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People, Power, and Profits: Progressive Capitalism for an Age of Discontent
From Nobel Prize-winning economist and bestselling author Joseph Stiglitz, this account of the dangers of free market fundamentalism reveals what has gone so wrong, but also shows us a way out.
We all have the sense that our economy tilts toward big business, but as Joseph E. Stiglitz explains in People, Power and Profits, a few corporations have come to dominate entire sectors, contributing to skyrocketing inequality and slow growth. This is how the financial industry has managed to write its own regulations, tech companies have accumulated reams of personal data with little oversight, and government has negotiated trade deals that fail to represent the best interests of workers. Too many have made their wealth through exploitation of others rather than through wealth creation. If something isn't done, new technologies may make matters worse, increasing inequality and unemployment.
Stiglitz identifies the true sources of wealth and increases in standards of living, based on learning, advances in science and technology, and the rule of law. He shows that the assault on the judiciary, universities, and the media undermines the very institutions that have long been the foundation of economic prosperity and democracy.
Helpless though we may feel today, we are far from powerless. In fact, the economic solutions are often quite clear. We need to exploit the benefits of markets while taming their excesses, making sure that markets work for people and not the other way around. If enough rally behind this agenda for change, we can create a progressive capitalism that will recreate a shared prosperity. Stiglitz shows how a decent middle-class life can once again be attainable by all.
We all have the sense that our economy tilts toward big business, but as Joseph E. Stiglitz explains in People, Power and Profits, a few corporations have come to dominate entire sectors, contributing to skyrocketing inequality and slow growth. This is how the financial industry has managed to write its own regulations, tech companies have accumulated reams of personal data with little oversight, and government has negotiated trade deals that fail to represent the best interests of workers. Too many have made their wealth through exploitation of others rather than through wealth creation. If something isn't done, new technologies may make matters worse, increasing inequality and unemployment.
Stiglitz identifies the true sources of wealth and increases in standards of living, based on learning, advances in science and technology, and the rule of law. He shows that the assault on the judiciary, universities, and the media undermines the very institutions that have long been the foundation of economic prosperity and democracy.
Helpless though we may feel today, we are far from powerless. In fact, the economic solutions are often quite clear. We need to exploit the benefits of markets while taming their excesses, making sure that markets work for people and not the other way around. If enough rally behind this agenda for change, we can create a progressive capitalism that will recreate a shared prosperity. Stiglitz shows how a decent middle-class life can once again be attainable by all.
371 pages, Paperback
First published January 1, 2019
786 people are currently reading
6040 people want to read
About the author
Joseph E. Stiglitz
247 books1,846 followersJoseph Eugene Stiglitz, ForMemRS, FBA, is an American economist and a professor at Columbia University. He is a recipient of the Nobel Memorial Prize in Economic Sciences (2001) and the John Bates Clark Medal (1979). He is also the former Senior Vice President and Chief Economist of the World Bank. He is known for his critical view of the management of globalization, free-market economists (whom he calls "free market fundamentalists") and some international institutions like the International Monetary Fund and the World Bank.
In 2000, Stiglitz founded the Initiative for Policy Dialogue (IPD), a think tank on international development based at Columbia University. Since 2001, he has been a member of the Columbia faculty, and has held the rank of University Professor since 2003. He also chairs the University of Manchester's Brooks World Poverty Institute and is a member of the Pontifical Academy of Social Sciences. Professor Stiglitz is also an honorary professor at Tsinghua University School of Public Policy and Management. Stiglitz is one of the most frequently cited economists in the world.
In 2000, Stiglitz founded the Initiative for Policy Dialogue (IPD), a think tank on international development based at Columbia University. Since 2001, he has been a member of the Columbia faculty, and has held the rank of University Professor since 2003. He also chairs the University of Manchester's Brooks World Poverty Institute and is a member of the Pontifical Academy of Social Sciences. Professor Stiglitz is also an honorary professor at Tsinghua University School of Public Policy and Management. Stiglitz is one of the most frequently cited economists in the world.
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January 21, 2025
First, let’s start with some statistics: Over the last 30 to 40 years, every major statistical measure of income inequality in the United States has increased significantly, now approaching the same extreme levels as prevailed before the Great Depression. If you visit inequality.org, the charts speak for themselves.
Over the last third of a century, the income share for the top 1 percent has doubled while the poverty rate has remained the same. The richest Americans have experienced the fastest income growth while middle class incomes have stagnated (imagine if middle class incomes had doubled and what that would mean for home ownership). From 1979 to 2017, worker productivity has increased by 138 percent while worker hourly compensation has increased by only 23 percent. The difference in wealth creation has gone to the top. In 1965, CEOs made 24 times the wages of the average production worker; in 2019, they made 185 times the average salary.
In 2017, just 26 people had as much wealth as the bottom 50 percent of the world, 3.9 billion people. If inequality is not a problem, then what would this number have to be before it is? 12? 6? 1? Some degree of inequality is of course fair and efficient as an incentive and reward for work, but surely there is a level that ceases to be fair, and we seem to have passed it long ago.
In healthcare, of the top 33 major industrialized countries in the world, the US is the only one without some form of universal coverage. The US spends more on healthcare per capita but has poorer public health outcomes, where life expectancy has actually been declining. In education, the price of college is increasing eight times faster than wages, with student debt accounting for the largest chunk of non-housing debt. In addition, our students consistently rank in the middle of the pack or lower compared to other advanced nations in terms of performance in science, math, and reading.
These are the facts, and not many would propose that this situation is anything close to ideal. The question is, how did this happen, and more importantly, what can we do about it. In his latest book, People, Power, and Profits, Joseph Stiglitz, a Nobel Prize winner and former chief economist of the World Bank, sets out to answer these two questions.
According to Stiglitz, the economic and political situation we find ourselves in is the result of trends beginning in the late 1970s, the result of both parties prioritizing the interests of business and the wealthy. We are caught in a vicious cycle where increasing economic inequality leads to political inequality, which leads to looser regulation and further economic inequality, and so on. Progressive policies are the only path out of the cycle, otherwise the forces in place will continue to perpetuate the problems.
Extreme inequality and economic volatility are the result of four decades of policies built on two assumptions that seem to be fairly obviously false: 1) that the market, left alone, is always efficient, and 2) that tax cuts for corporations and the wealthy will stimulate growth and trickle down to everyone else.
That the market is not always efficient should be obvious; in addition to the conspicuous examples of the Great Depression and 2008 financial crisis, the market by itself will tend to produce too much of some things (pollution) and too little of others (basic research, help for the poor and disabled). Free-riding is a problem for corporations just as it is for individuals. Public goods are under-produced in the market and externalities like pollution are over-produced because corporations have every incentive, in the absence of countervailing forces (regulation), to maximize profit at the expense of others.
Besides, the market cannot function without some kind of structure and regulation; therefore, the issue is not the choice between more or less government but rather in recognizing who benefits from the current arrangements.
As the inequality statistics clearly show, it is obvious who benefits—corporations and the ultra-wealthy. Four decades of trickle down economics have created the exact opposite—income and wealth trickling up. Middle class wages have remained constant while top incomes have soared—that is the exact opposite of what was supposed to happen under the policies of lower taxes and less regulation. As for growth, as Stiglitz wrote:
“For the third century after World War II, from 1947 to 1980, the US grew at an annual rate of 3.7 percent, while for the last third of a century, from 1980 to 2017, the average growth rate has been only 2.7 percent, a full percentage point lower. This is a major decline, nearly 30 percent.”
So the solution cannot possibly be more tax cuts for the rich and even less regulation, yet these are exactly the policies being implemented by the current administration. One definition of insanity is doing the same thing repeatedly and expecting different results; after four decades of lower growth and increasing inequality, belief in trickle down economics is nothing if not insane.
Inequality will simply not fix itself, and business, operating within the current environment, has no incentive to fix it either. The only thing the 2017 tax bill and lower corporate tax rates have done is create a record number of stock buybacks, again benefiting the wealthy.
The situation could also get worse; technological innovation and artificial intelligence will likely reduce demand for low-skilled workers, driving down wages, increasing unemployment, or both. Even as corporations save money via automation, consumer demand will plummet as unemployment and low wages will decrease overall consumer spending, which makes up 68 percent of the economy.
The market will not magically reorient itself to produce fair and equitable outcomes in the face of disruption; more than likely, asymmetries will be exploited to benefit a minority at the expense of the majority, as usual. The cost of inaction is too high, which means something must be done other than exacerbating the problem by giving business more market power.
As Stiglitz wrote, “The true wealth of a nation is measured by its capacity to deliver, in a sustainable way, high standards of living for all its citizens.” According to this definition, the US falls short. What can be done?
In the second part of the book, Stiglitz offers a way forward, but to appreciate the recommendations, people have to get over their bias against any and all forms of government spending. We’ve been told for four decades that the government is evil and the market is infallible, and for that we have record levels of inequality, stagnant middle class wages, poverty, declining life expectancy, widespread job insecurity, poverty traps, healthcare inefficiency, and inequality of opportunity. If we want to change this, we cannot do so by catering to the same market forces and business interests that created the situation in the first place.
The government is corrupt only to the degree that it implements policies that benefit a minority of wealthy individuals at the expense of the majority. We should demand that our government start working for the common good, not business interests. Stiglitz offer several suggestions for political and economic reform in this regard, from increasing voter turnout and limiting Supreme Court justice terms to overriding the Citizens United decision and taxing short-term financial speculation.
It’s worth pausing to note that progressive capitalism, in terms of specific policy, does not adopt a single approach at the exclusion of all others. Disagreement on policy implementation is inevitable and desirable. The real problem is not in healthy debate about policy details but rather in thinking that the best option is to do nothing, or to hopelessly rely on trickle down economics and market fundamentalism.
As the country continues to generate wealth, progressive capitalism simply says that more of that growth should make its way down to the middle class in terms of increased income, better services, or both, and that smart government intervention is the only way this is going to happen, as the last four decades of overreliance on the market make perfectly clear.
The type of intervention necessary is a whole other issue, a discussion that free-market fundamentalists can distract us from even having. But as the problems of inequality become more widely recognized, it is a discussion we need to have. An economy that works for everyone rather than the few is one that finds a better balance between extreme collectivism at one end (communism) and extreme individualism at the other end (US-style free-market capitalism). Finding that balance requires smart regulation and spending.
It’s not that other countries can’t and aren’t already doing this. American exceptionalism tells us we can’t learn anything from anyone else, but other countries are in fact managing universal healthcare with better health outcomes at lower cost, providing more affordable education for more people, and limiting inequality with more progressive taxation. We ignore this at our own peril.
As to which recommendations would be more effective is an open debate. For example, should we implement a universal basic income for all or instead rely on right-to-work programs and negative income tax? Both programs seek to reduce inequality and increase opportunity, but as a matter of policy, the more effective option is unclear. The point is, these are the types of debates we should be having, not whether something different needs to be done at all.
If we can all get over our aversion to government spending and blind faith in the market, perhaps people like Stiglitz can write more substantive books about the pros and cons of competing progressive policies rather than trying to talk people out of an economic theory that has repeatedly refuted itself for 40 years.
Stiglitz reminds us that we need to get back to basics, recognizing that real growth depends on basic research and science, which leads to technology, innovation, and productivity gains. Our increases in standard of living are mostly attributable to gains in a better scientific understanding of the world. This puts universities and basic research at the head of an agenda for economic growth, but as we’ve seen, these are the very things, as public goods, that the market left to its own will undervalue and underproduce. Instead of true wealth creation, in the current economy we get a disproportionate level of rent-seeking, exploitation, and transfer of wealth. Instead of an economy based on innovative products and services, we get real estate speculation and financial trading, the simple act of moving money around and exploiting small discrepancies in information.
Despite what is portrayed in the media, I think it’s probably true that most Americans do not want to have to worry about healthcare premiums, copays, and deductibles; that most Americans want access to more affordable education for themselves and their children; that most Americans don’t want billionaires getting richer at the expense of the middle class; and that most Americans want to live in a country that is at the forefront of scientific discovery and innovation. If this is not so radical to believe, then we all need to drop the fallacy of the free market, stop distracting ourselves with less pressing issues, and start thinking more seriously about how to create an economy that is more equitable in terms of opportunity, income, and wealth.
