politics, and might try to appoint a Supreme Court justice that would reverse Citizens United. The other one would appoint a Supreme Court justice that would reinforce Citizens United.
So, I understand the disillusionment and anger, but political disengagement is not going to work. It just gives them more power.
I spoke to Joseph Stiglitz before his event at Powell's at Cedar Hills Crossing on June 14, 2012.