Nobel-winning economist Joe Stiglitz on how the US economy became a "rigged, inherited plutocracy" and how to fix it

Writing in Scientific American (!), Nobel-prize-winning economist Joseph E Stiglitz (previously) describes the US economy as an "inherited plutocracy" that's "rigged" to shift an ever-greater share of the national wealth to the very richest people: Stiglitz blames the rigging on Ronald Reagan's dismantling of antitrust enforcement, inheritance tax, and other progressive measures 40 years ago -- and says that the orthodox economic apologists for economists who attribute inequality to globalism or other factors are wrong and unsupported by evidence.

Stiglitz describes how concentrating wealth in fewer hands means that it's easier for the wealthy in America to collaborate to get laws and regulations (anti-labor laws, free trade laws, limits to corporate liability, etc) passed that make them even richer, creating a "feedback loop" that drives ever-greater levels of inequality and with it, misery, desperation and sickness and death for the economic losers, who comprise an ever-larger group of the population.

Stiglitz also dismisses the economists who claim that inequality is the price we pay for growth, showing that inequality reduces GDP and national wealth -- and showing that broadly shared prosperity is an engine of growth that makes the nation better off as a whole, at the expense of a few mansions and super-yachts for the super-rich.

He finishes with a prescription for righting America's wrongs: campaign finance reforms; an end to the "revolving door" between government service and lobbying; progressive taxation; educational spending and universal access to university; a restoration of competition law; labor laws that increase unionization; limits on corporate executive compensation; strong finance laws; antidiscrimination laws that protect racial minorities, women and others; and "sensible inheritance laws;" universal retirement benefits; guaranteed "access to health care"; and reform of urban housing policies to "ensure affordable housing for all".

It is a long agenda—but a doable one. When skeptics say it is nice but not affordable, I reply: We cannot afford to not do these things. We are already paying a high price for inequality, but it is just a down payment on what we will have to pay if we do not do something—and quickly. It is not just our economy that is at stake; we are risking our democracy.

As more of our citizens come to understand why the fruits of economic progress have been so unequally shared, there is a real danger that they will become open to a demagogue blaming the country's problems on others and making false promises of rectifying “a rigged system.” We are already experiencing a foretaste of what might happen. It could get much worse.

The American Economy Is Rigged [Joseph E. Stiglitz/Scientific American]

(via Naked Capitalism)