Over the last third of a century, the income share for the top 1 percent has doubled while the poverty rate has remained the same. The richest Americans have experienced the fastest income growth while middle class incomes have stagnated (imagine if middle class incomes had doubled and what that would mean for home ownership). From 1979 to 2017, worker productivity has increased by 138 percent while worker hourly compensation has increased by only 23 percent. The difference in wealth creation has gone to the top. In 1965, CEOs made 24 times the wages of the average production worker; in 2019, they made 185 times the average salary.
In 2017, just 26 people had as much wealth as the bottom 50 percent of the world, 3.9 billion people. If inequality is not a problem, then what would this number have to be before it is? 12? 6? 1? Some degree of inequality is of course fair and efficient as an incentive and reward for work, but surely there is a level that ceases to be fair, and we seem to have passed it long ago.
In healthcare, of the top 33 major industrialized countries in the world, the US is the only one without some form of universal coverage. The US spends more on healthcare per capita but has poorer public health outcomes, where life expectancy has actually been declining. In education, the price of college is increasing eight times faster than wages, with student debt accounting for the largest chunk of non-housing debt. In addition, our students consistently rank in the middle of the pack or lower compared to other advanced nations in terms of performance in science, math, and reading.
These are the facts, and not many would propose that this situation is anything close to ideal. The question is, how did this happen, and more importantly, what can we do about it. In his latest book, People, Power, and Profits, Joseph Stiglitz, a Nobel Prize winner and former chief economist of the World Bank, sets out to answer these two questions.
According to Stiglitz, the economic and political situation we find ourselves in is the result of trends beginning in the late 1970s, the result of both parties prioritizing the interests of business and the wealthy. We are caught in a vicious cycle where increasing economic inequality leads to political inequality, which leads to looser regulation and further economic inequality, and so on. Progressive policies are the only path out of the cycle, otherwise the forces in place will continue to perpetuate the problems.
Extreme inequality and economic volatility are the result of four decades of policies built on two assumptions that seem to be fairly obviously false: 1) that the market, left alone, is always efficient, and 2) that tax cuts for corporations and the wealthy will stimulate growth and trickle down to everyone else.
That the market is not always efficient should be obvious; in addition to the conspicuous examples of the Great Depression and 2008 financial crisis, the market by itself will tend to produce too much of some things (pollution) and too little of others (basic research, help for the poor and disabled). Free-riding is a problem for corporations just as it is for individuals. Public goods are under-produced in the market and externalities like pollution are over-produced because corporations have every incentive, in the absence of countervailing forces (regulation), to maximize profit at the expense of others.
Besides, the market cannot function without some kind of structure and regulation; therefore, the issue is not the choice between more or less government but rather in recognizing who benefits from the current arrangements.
As the inequality statistics clearly show, it is obvious who benefits—corporations and the ultra-wealthy. Four decades of trickle down economics have created the exact opposite—income and wealth trickling up. Middle class wages have remained constant while top incomes have soared—that is the exact opposite of what was supposed to happen under the policies of lower taxes and less regulation. As for growth, as Stiglitz wrote:
“For the third century after World War II, from 1947 to 1980, the US grew at an annual rate of 3.7 percent, while for the last third of a century, from 1980 to 2017, the average growth rate has been only 2.7 percent, a full percentage point lower. This is a major decline, nearly 30 percent.”
So the solution cannot possibly be more tax cuts for the rich and even less regulation, yet these are exactly the policies being implemented by the current administration. One definition of insanity is doing the same thing repeatedly and expecting different results; after four decades of lower growth and increasing inequality, belief in trickle down economics is nothing if not insane.
Inequality will simply not fix itself, and business, operating within the current environment, has no incentive to fix it either. The only thing the 2017 tax bill and lower corporate tax rates have done is create a record number of stock buybacks, again benefiting the wealthy.
The situation could also get worse; technological innovation and artificial intelligence will likely reduce demand for low-skilled workers, driving down wages, increasing unemployment, or both. Even as corporations save money via automation, consumer demand will plummet as unemployment and low wages will decrease overall consumer spending, which makes up 68 percent of the economy.
The market will not magically reorient itself to produce fair and equitable outcomes in the face of disruption; more than likely, asymmetries will be exploited to benefit a minority at the expense of the majority, as usual. The cost of inaction is too high, which means something must be done other than exacerbating the problem by giving business more market power.
As Stiglitz wrote, “The true wealth of a nation is measured by its capacity to deliver, in a sustainable way, high standards of living for all its citizens.” According to this definition, the US falls short. What can be done?
In the second part of the book, Stiglitz offers a way forward, but to appreciate the recommendations, people have to get over their bias against any and all forms of government spending. We’ve been told for four decades that the government is evil and the market is infallible, and for that we have record levels of inequality, stagnant middle class wages, poverty, declining life expectancy, widespread job insecurity, poverty traps, healthcare inefficiency, and inequality of opportunity. If we want to change this, we cannot do so by catering to the same market forces and business interests that created the situation in the first place.
The government is corrupt only to the degree that it implements policies that benefit a minority of wealthy individuals at the expense of the majority. We should demand that our government start working for the common good, not business interests. Stiglitz offer several suggestions for political and economic reform in this regard, from increasing voter turnout and limiting Supreme Court justice terms to overriding the Citizens United decision and taxing short-term financial speculation.
It’s worth pausing to note that progressive capitalism, in terms of specific policy, does not adopt a single approach at the exclusion of all others. Disagreement on policy implementation is inevitable and desirable. The real problem is not in healthy debate about policy details but rather in thinking that the best option is to do nothing, or to hopelessly rely on trickle down economics and market fundamentalism.
As the country continues to generate wealth, progressive capitalism simply says that more of that growth should make its way down to the middle class in terms of increased income, better services, or both, and that smart government intervention is the only way this is going to happen, as the last four decades of overreliance on the market make perfectly clear.
The type of intervention necessary is a whole other issue, a discussion that free-market fundamentalists can distract us from even having. But as the problems of inequality become more widely recognized, it is a discussion we need to have. An economy that works for everyone rather than the few is one that finds a better balance between extreme collectivism at one end (communism) and extreme individualism at the other end (US-style free-market capitalism). Finding that balance requires smart regulation and spending.
It’s not that other countries can’t and aren’t already doing this. American exceptionalism tells us we can’t learn anything from anyone else, but other countries are in fact managing universal healthcare with better health outcomes at lower cost, providing more affordable education for more people, and limiting inequality with more progressive taxation. We ignore this at our own peril.
As to which recommendations would be more effective is an open debate. For example, should we implement a universal basic income for all or instead rely on right-to-work programs and negative income tax? Both programs seek to reduce inequality and increase opportunity, but as a matter of policy, the more effective option is unclear. The point is, these are the types of debates we should be having, not whether something different needs to be done at all.
If we can all get over our aversion to government spending and blind faith in the market, perhaps people like Stiglitz can write more substantive books about the pros and cons of competing progressive policies rather than trying to talk people out of an economic theory that has repeatedly refuted itself for 40 years.
Stiglitz reminds us that we need to get back to basics, recognizing that real growth depends on basic research and science, which leads to technology, innovation, and productivity gains. Our increases in standard of living are mostly attributable to gains in a better scientific understanding of the world. This puts universities and basic research at the head of an agenda for economic growth, but as we’ve seen, these are the very things, as public goods, that the market left to its own will undervalue and underproduce. Instead of true wealth creation, in the current economy we get a disproportionate level of rent-seeking, exploitation, and transfer of wealth. Instead of an economy based on innovative products and services, we get real estate speculation and financial trading, the simple act of moving money around and exploiting small discrepancies in information.
Despite what is portrayed in the media, I think it’s probably true that most Americans do not want to have to worry about healthcare premiums, copays, and deductibles; that most Americans want access to more affordable education for themselves and their children; that most Americans don’t want billionaires getting richer at the expense of the middle class; and that most Americans want to live in a country that is at the forefront of scientific discovery and innovation. If this is not so radical to believe, then we all need to drop the fallacy of the free market, stop distracting ourselves with less pressing issues, and start thinking more seriously about how to create an economy that is more equitable in terms of opportunity, income, and wealth.
Want to read
February 27, 2020
OK, a few days ago, he's just admitted that his "progressive Capitalism" is equivalent to Bernie Sanders "democratic Socialism".
One more vote(r) for Bernie Sanders. Or for Elisabeth Warren?
Or...?
Reflection
C=Capitalism
S=Socialism
p=progressive
d=democratic
If
p.C=d.S
then
C/d=S/p
But if:
p=1
and
d=1
then C=S
True, there are situations when Socialism and Capitalism don't differ.
Why bother then?
----
So what's the difference? Between Warren's socialism and Bernie's?
Bernie just said it: "ovaries".
"Sanders: Warren Is Surging Because She’s Got Ovaries"
In Vanity Fair
😂😂😂😂
But, there's another difference: for the moment she sits behind him, he's clearly ahead:
Whoops, another difference spotted by the Jacobin magazine:
Oops, now they converge:
Ha!
-He can.
Hmm They both have a student debt cancellation plan. Yet Warren spoke first.
Well, Germans say she "dominated" the Democratic debate, yesterday. Will she get ahead of Bernie? Let's see how will he perform, today.
Now she's ahead of Sanders
https://www.google.com/amp/s/theweek....
UPDATE
Wow, she's ahead of Biden!
https://www.politico.com/story/2019/0...
UPDATE
I know Bernie is the frontrunner after the Nevada win. Let's see if Bloomberg & Hillary won't try any Gambit.
https://www.salon.com/2020/02/25/bern...
Poor political prisoners who could read though.
May 14, 2019
1. American people are angry. Republican Presidents such as Reagan and Trump like to cut taxes and regulations. Trickledown economics doesn’t work and inequality is high. The poor’s income have stagnated and their children are stuck in the low income trap. This leads to despair and increasing mortality from drug use and suicide.
2. Real wealth comes from Productivity, Creativity and Vitality of the people; technology; advanced organisations; rule of law, competitive, well-regulated markets; and truth telling institution.
3. Finance industry is rent seeking and decreases the real wealth of the country. Donald Trump undermines truth, cut taxes to enrich the rich, cut spending on researches, and limit immigration when 52% of Silicon Valley companies are founded by immigrants.
4. Both capital income to GDP and labor income to GDP had dropped. Thus rent must have increased. Market power had increased from mergers resulting in oligopolies. They draw moats and create barriers to entry by abusing patent power, bundling it with existing products, evergreen ing patents, or bullying small firms. Anti-trust law is not applied rigorously.
5. Eliminating monopoly is estimated to raise productivity by 40% by David Baqaee. Also it decreases demand because money floats to the top and rich people spend less than the poor as a proportion. Investment is weakened because any increase in supply in a monopoly leads to lower price. This explains the recent high profits but lower investment. Innovation is used to maintain the monopoly, not to make new things.
6. Firms colluded (Apple, Google, Intel and Adobe; Disney) not to poach each other’s staff; they were fined 415 million. They invented on-call scheduling of work that wreaks havoc for workers’ lives. They gave part time or contractor only work to avoid giving health benefits and minimum wage. They weaken unions by lobbying for ‘right-to-work’ laws.
7. Stiglitz was critical of conservative economists of the Chicago school such as Milton Friedman who said that monopoly was good and temporary and would spur innovation. Predatory pricing for American Airlines first drive out competition, and then prices are increased. Mergers bring monopolies. He thinks these should not be allowed. Whereas mergers can be easily prevented, predatory pricing can only be regulated by price control. So we will become communists...He also proposed limiting the duration of patents, make media mergers extremely difficult so that rich people cannot control the narrative, and stop academic publishers from profiting by exploiting free labor from reviewers. However, owners of firms are necessarily rich people, thus owners of media companies tend to be rich too... So I don’t see how we can limit ‘the rich’. He thinks we should strengthen unions and make consumer class action against companies easy. I guess where there is real demand for workers (fracking etc), jobs are easy to come by for whoever wants to work and unions are not needed; otherwise it’s hard to union uber drivers.
8. Globalisation: Western elites got what they want, free trade, lower production cost from outsourcing, intellectual property protection. They did not want to share, however, leading to unskilled workers losing their job, dignity and their lives. On the other hand, tax rates had dropped to close to zero (Ireland), and the rich stashed their riches in Moneyland. He feels it’s simply to solve these: apply a minimum corporate tax, and bar Moneyland countries from assessing US financial system. I urge Stiglitz to have a read of Moneyland, as certain states in America are actually part of Moneyland...
