Inequality: A Common Cause

The Price of Inequalityis a well-argued narrative of the failures of the market, “a marvellous economic machine” that Americans had created, but that “worked only for those at the top” (p xii) at least under the neo-liberal regime of the past three decades. The immediate context of this narrative is the 2008 economic crisis that washed out the dreams of millions of Americans – to live a decent life. Jobs were hard to come – about 20 million people were unemployed in March 2012. Millions were being thrown out of their homes. “There was growth in GDP [gross domestic product]”, but “most citizens were seeing their standard of living erode” (p xii); the real wage rate had declined for most of them. The larger contexts of the story were “enormous increase in inequality” in income, wealth, and power in the land of equal opportunity and “a political system that seemed to give a disproportionate voice to those at the top” (p xi), at the cost of those at the bottom. The unique selling point (USP) of American society is under threat. And this is the central concern of Stiglitz in the book under review.

The issue of the American economy and polity working for “those at the top” is not new. C Wright Mills in The Power Elite (1956) wrote a critique of American democracy, and argued that it was effectively controlled by a troika of political, industrial and military elites who manipulatively ruled the country tweaking democracy. Nevertheless, the power elites were accountable to the majority of its citizens, and responded to their needs and aspirations. The market was reined in effectively; rent seeking was checked; the tax regime was progressive; budgetary provisions were distributive; and social policies were wide and reached out to the weaker, poorer and more vulnerable sections of society. The inclusive character of the policy regime was working well for the American economy, society and polity. Economic opportunities were open and accessible on merit; a sense of fairness prevailed in the society; and the legitimacy of democracy was high notwithstanding “the power elite”. The American economy, society and democracy prospered together before neo-liberalism robbed it of its cohesiveness and inclusiveness.