9. Trade deficit happens as long as the long term saving rate is lower than investment. It doesn’t matter if it’s China or Malaysia. Tariffs just cause things to cost more, and production shift to countries not affected.
10. Financial crisis: it was necessary to save the banks, but not the bankers. Certainly ordinary people who lost their homes and savings were not. But the lobbying industry is too strong. Banks are also lending less now than before the crisis, and prefer to exploit consumers instead. Wells Fargo defrauded consumers by opening accounts without authorisation and was fined a puny $100 million. Investment banks created investment vehicles that they know would fail and actually bet against and earned big. Banks also continue to refuse to bear the risk of a mortgage loan.
11. Robots are going to replace labor, so to maintain similar employment, wages must fall and demand all drop (since robots don’t need much). He suggested 1) Control monopolistic power of. Big Tech; 2) Share the fruits of Intellectual Property with government; 3) Progressive tax; 4) Government help change to service economy.
12. With AI firms now have different prices for different people. Certain zip code. They can know our weakness (e.g. addiction tendency) and then offer a product (e.g. free Las Vegas hotel stay) and dissipate our income. Actually casinos already do that. Stiglitz did bring up a solid suggestion: we should own our own data. So firms must ask and pay us to use that. Infringement must be punished, data storage should be taxed. He thinks we should break up Facebook, Instagram and Whatsapp. If that is not possible Facebook must be regulated as a public utility.
13. Government is important for defence, infrastructure building and maintenance, basic research, social security, Medicare and redistribution of wealth. Only the government can regulate firms to ensure a level playing field.
14. Stiglitz thinks American democracy is in peril because the Republicans are destroying it. He thinks voting should be on Sunday; registration should be easy; people should be paid for voting; convicted felons should be allowed to vote; dreamers should have a path to citizenship; and gerrymandering must stop. He thinks illegal workers who come every year to work should become citizens. I think he needs to read WhiteShift by Kaufmann to understand the link between immigration of non-whites and vote for Trump... Most citizens cannot accept sudden and large influx of immigrants; even in Singapore the opposition gained votes during the decade when immigration was too fast and furious.
15. Stiglitz feels that Republicans had assigned partisan supreme court judges, which had passed some dubious decisions such as Citizens United. So corporations can pour unlimited amounts of money to political parties; no wonder Americans feel that elections are driven by money.
16. Stiglitz is very upset that Trump taxes endowment of universities. He thinks that should be abolished and more money to be spent on research. Teachers should be paid more, infrastructure built, public transport provided.
17. He thinks less skilled workers should be supported by childcare, minimum wage, wage subsidy, earned income credit and even government jobs so that anyone who wants to work, can. He feels universal pre-school education and increased federal funding for schools and greatly increased teacher pay will help reduce inequality. Repayment of college debt should be contingent on income, just like in Australia. College loan should also be dischargeable in bankruptcy just like other loans.
18. He thinks tax should be greatly increased for land, so that capital can be put in more productive use. Tax on carbon for household and firms would help save the planet and encourage clean energy development. Financial transactions should be taxed because it is a zero sum game and has no real benefits.
19. On mortgage, Stiglitz thinks the current arrangement for banks to earn the fees but pass the risk to the government. He thinks the IRS should administer mortgages. This is starting to sound like singapore when the government does the mortgage for government housing; people like it because it is kinder to people who has difficulties and missed a few payments. People also can get their mortgage from banks for lower rates but if they miss a payment, the bank can take over the house.
Another great book by Stiglitz!
2. Real wealth comes from Productivity, Creativity and Vitality of the people; technology; advanced organisations; rule of law, competitive, well-regulated markets; and truth telling institution.
3. Finance industry is rent seeking and decreases the real wealth of the country. Donald Trump undermines truth, cut taxes to enrich the rich, cut spending on researches, and limit immigration when 52% of Silicon Valley companies are founded by immigrants.
4. Both capital income to GDP and labor income to GDP had dropped. Thus rent must have increased. Market power had increased from mergers resulting in oligopolies. They draw moats and create barriers to entry by abusing patent power, bundling it with existing products, evergreen ing patents, or bullying small firms. Anti-trust law is not applied rigorously.
5. Eliminating monopoly is estimated to raise productivity by 40% by David Baqaee. Also it decreases demand because money floats to the top and rich people spend less than the poor as a proportion. Investment is weakened because any increase in supply in a monopoly leads to lower price. This explains the recent high profits but lower investment. Innovation is used to maintain the monopoly, not to make new things.
6. Firms colluded (Apple, Google, Intel and Adobe; Disney) not to poach each other’s staff; they were fined 415 million. They invented on-call scheduling of work that wreaks havoc for workers’ lives. They gave part time or contractor only work to avoid giving health benefits and minimum wage. They weaken unions by lobbying for ‘right-to-work’ laws.
7. Stiglitz was critical of conservative economists of the Chicago school such as Milton Friedman who said that monopoly was good and temporary and would spur innovation. Predatory pricing for American Airlines first drive out competition, and then prices are increased. Mergers bring monopolies. He thinks these should not be allowed. Whereas mergers can be easily prevented, predatory pricing can only be regulated by price control. So we will become communists...He also proposed limiting the duration of patents, make media mergers extremely difficult so that rich people cannot control the narrative, and stop academic publishers from profiting by exploiting free labor from reviewers. However, owners of firms are necessarily rich people, thus owners of media companies tend to be rich too... So I don’t see how we can limit ‘the rich’. He thinks we should strengthen unions and make consumer class action against companies easy. I guess where there is real demand for workers (fracking etc), jobs are easy to come by for whoever wants to work and unions are not needed; otherwise it’s hard to union uber drivers.
8. Globalisation: Western elites got what they want, free trade, lower production cost from outsourcing, intellectual property protection. They did not want to share, however, leading to unskilled workers losing their job, dignity and their lives. On the other hand, tax rates had dropped to close to zero (Ireland), and the rich stashed their riches in Moneyland. He feels it’s simply to solve these: apply a minimum corporate tax, and bar Moneyland countries from assessing US financial system. I urge Stiglitz to have a read of Moneyland, as certain states in America are actually part of Moneyland...
9. Trade deficit happens as long as the long term saving rate is lower than investment. It doesn’t matter if it’s China or Malaysia. Tariffs just cause things to cost more, and production shift to countries not affected.
10. Financial crisis: it was necessary to save the banks, but not the bankers. Certainly ordinary people who lost their homes and savings were not. But the lobbying industry is too strong. Banks are also lending less now than before the crisis, and prefer to exploit consumers instead. Wells Fargo defrauded consumers by opening accounts without authorisation and was fined a puny $100 million. Investment banks created investment vehicles that they know would fail and actually bet against and earned big. Banks also continue to refuse to bear the risk of a mortgage loan.
11. Robots are going to replace labor, so to maintain similar employment, wages must fall and demand all drop (since robots don’t need much). He suggested 1) Control monopolistic power of. Big Tech; 2) Share the fruits of Intellectual Property with government; 3) Progressive tax; 4) Government help change to service economy.
12. With AI firms now have different prices for different people. Certain zip code. They can know our weakness (e.g. addiction tendency) and then offer a product (e.g. free Las Vegas hotel stay) and dissipate our income. Actually casinos already do that. Stiglitz did bring up a solid suggestion: we should own our own data. So firms must ask and pay us to use that. Infringement must be punished, data storage should be taxed. He thinks we should break up Facebook, Instagram and Whatsapp. If that is not possible Facebook must be regulated as a public utility.
13. Government is important for defence, infrastructure building and maintenance, basic research, social security, Medicare and redistribution of wealth. Only the government can regulate firms to ensure a level playing field.
14. Stiglitz thinks American democracy is in peril because the Republicans are destroying it. He thinks voting should be on Sunday; registration should be easy; people should be paid for voting; convicted felons should be allowed to vote; dreamers should have a path to citizenship; and gerrymandering must stop. He thinks illegal workers who come every year to work should become citizens. I think he needs to read WhiteShift by Kaufmann to understand the link between immigration of non-whites and vote for Trump... Most citizens cannot accept sudden and large influx of immigrants; even in Singapore the opposition gained votes during the decade when immigration was too fast and furious.
15. Stiglitz feels that Republicans had assigned partisan supreme court judges, which had passed some dubious decisions such as Citizens United. So corporations can pour unlimited amounts of money to political parties; no wonder Americans feel that elections are driven by money.
16. Stiglitz is very upset that Trump taxes endowment of universities. He thinks that should be abolished and more money to be spent on research. Teachers should be paid more, infrastructure built, public transport provided.
17. He thinks less skilled workers should be supported by childcare, minimum wage, wage subsidy, earned income credit and even government jobs so that anyone who wants to work, can. He feels universal pre-school education and increased federal funding for schools and greatly increased teacher pay will help reduce inequality. Repayment of college debt should be contingent on income, just like in Australia. College loan should also be dischargeable in bankruptcy just like other loans.
18. He thinks tax should be greatly increased for land, so that capital can be put in more productive use. Tax on carbon for household and firms would help save the planet and encourage clean energy development. Financial transactions should be taxed because it is a zero sum game and has no real benefits.
19. On mortgage, Stiglitz thinks the current arrangement for banks to earn the fees but pass the risk to the government. He thinks the IRS should administer mortgages. This is starting to sound like singapore when the government does the mortgage for government housing; people like it because it is kinder to people who has difficulties and missed a few payments. People also can get their mortgage from banks for lower rates but if they miss a payment, the bank can take over the house.
Another great book by Stiglitz!
June 17, 2019
This book is so bad I couldn't read it. It is nothing but a tirade of an aging liberal economist bemoaning the Rise of Trump. (I did not support Trump for president, nor am I happy with the state of American politics.) He is sloppy and does not seem to care to persuade. He writes that a "majority of Americans" voted for Gore over Bush and Clinton over Trump, but that's plain false: a majority of those who bothered to vote is entirely different from a majority of Americans. He keeps talking about the need to ensure people get new jobs when they lose theirs, but the unemployment rate is the lowest it's been in my 50-year existence and is far superior to nearly every socialist nation he likely adores. He says that he will explain why inequality is bad, but he really just assumes you believe it, too. And then he's just downright insulting, assuming we are as ignorant as the grandchildren he must be used to preaching at: "Smith himself was part of a great intellectual movement of the late eighteenth century called the Enlightenment. Often associated with the scientific revolution, the Enlightenment was built on developments over the preceding centuries, beginning with the Protestant Reformation." Are you serious right now? Am I in middle school?? Go back to schooling your granddaughter, kind sir, and leave that keyboard alone.
June 28, 2019
It will not be difficult for people to disagree with some or even many aspects of Joseph Stiglitz’s new book, but it is important to recognize what the book is attempting to do in order to come to some conclusions about its quality or success.
Power, People, and Profits provides an economic policy agenda for progressives as the 2020 presidential appears to be ramping up. Anyone following the process of winnowing out members of the large herd of potential Democratic challengers in 2020 will do well to familiarize themselves with this book in order to understand the economic policy choices that will guide the party during the upcoming campaign. It is a policy statement and explanation written to motivate economic choices during what will certainly prove to be one of the more contentious campaigns in American history. It is intended to be biased towards a set of economic theories and values and deeply hostile to some others, especially what Stiglitz call the free market fundamentalism that has come to dominate national politics since the Reagan era. This is about as far from a detached academic study as it is possible to be. Spoiler alert - Stiglitz is not supportive of the current administration, the President, or his economic policies. ... but which economists are supportive? Remember that this administration recruits its economic advisors from CNBC.
One has to go by the book and its arguments, of course, but it is worth noting that Stiglitz is not just any economist. He is a professor at Columbia, was the top economist for the World Bank, and served as a senior advisor in the Obama administration. It is also important to note that the lines of criticism elaborated by Professor Stiglitz are hardly new in this book. Stiglitz has been harshly critical of free market fundamentalism since around the time of the millenium and has been fairly consistent in his work. This includes his distinctive claim that the key to getting America out of its current economic malaise is a recourse to more government rather than to less government - the argument of the free market orthodoxy. It is safe to say that Stiglitz has not forged a universal consensus around his view but it increasingly seems as if the times have caught up to the positions that Stiglitz has held for a long time.
Stiglitz is not the only critic of economic policies since the Great Recession of 2008. His book is well written and exceptionally clear, however. If you are interested in clear and generally accessible explanations of some very complex problems, then this is the book for you. Even if one disagrees with Stiglitz, it is worth it to work through the book and understand the reasons for disagreements.
I would like to say that Stiglitz was persuasive for me, but I was already largely convinced and he was thus preaching to the choir. Logic and clarity are worthwhile values, however, and working through the book will be rewarding for those who take the time.
Stiglitz has a clear perspective and may be accused of bias. That is not troubling to me. First, every piece of economic policy writing is biased and is arguing one point against others. Economic policy writing almost always combines politics and economics and always seeks to make a case. The burden on the reader is to determine how well the case has been made. I always enjoy reading Stiglitz and found this book valuable.
Power, People, and Profits provides an economic policy agenda for progressives as the 2020 presidential appears to be ramping up. Anyone following the process of winnowing out members of the large herd of potential Democratic challengers in 2020 will do well to familiarize themselves with this book in order to understand the economic policy choices that will guide the party during the upcoming campaign. It is a policy statement and explanation written to motivate economic choices during what will certainly prove to be one of the more contentious campaigns in American history. It is intended to be biased towards a set of economic theories and values and deeply hostile to some others, especially what Stiglitz call the free market fundamentalism that has come to dominate national politics since the Reagan era. This is about as far from a detached academic study as it is possible to be. Spoiler alert - Stiglitz is not supportive of the current administration, the President, or his economic policies. ... but which economists are supportive? Remember that this administration recruits its economic advisors from CNBC.
One has to go by the book and its arguments, of course, but it is worth noting that Stiglitz is not just any economist. He is a professor at Columbia, was the top economist for the World Bank, and served as a senior advisor in the Obama administration. It is also important to note that the lines of criticism elaborated by Professor Stiglitz are hardly new in this book. Stiglitz has been harshly critical of free market fundamentalism since around the time of the millenium and has been fairly consistent in his work. This includes his distinctive claim that the key to getting America out of its current economic malaise is a recourse to more government rather than to less government - the argument of the free market orthodoxy. It is safe to say that Stiglitz has not forged a universal consensus around his view but it increasingly seems as if the times have caught up to the positions that Stiglitz has held for a long time.
Stiglitz is not the only critic of economic policies since the Great Recession of 2008. His book is well written and exceptionally clear, however. If you are interested in clear and generally accessible explanations of some very complex problems, then this is the book for you. Even if one disagrees with Stiglitz, it is worth it to work through the book and understand the reasons for disagreements.
I would like to say that Stiglitz was persuasive for me, but I was already largely convinced and he was thus preaching to the choir. Logic and clarity are worthwhile values, however, and working through the book will be rewarding for those who take the time.
Stiglitz has a clear perspective and may be accused of bias. That is not troubling to me. First, every piece of economic policy writing is biased and is arguing one point against others. Economic policy writing almost always combines politics and economics and always seeks to make a case. The burden on the reader is to determine how well the case has been made. I always enjoy reading Stiglitz and found this book valuable.
April 12, 2020
People, Power, and Profits: Progressive Capitalism for an Age of Discontent by Joseph E. Stiglitz
“People, Power, and Profits” is an excellent diagnosis of what ails our economy but most importantly it provides a progressive prescription, on what we can do moving forward. Nobel prize winning author and professor of economics at Columbia University Joseph E. Stiglitz provides readers with a clear an informative assessment. This insightful 389-page book includes eleven chapters and is broken out into the following two parts: Part I. Losing the Way, and Part II. Reconstructing American Politics and Economics: The Way Forward.
Positives:
1. A well-written, well-researched book that is accessible to the masses.
2. An excellent topic, what’s wrong with our economy and what can we do about it? Lucid writing style. “I present the outlines of a progressive agenda that represents the antithesis to the agenda of Trump and his supporters.”
3. Provides a brief historical look at what brought us here.
4. Summarizes the nine key points of why neoliberalism (ideas based on unfettered markets) has failed. “First, markets on their own will fail to achieve shared and sustainable prosperity.”
5. The true sources of a nation’s wealth. “The true sources of wealth are the productivity, creativity, and vitality of our people; the advances of science and technology that have been so marked over the past two and a half centuries; and the advances in economic, political, and social organization that have occurred over the same period, including the rule of law, competitive, well-regulated markets, and democratic institutions with checks, balances, and a broad range of “truth-telling” institutions.” “The true wealth of a nation is measured by its capacity to deliver, in a sustainable way, high standards of living for all of its citizens.”
6. The truth about Trump. “Rather than adapting his views to make them consonant with reality (say, about climate change), Trump would rather attack those who work to uncover the truth.”
7. Clearly describes growing inequality. “THE REALITY IS that, using the Human Development Index, a broad-gauge measure of standard of living, the US ranks thirteenth, just above the United Kingdom. Once America’s inequality is taken into account, it slips to twenty-fourth.”
8. The concept of market power. “Market power allows firms to exploit consumers by charging higher prices than they otherwise would and by taking advantage of consumers in a variety of other ways. Higher prices hurt workers just as much as lower wages.” “There is a further effect that has already been noted: innovation that should be directed at creating more efficient ways of producing better products is instead directed at better ways of creating and maintaining market power and exploiting consumers.”
9. The need to constrain market power. “What is needed then is a renewed commitment to constraining excesses of market power, wherever they exist and however they arise, to try to restore competition in the economy. It should be a violation of antitrust laws to engage in the abuse of market power, no matter how acquired. Anticompetitive practices, whether arising from monopsony or monopoly power, should be outlawed, period.”
10. Why globalization hasn’t lived up to its promises. “Globalization provided a way by which corporations could game countries against each other. Corporations persuaded governments that, unless they lower the corporate tax rate, they will relocate abroad.”
11. Lessons learned. “If we are to achieve the necessary economic reforms, we need to reform our politics.”
12. The reality of technology. “The lesson of this experience is that if innovation is not well managed, rather than bringing prosperity to all, it could have just the opposite effect.” “In short, the unemployment, decreasing wages, and increasing hardship for workers that result from advances in technology could easily be addressed, if there were only the political will to do so.”
13. The issue of privacy. “We should be concerned about our loss of privacy. Privacy is about power. The Big Data companies understand this, but it’s not apparent that the same is true for those they prey upon.”
14. The need for government. “We need regulation to make markets work like they’re supposed to—in a competitive way, with transactions between well-informed parties, where one party isn’t trying to take advantage of another.”
15. Describes the Republican’s agenda for the nation. “It is becoming clearer that the objective of the Republican Party is a permanent rule of the minority over the majority.”
16. The three critical areas to restoring democracy. “Ensuring fairness in voting, maintaining an effective system of checks and balances in government, and reducing the power of money in politics.”
17. Many examples of abuse. “The pharmaceutical companies put a little provision in the law providing the elderly with drugs under Medicare: the government, the largest buyer of drugs in the world, was not allowed to bargain on price.”
18. How to restore a dynamic economy. “No policy is more important for equality, growth, and efficiency than maintaining full employment. And the most important ingredient in a middle-class life style is having a decent job.”
19. The core of a decent life. “There are just a few things that are at the core of a decent life: people care about jobs with fair pay and a modicum of security both before and after retirement, about education for their children, about owning a home, and about access to good health care.”
20. The pillars to increase standard of living. “There are two pillars to the increases in our standards of living over the past 250 years: better understanding of how to organize society (checks and balances, rule of law); and better understanding of nature—the advances in science and technology.”
21. Notes included.
Negatives:
1. Limited use of charts and illustrations.
2. No formal bibliography.
3. Lacks depth and done understandably so to reach out to a broader audience.
4. Conservatives will probably pass on the book before even trying.
5. The chapter on globalization needed more work or it may have been not as clear to me as I would have wished.
In summary, a lucid and well-explained book on what is wrong with our economy and what we can do about it. I like the clarity of thought in this book and the fact that Stiglitz took the time to provide a comprehensive list on what we can do and describes how the economy and politics are intertwined. A worthwhile read, I recommend it!
Further suggestions: “The Price of Inequality” and “The Great Divide” by the same author, “Aftershock” and “Saving Capitalism” by Robert B. Reich, “Winner-Take All Politics” by Jacob S. Hacker, “Screwed the Undeclared War Against the Middle Class” by Thom Hartmann, “Perfectly Legal…” by David Cay Johnston, “The Looting of America” by Les Leopold and “The Great American Stickup” by Robert Scheer.
“People, Power, and Profits” is an excellent diagnosis of what ails our economy but most importantly it provides a progressive prescription, on what we can do moving forward. Nobel prize winning author and professor of economics at Columbia University Joseph E. Stiglitz provides readers with a clear an informative assessment. This insightful 389-page book includes eleven chapters and is broken out into the following two parts: Part I. Losing the Way, and Part II. Reconstructing American Politics and Economics: The Way Forward.
Positives:
1. A well-written, well-researched book that is accessible to the masses.
2. An excellent topic, what’s wrong with our economy and what can we do about it? Lucid writing style. “I present the outlines of a progressive agenda that represents the antithesis to the agenda of Trump and his supporters.”
3. Provides a brief historical look at what brought us here.
4. Summarizes the nine key points of why neoliberalism (ideas based on unfettered markets) has failed. “First, markets on their own will fail to achieve shared and sustainable prosperity.”
5. The true sources of a nation’s wealth. “The true sources of wealth are the productivity, creativity, and vitality of our people; the advances of science and technology that have been so marked over the past two and a half centuries; and the advances in economic, political, and social organization that have occurred over the same period, including the rule of law, competitive, well-regulated markets, and democratic institutions with checks, balances, and a broad range of “truth-telling” institutions.” “The true wealth of a nation is measured by its capacity to deliver, in a sustainable way, high standards of living for all of its citizens.”
6. The truth about Trump. “Rather than adapting his views to make them consonant with reality (say, about climate change), Trump would rather attack those who work to uncover the truth.”
7. Clearly describes growing inequality. “THE REALITY IS that, using the Human Development Index, a broad-gauge measure of standard of living, the US ranks thirteenth, just above the United Kingdom. Once America’s inequality is taken into account, it slips to twenty-fourth.”
8. The concept of market power. “Market power allows firms to exploit consumers by charging higher prices than they otherwise would and by taking advantage of consumers in a variety of other ways. Higher prices hurt workers just as much as lower wages.” “There is a further effect that has already been noted: innovation that should be directed at creating more efficient ways of producing better products is instead directed at better ways of creating and maintaining market power and exploiting consumers.”
9. The need to constrain market power. “What is needed then is a renewed commitment to constraining excesses of market power, wherever they exist and however they arise, to try to restore competition in the economy. It should be a violation of antitrust laws to engage in the abuse of market power, no matter how acquired. Anticompetitive practices, whether arising from monopsony or monopoly power, should be outlawed, period.”
10. Why globalization hasn’t lived up to its promises. “Globalization provided a way by which corporations could game countries against each other. Corporations persuaded governments that, unless they lower the corporate tax rate, they will relocate abroad.”
11. Lessons learned. “If we are to achieve the necessary economic reforms, we need to reform our politics.”
12. The reality of technology. “The lesson of this experience is that if innovation is not well managed, rather than bringing prosperity to all, it could have just the opposite effect.” “In short, the unemployment, decreasing wages, and increasing hardship for workers that result from advances in technology could easily be addressed, if there were only the political will to do so.”
13. The issue of privacy. “We should be concerned about our loss of privacy. Privacy is about power. The Big Data companies understand this, but it’s not apparent that the same is true for those they prey upon.”
14. The need for government. “We need regulation to make markets work like they’re supposed to—in a competitive way, with transactions between well-informed parties, where one party isn’t trying to take advantage of another.”
15. Describes the Republican’s agenda for the nation. “It is becoming clearer that the objective of the Republican Party is a permanent rule of the minority over the majority.”
16. The three critical areas to restoring democracy. “Ensuring fairness in voting, maintaining an effective system of checks and balances in government, and reducing the power of money in politics.”
17. Many examples of abuse. “The pharmaceutical companies put a little provision in the law providing the elderly with drugs under Medicare: the government, the largest buyer of drugs in the world, was not allowed to bargain on price.”
18. How to restore a dynamic economy. “No policy is more important for equality, growth, and efficiency than maintaining full employment. And the most important ingredient in a middle-class life style is having a decent job.”
19. The core of a decent life. “There are just a few things that are at the core of a decent life: people care about jobs with fair pay and a modicum of security both before and after retirement, about education for their children, about owning a home, and about access to good health care.”
20. The pillars to increase standard of living. “There are two pillars to the increases in our standards of living over the past 250 years: better understanding of how to organize society (checks and balances, rule of law); and better understanding of nature—the advances in science and technology.”
21. Notes included.
Negatives:
1. Limited use of charts and illustrations.
2. No formal bibliography.
3. Lacks depth and done understandably so to reach out to a broader audience.
4. Conservatives will probably pass on the book before even trying.
5. The chapter on globalization needed more work or it may have been not as clear to me as I would have wished.
In summary, a lucid and well-explained book on what is wrong with our economy and what we can do about it. I like the clarity of thought in this book and the fact that Stiglitz took the time to provide a comprehensive list on what we can do and describes how the economy and politics are intertwined. A worthwhile read, I recommend it!
Further suggestions: “The Price of Inequality” and “The Great Divide” by the same author, “Aftershock” and “Saving Capitalism” by Robert B. Reich, “Winner-Take All Politics” by Jacob S. Hacker, “Screwed the Undeclared War Against the Middle Class” by Thom Hartmann, “Perfectly Legal…” by David Cay Johnston, “The Looting of America” by Les Leopold and “The Great American Stickup” by Robert Scheer.
May 15, 2019
The author will call Trump a ‘misogynist, racist, nativist, populist, liar’ who tries to pull the country apart by creating hate against imaginary villains through race, gender, immigration and ethnic differences. The author will say and show how Trump wants to undermine ‘science, knowledge, and our social institutions’, and will show how Trump is ignorant and dangerous on tax policy, trade war with China, health insurance, trade in general and creates fear, uncertainty, and doubt to shout and shut down thinking by manipulating his Fox News cult base who are willfully being manipulated by Rupert Murdoch and his paid creators and purveyors of hate, pseudoscience and fear mongers.
All of the above is in this book. That is only the tip of the iceberg. All of the above dwarfs in comparison to what the real problem with who Donald Trump and his Republican Party enablers are and what we need to fight against with every fiber in our being except for those who welcome a fascist totalitarian state. Extreme inequality is destroying the middle class and therefore the ‘wealth of a nation does not equate to the wealth of the individuals’. Those with the gold are making the rules (the real golden rule) and inequality in economics translates to inequality in political power. Everything Trump does has as its end goal to increase the rent for the owning class at the expense of the middle and working class and the regular individual. All of this is laid out in this book.
As in 900 CE or so post Charlemagne Europe and when the land working peasants were no longer needed to fight their wars since the Knight who owned armor and a horse became the warrior of choice and the peasant was discarded and made into serfs, the rich oligarch (the 75000 families that control most of the wealth in America) of today no longer need as many of us to fight their wars and we are being squeezed out and turn into low wage debt slaves without health insurance if Trump and the Republicans get what they want. (This paragraph is my digressing, and the author doesn’t make these connections, but the rest of what I wrote above and below sticks closely to what the author says).
‘Competition is for losers’. That means The Googles, The Facebooks, The Apples, The Amazons and so on want complete market domination and nothing more than complete domination in their domain allowing for strong barriers against entry from all potential competitors and are more than happy to pay 18 Billion dollars for an insignificant company like Whats App since that will translate into complete domination for Facebook in the near future. Those oligarchs are in the process of stifling all future competition while remaking the American middle class and squashing creative innovation from potential competitors and makes a tech graduate from Iowa, say, not be able to find anything in his field unless it is working with the monopolist and at a lower pay since the competition for his services are no longer in as much demand since the monopoly is stifling competition in its domain. A monopoly will exploit their own customers when they can and stifle growth outside of themselves when at all possible. (There is an example about Staple using big data that is frightening that is mentioned in the book).
Donald Trump and his Republican Party is a scourge to our nation and will lead to a dystopian future for all but the extreme well to do. This book lays out how we got there and what we need to do to make a better world for all of us. As long as we can defeat Trump and the Republicans by the next election we have hope to change this nightmare. If you disagree with what I’m saying, you probably won’t like this book, because most of what I wrote was in this book and this author presented the story similar to how I reviewed this book with the exception of that one paragraph about Europe 900 CE.
This book will show that the real problem and the true threat Trump poses for our nation is not his creation of hate, or his ignorance. The real problem is he pretends to believe in the myth of trickledown economics and unfettered markets without reasonable government interference which will lead to the rich only getting richer off the brows and the exploitation of the shrinking middle class. Thus creating more economic anxiety and stoking more fear against the other within his cult members all in the hope of controlling the masses and doing everything he can to retain his power and skirting the rule of law. Noblesse oblige is just a slogan so the rich will feel better as they exploit us and take our resources from us and charge us higher and higher rents for IPR (intellectual property rights) and their tangle assets all the while destroying the middle class in the process in the name of unfettered greed. (Does anyone really believe ‘climate change is a Chinese hoax’)?
I highly recommend this book for those who want to understand the real nightmare Donald Trump and the modern Republican Party threatens and why he is such a potential menace to those who despise fascism, racism, misogyny, and the exploitation of the middle/working class by the ruling class . Putin and his kleptocracy is an example of capitalism without rules enabling fair markets and we are potentially one election away from having that happen in our country.
All of the above is in this book. That is only the tip of the iceberg. All of the above dwarfs in comparison to what the real problem with who Donald Trump and his Republican Party enablers are and what we need to fight against with every fiber in our being except for those who welcome a fascist totalitarian state. Extreme inequality is destroying the middle class and therefore the ‘wealth of a nation does not equate to the wealth of the individuals’. Those with the gold are making the rules (the real golden rule) and inequality in economics translates to inequality in political power. Everything Trump does has as its end goal to increase the rent for the owning class at the expense of the middle and working class and the regular individual. All of this is laid out in this book.
As in 900 CE or so post Charlemagne Europe and when the land working peasants were no longer needed to fight their wars since the Knight who owned armor and a horse became the warrior of choice and the peasant was discarded and made into serfs, the rich oligarch (the 75000 families that control most of the wealth in America) of today no longer need as many of us to fight their wars and we are being squeezed out and turn into low wage debt slaves without health insurance if Trump and the Republicans get what they want. (This paragraph is my digressing, and the author doesn’t make these connections, but the rest of what I wrote above and below sticks closely to what the author says).
‘Competition is for losers’. That means The Googles, The Facebooks, The Apples, The Amazons and so on want complete market domination and nothing more than complete domination in their domain allowing for strong barriers against entry from all potential competitors and are more than happy to pay 18 Billion dollars for an insignificant company like Whats App since that will translate into complete domination for Facebook in the near future. Those oligarchs are in the process of stifling all future competition while remaking the American middle class and squashing creative innovation from potential competitors and makes a tech graduate from Iowa, say, not be able to find anything in his field unless it is working with the monopolist and at a lower pay since the competition for his services are no longer in as much demand since the monopoly is stifling competition in its domain. A monopoly will exploit their own customers when they can and stifle growth outside of themselves when at all possible. (There is an example about Staple using big data that is frightening that is mentioned in the book).
Donald Trump and his Republican Party is a scourge to our nation and will lead to a dystopian future for all but the extreme well to do. This book lays out how we got there and what we need to do to make a better world for all of us. As long as we can defeat Trump and the Republicans by the next election we have hope to change this nightmare. If you disagree with what I’m saying, you probably won’t like this book, because most of what I wrote was in this book and this author presented the story similar to how I reviewed this book with the exception of that one paragraph about Europe 900 CE.
This book will show that the real problem and the true threat Trump poses for our nation is not his creation of hate, or his ignorance. The real problem is he pretends to believe in the myth of trickledown economics and unfettered markets without reasonable government interference which will lead to the rich only getting richer off the brows and the exploitation of the shrinking middle class. Thus creating more economic anxiety and stoking more fear against the other within his cult members all in the hope of controlling the masses and doing everything he can to retain his power and skirting the rule of law. Noblesse oblige is just a slogan so the rich will feel better as they exploit us and take our resources from us and charge us higher and higher rents for IPR (intellectual property rights) and their tangle assets all the while destroying the middle class in the process in the name of unfettered greed. (Does anyone really believe ‘climate change is a Chinese hoax’)?
I highly recommend this book for those who want to understand the real nightmare Donald Trump and the modern Republican Party threatens and why he is such a potential menace to those who despise fascism, racism, misogyny, and the exploitation of the middle/working class by the ruling class . Putin and his kleptocracy is an example of capitalism without rules enabling fair markets and we are potentially one election away from having that happen in our country.
December 1, 2020
Jetzt schon in meinem Kopf ein Klassiker. So umfassend, so präzise, so klar.
October 18, 2019
People, Power, and Profits: Progressive Capitalism for an Age of Discontent, by Joseph E. Stiglitz is an interesting book on Stiglitz's ideas on taking the United States and its capitalist democracy into a more progressive format. Stiglitz is a well know progressive economist, and this text does not deviate from his usual format. Stiglitz discusses a number of pressing issues effecting economic mobility, employment, wages, and democratic power. Financial and monetary policy on a basic level are examined. Stiglitz also looks at the myth of market power and shareholder value, and takes a stab at discrediting trickle down economics as a concept. Clearly, as many writers and thinkers (Stiglitz included) have shown, the economic instability of the Western system is a pressing concern. Inequality levels are astronomically high, as compared to previous decades, rivaling the economic situation of the Gilded Age.
Stiglitz goes into detail on a number of topics, all culminating in the need for political reform in the United States. Issues particularly concerning are the increasingly monopolistic power and activity of large companies - Google, Facebook etc. as they hoover up other companies and create giant monoliths that control massive percentages of their market share. Vertical and horizontal integration abound in the deregulated environment of the United States, creating inefficient systems with high costs to consumers, poor workers rights, and discouraging R&D systems of innovation. Instead, tech companies and those mirroring them are increasingly concerns with shareholder value over boosting consumer well-being. This culminates into a drive to create short term profits; short shelf life products, selling consumer data to third parties, waiver forms and terms of use that waive the rights of consumers, and of course, rampant corporate lobbying. These issues not only lead to huge market inefficiencies; after all, a market is at peak efficiency (so the theory goes) if it is fully competitive. Instead, monopoly power allows companies to raise costs, fees, and create onerous terms of service that consumers have no say over.
Another issue is the collection and use of personal data. Many localities (such as the EU) are beginning to regulate this sector of the economy. Fake news is another issue at stake. Stiglitz makes the point that if a newspaper company were to print ads for a neo-Nazi party, they may be fined or held accountable. Online, however, big tech companies seem to feel this is not there responsibility. Sure they can set up platforms, and build sophisticated systems to track user data and sell it for profit. But tackling propaganda and hate speech? That is onerous!! Facebook and the like are increasingly ....
Stiglitz goes into detail on a number of topics, all culminating in the need for political reform in the United States. Issues particularly concerning are the increasingly monopolistic power and activity of large companies - Google, Facebook etc. as they hoover up other companies and create giant monoliths that control massive percentages of their market share. Vertical and horizontal integration abound in the deregulated environment of the United States, creating inefficient systems with high costs to consumers, poor workers rights, and discouraging R&D systems of innovation. Instead, tech companies and those mirroring them are increasingly concerns with shareholder value over boosting consumer well-being. This culminates into a drive to create short term profits; short shelf life products, selling consumer data to third parties, waiver forms and terms of use that waive the rights of consumers, and of course, rampant corporate lobbying. These issues not only lead to huge market inefficiencies; after all, a market is at peak efficiency (so the theory goes) if it is fully competitive. Instead, monopoly power allows companies to raise costs, fees, and create onerous terms of service that consumers have no say over.
Another issue is the collection and use of personal data. Many localities (such as the EU) are beginning to regulate this sector of the economy. Fake news is another issue at stake. Stiglitz makes the point that if a newspaper company were to print ads for a neo-Nazi party, they may be fined or held accountable. Online, however, big tech companies seem to feel this is not there responsibility. Sure they can set up platforms, and build sophisticated systems to track user data and sell it for profit. But tackling propaganda and hate speech? That is onerous!! Facebook and the like are increasingly ....
November 14, 2020
Стиглиц прилича на убеден социалист, но за него това не е нещо лошо. По същество предлага усилване на ролята на държавата - чрез създаване на регулаторни правила за ограничаване на слабостите на пазара, за подпомагане на прехода от индустриална към информационна икономика, за подпомагане на най-ощетените от този преход слоеве на обществото. И вярва, че силна държава би работила добре. Но освен добрата регулация и правилните закони ще трябва и воля за налагане на правилата. Защото ние тук си имаме отлични закони и повсеместна корупция, която - също като хищничестките пазари - прецаква правилата на играта. Мисля, че е прав за изгубените ценности - без тях никакви правила не биха проработили, нито тези на пазара, нито онези на силната държава.
На моменти книгата навлиза в неясни (за мен) финансови подробности и затова се чете малко трудно. Но си струва усилието, ако това ще доведе до промяна на гледната точка. Надгражда предишните две книги на Стиглиц, но допълнена с критика към политиката на Тръмп (но без да изпада в големи подробности).
На моменти книгата навлиза в неясни (за мен) финансови подробности и затова се чете малко трудно. Но си струва усилието, ако това ще доведе до промяна на гледната точка. Надгражда предишните две книги на Стиглиц, но допълнена с критика към политиката на Тръмп (но без да изпада в големи подробности).
July 4, 2023
It’s not the economics that are difficult. It’s the politics.
February 6, 2023
Guarantee that this book will make you want to do good with your life, and anyone who lives in America with more than an ounce of privilege should read this book. Stiglitz outlines many seemingly simple solutions to fix a lot of the growing inequalities in our society. In general, it was an amazing reminder of the values our country stands (or should stand) for and how to incorporate them in to our economy/polity.
Praying that the next Democratic candidate for president has read this.
Praying that the next Democratic candidate for president has read this.
March 5, 2025
Il testo del premio Nobel Stigliz non fa sconti a nessuno né alla sinistra né alla destra americana . Un libro che è una critica spietata alla politica americana sempre più cieca e piegata ai voleri ed ai desiderata dei tecnocrati e dei miliardari e che ha abbandonato quanto di etico c’è nel fare politica. Il sistema capitalistico spinto alle estreme conseguenze dalla destra americana in primis da regan ha dimostrato tutta la sua faccia feroce e pensare che il libro è stato scritto all’indomani del primo governo trump leggerlo ora ci dà la misura di quanto le paure e le previsioni dell’autore si siano e si stiano realizzando. Gli usa hanno la più grande popolazione carceraria al mondo, milioni di persone senza assistenza medica, milioni di bambini poveri figli di famiglie povere che non potranno mai aspirare a migliorare le proprie condizioni di vita perché non potranno mai studiare perché questo vorrebbe dire contrarre debiti enormi , tutto questo mentre trump si appresta a governare il paese pensando di attuare politiche economiche prive di logica e di fondamento scientifico che aggraverà la situazione economica di milioni di persone a vantaggio del due per cento degli americani che detengono la ricchezza del 98 per cento del popolo. Peggio non poteva andare per gli usa e di rimbalzo per tutti noi .
February 12, 2020
Stieglitz calls his book a "peaceful call to action".
His vision is grounded in the U.S. Constitution which promotes the general welfare, not just the welfare of the few. He denounces the "obscene" inequality that prevails in the U.S. today.
This book is basically an anti- Milton Friedman/anti-neo-liberal (though the author never mentions Milton Friedman's name), anti-GOP, anti-Trump manifesto for more social justice, not only because it is just and fair but because it benefits the economy long term.
He explains why the course that Trump and the GOP are on, with their combination of nativism, protectionism and "absolute free market economy" policies (started by Reagan 40 years ago) is unsustainable.
The book is quite complex and addresses a very wide array of economic issues. I mention a few of them but my review is far from complete.
After the great recession of 2008, failing banks got bailed out, executive suites kept their jobs and got huge bonuses while millions lost their homes and tens of millions lost their jobs. That same class that benefited from taxpayers bailouts opposed assistance for those who lost their jobs or homes.
There was no accountability whatsoever. There were no strings attached to the bailout. The government could have stipulated as a condition to a bailout to the banks that they should help the millions of homeowners who lost their homes/jobs. Instead the banks paid huge bonuses to the very bankers who had committed fraud. The very ones who sold products designed to fail and who took bets on the products they sold to their clients that they would fail (short selling) got huge bonuses.
If banks make profits it's all theirs; if they fail, the government (= taxpayer) bails them out.
AIG got $180 billion in bailout money.
The total bailout amounted to about one trillion dollars.
This paved the way for angry people to elect Trump.
Trump blamed the elite and promised to "clean out the swamp" but instead enacted tax cuts for corporations and the rich and pursued deregulation.
Stieglitz attacks the Trump tax bill of 2017 as the
" worst piece of tax legislation ever", increasing taxes for the majority of the middle class and providing generous tax cuts for corporations and billionaires.
Conservatives and Republicans have always railed against increasing national deficits and debt... until they had the chance to do so by enriching corporations and billionaires.
He claims that Republicans do not recognize the difference between the wealth of nations and the wealth of individuals. However, the wealth of a small % of individuals does not guarantee the wealth of a nation.
Stieglitz explains that government policy has the power to shape the economy. Since money has so much influence in politics today, he calls our electoral system the one dollar one vote system ( instead of the one person one vote system). This explains why government policies favor the wealthy. The wealthy are basically the ones writing the laws.
The last 40 years has seen a shift from wealth creation to exploitation.
There are three ways to create more wealth:
1-Create more wealth by making the pie bigger- through innovation
2-Grab wealth from others- take a larger piece of the same pie- e.g. colonialism/slavery/exploitation of workers/corruption.
This is not really wealth creation but wealth distribution- taking money from the bottom and moving it to the top.
3-Inheritance
Stieglitz bemoans the fact that we have moved from wealth creation which enlarges the pie for everyone to wealth distribution from the bottom up. Today's bright minds go to Wall Street instead of pursuing careers in scientific research. Wall Street does not create anything new that is of value to mankind. It just takes from some to give to others.
He claims that the free-market economy touted by the GOP is a myth. There is no free-market economy. It is not the free market which benefits the wealthy. It is government policy which subsidizes the wealthy.
Markets have become concentrated in the hands of a few mega-corporations. Their control of the market leads to much weakened bargaining power of employees and consumers. It leads to bad consumer service and employee exploitation.
Some examples:
- bad service by telecom and ISP companies who hold quasi-monopolies
-price gauging by big pharma
- arbitration clauses by large companies taking away consumer's right of redress in a court of law
-credit cards companies charging merchants exorbitant fees, which they pass on to consumers
- consistent mergers and acquisitions by powerful corporations of smaller companies, while anti-trust laws are not being enforced
- Apple & Google colluding to not poach each others employees
- secret agreements to raise prices of goods and to keep wages low
Adam Smith's invisible hand (market competition) is not there anymore. Big corporations have become so powerful that they have eliminated market competition, to the detriment of employees and consumers. "Competition is for losers" said Peter Theil.
The entire justification of the free market economy was that it would ultimately also benefit consumers and workers through the magic workings of competition.
Consumers would get the cheapest prices and the best services. Workers would be able to choose the best jobs.
CLEARLY this is not the case in today's economy.
As far as "inherited wealth" is concerned, we have evolved to a new "aristocracy": an inherited plutocracy.
1 in 5 children in the US are born in poverty
and have a low probability of escaping it; equality of opportunity is a myth.
Stieglitz also points out the negative effects of globalization and the development of AI on employment.
These trends cannot be good for the economy as a whole. One of the best stories illustrating this is the following one:
A Ford executive was showing an automated plant to a union leader and said: "ha, those robots will not pay union dues!" The union leader responded: "this may be true, but those robots won't buy your cars".
Workers with no jobs or with underpaid jobs cannot buy the products the wealthy manufacture.
Stieglitz recommends that we must strengthen the bargaining power of workers & decrease the power of monopolies.
To achieve this, government policies are essential. It all depends on political will.
Stieglitz recommends taxing corporations, encouraging research and investment in infrastructure, technology & science;
supporting the post-industrial economy transition; supporting climate change action, robotization and AI by helping retrain individuals for these new jobs.
Replace an aging labor force by facilitating immigration and by encouraging more women to remain in the work force through family friendly policies.
Stieglitz has many more creative and constructive proposals, too numerous to list here.
But here lies the catch 22:
A majority is now ruled by a minority, and that minority is abusing its power to perpetuate control.
The country's economic agenda is set by the moneyed elites; they need a coalition to attain majority in numbers so they throw crumbs to other segments of society such as evangelicals by supporting anti-abortion policies. This is how they get people to vote against their own economic interests.
Stieglitz mentions that the true risk of today's policies is to our democracy.
Republicans don't want democracy because the majority does not want tax cuts for the rich and the ensuing cuts in government funding, social security and medicare.
Trump has attacked all our democratic institutions:
Media, universities, science, independent judiciary, voting rights.
Ideology has replaced facts and science in the service of the 1%
Stieglitz proposes an agenda for reducing the power of money in politics:
-Increase transparency of contributions (e.g. those in congress who vote against tobacco regulations should reveal the contributions they received from tobacco companies)
-PACS are secretive; there should be full disclosure of pac contributions and spending
-Reduce campaign expenses; limit campaign spending and provide public campaign funds(reduces need for private funding)
- Overturn Citizen United
- Curtail revolving doors, the payoff for "good" politicians who vote in the interest of corporations: when they leave office they get a cushy job in the private sector and/or get paid huge speaking engagement fees by private companies
He also proposes protection of voting rights e.g. by allowing convicted felons to vote (hint: they would not vote Republican) and by promoting voting on Sunday or by make voting day a holiday.
Lastly, he advises to improve the system of checks and balances by e.g. changing the life tenure of Supreme Court Justices to a 20 year term.
His vision is grounded in the U.S. Constitution which promotes the general welfare, not just the welfare of the few. He denounces the "obscene" inequality that prevails in the U.S. today.
This book is basically an anti- Milton Friedman/anti-neo-liberal (though the author never mentions Milton Friedman's name), anti-GOP, anti-Trump manifesto for more social justice, not only because it is just and fair but because it benefits the economy long term.
He explains why the course that Trump and the GOP are on, with their combination of nativism, protectionism and "absolute free market economy" policies (started by Reagan 40 years ago) is unsustainable.
The book is quite complex and addresses a very wide array of economic issues. I mention a few of them but my review is far from complete.
After the great recession of 2008, failing banks got bailed out, executive suites kept their jobs and got huge bonuses while millions lost their homes and tens of millions lost their jobs. That same class that benefited from taxpayers bailouts opposed assistance for those who lost their jobs or homes.
There was no accountability whatsoever. There were no strings attached to the bailout. The government could have stipulated as a condition to a bailout to the banks that they should help the millions of homeowners who lost their homes/jobs. Instead the banks paid huge bonuses to the very bankers who had committed fraud. The very ones who sold products designed to fail and who took bets on the products they sold to their clients that they would fail (short selling) got huge bonuses.
If banks make profits it's all theirs; if they fail, the government (= taxpayer) bails them out.
AIG got $180 billion in bailout money.
The total bailout amounted to about one trillion dollars.
This paved the way for angry people to elect Trump.
Trump blamed the elite and promised to "clean out the swamp" but instead enacted tax cuts for corporations and the rich and pursued deregulation.
Stieglitz attacks the Trump tax bill of 2017 as the
" worst piece of tax legislation ever", increasing taxes for the majority of the middle class and providing generous tax cuts for corporations and billionaires.
Conservatives and Republicans have always railed against increasing national deficits and debt... until they had the chance to do so by enriching corporations and billionaires.
He claims that Republicans do not recognize the difference between the wealth of nations and the wealth of individuals. However, the wealth of a small % of individuals does not guarantee the wealth of a nation.
Stieglitz explains that government policy has the power to shape the economy. Since money has so much influence in politics today, he calls our electoral system the one dollar one vote system ( instead of the one person one vote system). This explains why government policies favor the wealthy. The wealthy are basically the ones writing the laws.
The last 40 years has seen a shift from wealth creation to exploitation.
There are three ways to create more wealth:
1-Create more wealth by making the pie bigger- through innovation
2-Grab wealth from others- take a larger piece of the same pie- e.g. colonialism/slavery/exploitation of workers/corruption.
This is not really wealth creation but wealth distribution- taking money from the bottom and moving it to the top.
3-Inheritance
Stieglitz bemoans the fact that we have moved from wealth creation which enlarges the pie for everyone to wealth distribution from the bottom up. Today's bright minds go to Wall Street instead of pursuing careers in scientific research. Wall Street does not create anything new that is of value to mankind. It just takes from some to give to others.
He claims that the free-market economy touted by the GOP is a myth. There is no free-market economy. It is not the free market which benefits the wealthy. It is government policy which subsidizes the wealthy.
Markets have become concentrated in the hands of a few mega-corporations. Their control of the market leads to much weakened bargaining power of employees and consumers. It leads to bad consumer service and employee exploitation.
Some examples:
- bad service by telecom and ISP companies who hold quasi-monopolies
-price gauging by big pharma
- arbitration clauses by large companies taking away consumer's right of redress in a court of law
-credit cards companies charging merchants exorbitant fees, which they pass on to consumers
- consistent mergers and acquisitions by powerful corporations of smaller companies, while anti-trust laws are not being enforced
- Apple & Google colluding to not poach each others employees
- secret agreements to raise prices of goods and to keep wages low
Adam Smith's invisible hand (market competition) is not there anymore. Big corporations have become so powerful that they have eliminated market competition, to the detriment of employees and consumers. "Competition is for losers" said Peter Theil.
The entire justification of the free market economy was that it would ultimately also benefit consumers and workers through the magic workings of competition.
Consumers would get the cheapest prices and the best services. Workers would be able to choose the best jobs.
CLEARLY this is not the case in today's economy.
As far as "inherited wealth" is concerned, we have evolved to a new "aristocracy": an inherited plutocracy.
1 in 5 children in the US are born in poverty
and have a low probability of escaping it; equality of opportunity is a myth.
Stieglitz also points out the negative effects of globalization and the development of AI on employment.
These trends cannot be good for the economy as a whole. One of the best stories illustrating this is the following one:
A Ford executive was showing an automated plant to a union leader and said: "ha, those robots will not pay union dues!" The union leader responded: "this may be true, but those robots won't buy your cars".
Workers with no jobs or with underpaid jobs cannot buy the products the wealthy manufacture.
Stieglitz recommends that we must strengthen the bargaining power of workers & decrease the power of monopolies.
To achieve this, government policies are essential. It all depends on political will.
Stieglitz recommends taxing corporations, encouraging research and investment in infrastructure, technology & science;
supporting the post-industrial economy transition; supporting climate change action, robotization and AI by helping retrain individuals for these new jobs.
Replace an aging labor force by facilitating immigration and by encouraging more women to remain in the work force through family friendly policies.
Stieglitz has many more creative and constructive proposals, too numerous to list here.
But here lies the catch 22:
A majority is now ruled by a minority, and that minority is abusing its power to perpetuate control.
The country's economic agenda is set by the moneyed elites; they need a coalition to attain majority in numbers so they throw crumbs to other segments of society such as evangelicals by supporting anti-abortion policies. This is how they get people to vote against their own economic interests.
Stieglitz mentions that the true risk of today's policies is to our democracy.
Republicans don't want democracy because the majority does not want tax cuts for the rich and the ensuing cuts in government funding, social security and medicare.
Trump has attacked all our democratic institutions:
Media, universities, science, independent judiciary, voting rights.
Ideology has replaced facts and science in the service of the 1%
Stieglitz proposes an agenda for reducing the power of money in politics:
-Increase transparency of contributions (e.g. those in congress who vote against tobacco regulations should reveal the contributions they received from tobacco companies)
-PACS are secretive; there should be full disclosure of pac contributions and spending
-Reduce campaign expenses; limit campaign spending and provide public campaign funds(reduces need for private funding)
- Overturn Citizen United
- Curtail revolving doors, the payoff for "good" politicians who vote in the interest of corporations: when they leave office they get a cushy job in the private sector and/or get paid huge speaking engagement fees by private companies
He also proposes protection of voting rights e.g. by allowing convicted felons to vote (hint: they would not vote Republican) and by promoting voting on Sunday or by make voting day a holiday.
Lastly, he advises to improve the system of checks and balances by e.g. changing the life tenure of Supreme Court Justices to a 20 year term.
March 18, 2022
First, I have to acknowledge my biases. I firmly support progressive economics and think Trump is an idiot. So...the author and I have that in common. Second, I have to acknowledge that if I had read this book when I was more conservative, I probably would have bristled at the tone. It's dismissive and a bit condescending and even though he's RIGHT he's not going to win over anyone like that.
That's OK, though, because this is a really good book about how economics and politics are intertwined and even if it's only read by progressive minded people, it has value. I have often heard people talk about how we need to make our economy more fair, and I've often heard people talk about how we need to make our economy more efficient, but I've never heard someone explain how those two things are related. Being more fair to all groups of people will create a more efficient economy. That's an amazing point when you get right down to it.
Ultimately, I don't think this book will change any minds and it's already a bit dated as it was written during the Trump presidency and before the Covid pandemic but it's still an insightful and intelligent read for those interested in this space.
That's OK, though, because this is a really good book about how economics and politics are intertwined and even if it's only read by progressive minded people, it has value. I have often heard people talk about how we need to make our economy more fair, and I've often heard people talk about how we need to make our economy more efficient, but I've never heard someone explain how those two things are related. Being more fair to all groups of people will create a more efficient economy. That's an amazing point when you get right down to it.
Ultimately, I don't think this book will change any minds and it's already a bit dated as it was written during the Trump presidency and before the Covid pandemic but it's still an insightful and intelligent read for those interested in this space.
March 19, 2023
The book lambasts republicans and the american right and pushes forth long held progressive policies already implemented by europe such as more regulation, unemployment insurance, taxing carbon, blablabla. Normal economic essay stuff. Nothing very special. Unconvincing.
December 29, 2024
This book reads like he had a research assistant write the entire thing
November 19, 2020
The book tackles with the changes disrupting our economic and political institutions, leading to broadening racial, ethnic and economic inequalities, and inequality of opportunities around the globe. The author provides insights in the example of the US to articulate the form our world takes, and in the 2nd part of the book explains why the current wisdom of policy of Trump administration will fail many, including Americans unless altered. Disclosure of many facts in this book will likely not be something startling to graduates and workers whose domains are related to economy. But to read it from a prominent economist like Pr. Jozeph Stiglitz is always good🙂
June 11, 2019
Opph, Stiglitz, yer just embarrassing yerself at this point. For the love of God man, sit down and have a chat with a freaking Socialist historian, yer talking nonsense all the damn time because you've never sat yerself down and learned history.
Here's the secret -- The people in power? They're doing this shit on purpose (not like, well-planned or anything, just whatever it takes to get more power, the consequences are, well, inconsequential) . They're not 'bad actors', they're just bastards, it's the ideology itself that produced them and the system what incentivizes every one of their evil acts. You get the behavior the world rewards, it's really that simple.
But those defenses of Reagan just made me feel dirty -- how didn't they make you feel that way, mate? I mean, really? Dude's a war criminal, an incompetent tit, and he took milk from starving children, in this country, literally. Nevermind being part and parcel of the resurgence of American White Supremacy and on and on that hole goes.
I'll say it: Reagan was worse than Trump. Flat out. Shit, Obama was worse than Trump -- if only because Obama betrayed the nation and destroyed the hope of a generation. Trump? We all knew he was retarded, rich, pansy. His bullying aggression against the weak, open endorsement of torture and genocides that Obama was responsible for before him, but kept to a whisper, his pathological lies and boasts, nepotism and kleptocracy, this was all on full display. Obama was either truly evil, or merely venal, but the result is the same -- he destroyed the unity of this country, when he was meant to be one of our greatest triumphs. He broke the backs of the working class, betrayed people of colour and women, sold a generation down the river to bankers with student loans, and raided the treasury to appease the treasonous terrorists on wallstreet and in medicine to "Just please give the little folk some work."
Thing is tho - we've not had a single decent person as president in my lifetime -- Bush I and II were Christian Fascists, Clinton destroyed what little Left still existed in this country and moved the whole conversation to "Literal Nazis vs. Eisenhower Republicans" thru NAFTA, and Obam, see above. And all of them are guilty of ordering genocide. All of them are guilty of ordering assassinations. All of them guilty of overthrowing governments, rigging elections, and everything else. America is easily the most corrupt country in the world, because it enacts that corruption on the entire world - -the CIA even hit Australia in the 70s FFS.
*coughs* Point is -- Stiglitz, this shit? It's not enough. Do better.
Here's the secret -- The people in power? They're doing this shit on purpose (not like, well-planned or anything, just whatever it takes to get more power, the consequences are, well, inconsequential) . They're not 'bad actors', they're just bastards, it's the ideology itself that produced them and the system what incentivizes every one of their evil acts. You get the behavior the world rewards, it's really that simple.
But those defenses of Reagan just made me feel dirty -- how didn't they make you feel that way, mate? I mean, really? Dude's a war criminal, an incompetent tit, and he took milk from starving children, in this country, literally. Nevermind being part and parcel of the resurgence of American White Supremacy and on and on that hole goes.
I'll say it: Reagan was worse than Trump. Flat out. Shit, Obama was worse than Trump -- if only because Obama betrayed the nation and destroyed the hope of a generation. Trump? We all knew he was retarded, rich, pansy. His bullying aggression against the weak, open endorsement of torture and genocides that Obama was responsible for before him, but kept to a whisper, his pathological lies and boasts, nepotism and kleptocracy, this was all on full display. Obama was either truly evil, or merely venal, but the result is the same -- he destroyed the unity of this country, when he was meant to be one of our greatest triumphs. He broke the backs of the working class, betrayed people of colour and women, sold a generation down the river to bankers with student loans, and raided the treasury to appease the treasonous terrorists on wallstreet and in medicine to "Just please give the little folk some work."
Thing is tho - we've not had a single decent person as president in my lifetime -- Bush I and II were Christian Fascists, Clinton destroyed what little Left still existed in this country and moved the whole conversation to "Literal Nazis vs. Eisenhower Republicans" thru NAFTA, and Obam, see above. And all of them are guilty of ordering genocide. All of them are guilty of ordering assassinations. All of them guilty of overthrowing governments, rigging elections, and everything else. America is easily the most corrupt country in the world, because it enacts that corruption on the entire world - -the CIA even hit Australia in the 70s FFS.
*coughs* Point is -- Stiglitz, this shit? It's not enough. Do better.
September 1, 2019
Here is government policy ready-made for implementation. Through solid argument and historical example, Joseph E. Stiglitz demonstrates that the solution is Keynesian—government unapologetically has an indispensable role in the well-being of everyone, including the rich in a fair relationship.
Stiglitz shreds the tired old demagogy of free market ideology (both intellectual and popular), with articulate and well researched refutation of its failed trickle-down theory and conservative folklore about freeloaders. Here you will find effective detox from the Chicago school of economics supply side snake oil that has been artificially injected into policy and public opinion for the past 40 years—the author offers a well deserved shout out to Nancy MacLean for her book, "Democracy in Chains" (an insightful work that has struck a nerve about the deliberate suppression of public will, and about which there has been a telling amount of gaslighting from the libertarian right wing).
Government, democracy, and public opinion must be freed from their current capture by wealthy corporate forces in finance and other sectors. This will be difficult to achieve, but it is possible with sufficient public awareness and pressure.
Along with protecting people from economic fluctuations outside of their control, the economy will grow only when extractive practices that merely transfer wealth from poor to rich cease to operate. That means minimizing the current regime of rent seeking in financial markets and elsewhere, and incentivizing technological innovations that create true wealth—this is not happening under the dominant religion of short term profits and grossly distorted patent system.
This book addresses technical economic issues, but it is easily followed by those without training in economics. The unfair rigging of past and current economic policy is depressing. But the realism of the solutions proposed in this book are cause for hope—let's make it happen.
Stiglitz shreds the tired old demagogy of free market ideology (both intellectual and popular), with articulate and well researched refutation of its failed trickle-down theory and conservative folklore about freeloaders. Here you will find effective detox from the Chicago school of economics supply side snake oil that has been artificially injected into policy and public opinion for the past 40 years—the author offers a well deserved shout out to Nancy MacLean for her book, "Democracy in Chains" (an insightful work that has struck a nerve about the deliberate suppression of public will, and about which there has been a telling amount of gaslighting from the libertarian right wing).
Government, democracy, and public opinion must be freed from their current capture by wealthy corporate forces in finance and other sectors. This will be difficult to achieve, but it is possible with sufficient public awareness and pressure.
Along with protecting people from economic fluctuations outside of their control, the economy will grow only when extractive practices that merely transfer wealth from poor to rich cease to operate. That means minimizing the current regime of rent seeking in financial markets and elsewhere, and incentivizing technological innovations that create true wealth—this is not happening under the dominant religion of short term profits and grossly distorted patent system.
This book addresses technical economic issues, but it is easily followed by those without training in economics. The unfair rigging of past and current economic policy is depressing. But the realism of the solutions proposed in this book are cause for hope—let's make it happen.
October 26, 2019
Stiglitz' prescription for our complex economy is too simple - the issues are nuanced, and he portrays them as solvable and that he knows how to solve them. Surprisingly, it seems that most of his book is about the pernicious effects of wealth at the top, and the resulting impacts on those towards the bottom, but he doesn't focus on consumption levels of those at the bottom but rather incomes, and in such broad measures that we don't see the details that matter nor are they helpful in understanding.
"the 2008 financial crisis showed that capitalism wasn't all that it was supposed to be" - This is a worthless statement / broad generalization.
"The firm can easily find a replacement worker, perhaps not quite as good, but almost." Has he ever tried to find good talent and hired workers? This doesn't strike me as true at all, yet he uses the general idea to claim that firms have much more power over workers.
Many of his claims have some truth, but they are not true for the entire group he discusses. Again, he lacks nuance. Another example: "we've left millions of young people burdened by student debts beyond their ability to pay." Some I'm sure cannot repay. But others are choosing not to repay in the hopes of a bailout.
Also, his claims for a lot more spending are easy answers - not easy in the sense of politically, but easy in that suggesting other people tax themselves to pay for more of what you like is a lame response to problems.
This book also is way too broad to enlighten the reader about any of his actually good points, and thus the book is not worth reading unless you completely agree with him already.
"the 2008 financial crisis showed that capitalism wasn't all that it was supposed to be" - This is a worthless statement / broad generalization.
"The firm can easily find a replacement worker, perhaps not quite as good, but almost." Has he ever tried to find good talent and hired workers? This doesn't strike me as true at all, yet he uses the general idea to claim that firms have much more power over workers.
Many of his claims have some truth, but they are not true for the entire group he discusses. Again, he lacks nuance. Another example: "we've left millions of young people burdened by student debts beyond their ability to pay." Some I'm sure cannot repay. But others are choosing not to repay in the hopes of a bailout.
Also, his claims for a lot more spending are easy answers - not easy in the sense of politically, but easy in that suggesting other people tax themselves to pay for more of what you like is a lame response to problems.
This book also is way too broad to enlighten the reader about any of his actually good points, and thus the book is not worth reading unless you completely agree with him already.
September 19, 2020
As I try to self-educate by a study of economic books, I find this volume helpful. Concepts and policies in both the public and private sphere are introduced and additional resources noted. The political orientation of the author is apparent, but he buttresses his position with objective data and fairness. A good read for me and a book discussion group to which I belong.
January 14, 2020
''Inequality is a choice. It is not inevitable''.
(Preface, page xx).
''We didn't understand the true foundation of our well-being – the increases in standards of living as well as the fulfillment of or highest ideas – rested on foundations of science, rational enquiry, and discourse, and the social institutions derived from them, including the rule of law based on democratic processes'' (page 240).
Let's start with some statistics:
- Forty percent of Americans can't cover a four-hundred-dollar calamity, whether it is a child getting sick or a car breaking down (page 5).
- The three richest Americans, Jeff Bezos, Bill Gates and Warren Buffet are worth more than the bottom half of the US population combined (p5)
- Looking at the entire world: 26 individuals have as much wealth as the bottom 50 percent of the world, some 3,9 billion people (p43)
- In the US, one out of five children grow up in poverty (p200).
These statistics are not the unavoidable consequence of laws of nature. They are the result of an economic system that we have built. A made-made system that causes these extreme outcomes should be changed. An economic system where hundreds of millions of people live on a dollar a day should be changed. We need a system that works for more people, that aims to provide equality of opportunity for all.
Stiglitz argues that what we need to change most of all is the way we design and control our markets. He clearly is no fan of completely unregulated, unfettered free markets: ''Markets play an invaluable role in any well-functioning economy and yet they often fail to produce fair and efficient outcomes, producing too much of some things (pollution) and too little of others (basic research)'' (pxxiii).
There are many reasons why markets may not work well: There may be information asymmetries, key markets may be absent (e.g for insuring certain risks), markets may fail to produce ''public goods'' (from national defense to a just legal system), and there may be limited competition. This book focuses mostly on a frequent consequence of limited competition: Abuse of market power.
Abuse of market power can manifest itself in 2 directions: Monopoly and Monopsony .
In a monopoly, there is a single seller, so consumers have only one choice: to buy the product or service from the firm that has the monopoly, or not to buy. An easy example is a pharmaceutical company that has a patent and can ask any price it wants. Stiglitz points out that in order to abuse this kind of market power associated with a monopoly, it is not necessary that there is a complete monopoly: ''The power to sustain prices over costs reflects market power... Even with a few competitors, firms can have some power over price''. Warren Buffet agrees, giving this investment advice: ''The single most important decision in evaluating a business is pricing power. If you've got the power to raise prices without losing business to a competitor, you've got a very good business'' (p48).
These higher prices may mean that consumers are paying more for products than they would have paid in a market with real competition (Perfect competition would drive down prices to just above costs). These higher prices thus mean a surplus transfer of wealth from consumers to market power abusing firms, leading to what Stiglitz describes as ''excess profits''. This is an example of how market power can lead to an increase of inequality: Money, in the form of excess profits, flows from the bottom (the average consumer) to the top (powerful companies, their CEOs and their shareholders, both most likely to be part of the top 1%).
This kind of market power not only manifests itself through higher prices for consumers, but also in other forms of exploiting customers: Arbitration panels (where consumers sign away their right to a case in court and instead agree to settle disputes in arbitration panels that tend to favor big business), price discrimination, conflicts of interests (e.g. when Google favors its own services in internet searches over other companies who offer similar services and who pay Google for advertising).
In a monopsony, there is only one buyer. So all suppliers can only sell their goods and services to one firm. This gives that firm power to set prices as it pleases. Most importantly, it can set the price on labor: Employers, like Walmart in towns and villages where there are few other employment opportunities, can drive down wages.
Obviously, most companies prefer as limited competition as possible, allowing them to use their market power, both monopoly and monopsony, to their benefit. In order to preserve their market power, companies take a page out of Michael Porter's 5 Forces playbook and build barriers to entry. An easy example are patents, as already mentioned. Stiglitz' worry is first, that market power companies dedicate much more energy and innovation to building and improving barriers to entry than to improving products and services, and second, that less innovation in products and services leads to slower growth than would be possible in a market with real competition.
Another way for sustaining market power are preemptive mergers. Stiglitz list the example of Facebook's acquisition of Instagram and Whatsapp: Facebook bought these companies when they were still relatively small, taking possible future competitors out of the market at a moment when anti-trust and anti-competition issues are not yet a concern.
In summary:
Surplus transfer of wealth from bottom to top => market power contributes to inequality.
Monopoly => barriers to entry => e.g. patents => sub-optimal product + service innovation => market power contributes to slower growth.
On top of this, inequality itself adversely affects economic performance: ''One of the insights of modern economics is that countries with greater inequality perform more poorly'' (p19).
Stiglitz next concern is that market power gets translated into political power. For instance, with the help of lobbyists, powerful companies buy political influence that allows them to promote legislation that will protect their market power. We enter a vicious circle: More market power leads to more political power leads to more market power. And since market power tends to increase inequality, this affects our societies at large. So ''curbing market power is about more than just economics – about the power to raise prices or lower wages, or to exploit in other ways consumers and workers. Market power gets translated into political power: one can not have a true democracy with the kinds of large concentrations of market power and wealth that mark the US today'' (p77).
And that brings us to Stiglitz' real worry: In the US, a political minority, defending the interests of big business and the very rich, is dominating the majority. The examples are well known: ''Issues like gun control, minimum wage, and tighter financial regulation have had the support of large majorities of Americans but can't be addressed'' (p160).
So Stiglitz argues that in order to reform our economy, we first need to reform our politics. He gives suggestions for reform in 3 areas: Ensuring fairness in voting, maintaining an effective system of checks and balances, and reducing the power of money in politics.
A reformed democracy will allow for the reform of our economic system. Stiglitz argues that we need to abandon the belief that completely unregulated, unfettered markets can solve all of societies problems. We need market regulations to limit the adverse effects of externalities (like pollution) and to limit market power and promote real competition. He observes that ''capitalists economies have always involved a blend of private markets and government – the question is not markets or government, but how to combine the two to best advantage'' (pxxiii). At the end of the book, Stiglitz proposes a mix of markets, government institutions, non-government organizations, cooperatives and universities. This is similar to what Kate Raworth suggests in Doughnut Economics, where she argues for a mix of markets, government, the commons and the household.
Government regulation and legislation should also help to focus on the real sources of the wealth of a nation:
- Knowledge
- Learning
- Advances in science and technology
- Social institutions, like the rule of law, that allow us to both live peacefully with each other and to cooperate together for our common good.
The main driver of new knowledge and learning is basic research. Basic research is a public good, something that on their own, markets will undersupply.
Besides this main argument for regulated markets, People, Power and Profits offers several other insights and ideas:
Our profession shapes us: ''It is not an accident that bankers exhibited the extent of moral turpitude that has been shown: Experiments show that bankers – especially when they are reminded that they are bankers – act in a more dishonest and selfish way. So too for economist: While those who choose to study economics may be more selfish than others, the longer they study economics, the more selfish they become'' (p30). Kate Raworth, in her book Doughnut Economics, also mentions this phenomenon: ''In Israel, third-year economic majors rated altruistic values – such as helpfulness, honesty and loyalty – as far less important in life than did their freshman equivalents''.
Stiglitz extrapolates to how economic models influence us all, even those of us who don't study economics: ''We let the wrong models of human nature drive us to become like the models themselves''. As a result, ''we have become a more selfish society'' (p240).
The US is becoming a ''twenty-first-century inherited plutocracy''. ''Income and wealth from one generation translates into wealth in the next. Advantages – and disadvantages – get transmitted across generations'' (p44). Being born in the right family and in the right neighborhood are now key success factors in life.
The American dream of equality of opportunity is a myth. ''We are so in love with our mythologized self-image that we insist upon its reality even when the facts scream otherwise. For instance, many continue to believe that opportunity is an immutable quality of the country, even though statistics tell us the opposite'' (p224).
The daily Trump show distracts us (p27).
The first element of Corporate Social Responsibility is to pay your taxes (p108).
Individuals often have unrealistic expectations of what wages they should get, and underestimate the value of having a job – not just the income, but the social connections, with important consequences for well being – and the cost of not having a job for future employability (p189).
My observations:
My main problem with this book is that I think Stiglitz is mostly preaching for his own church. To begin with, both the title and the image on the front cover are not likely to attract staunch defenders of unfettered free markets or republicans who adore Reagan's remarks that the government is the problem, not the solution. Also, the way he describes republicans throughout the book doesn't show much intention to reach out to them. Many of his arguments are compelling, but I think that most of his readers will already agree with him before they even started the book.
Also, I think his suggestions often only scratch the surface. When discussing the reform of US democracy, he misses what I think is one of the most important reforms: getting rid of the electoral college. It is strange that he doesn't mention this explicitly, especially since immediately after offering his 6 suggestions for reform, he writes that ''every vote should count equally'' (p162) and mentions that ''two of the three presidents who took office this century did so with a distinct minority of votes'' (p159). When discussing education for workers, he offers few details on how to do this. Other authors, like Zakaria in the Future of Freedom and Friendman in Thank you for being late, give more detailed ideas on political reform and worker education, respectively.
Stiglitz is no fan of a Universal Basic Income (UBI). However, here his opinion seems to be based on belief rather than knowledge or experiment. He simply states: ''I don't believe simply providing income is the right approach: for most people work is an important part of life'' (p191). Perhaps he should pick up Rutger Bregman's book Utopia for Realists, which explores UBI from a pragmatic point of view, analyzing experiments that have been done on UBI, which tend to show that people often don't work less hours when they receive a UBI, and when they do decide to work less, it is most often to take up studies or raise children.
My overall appraisal: An interesting book, which is probably radical for some in the US. For me, living in the Netherlands, many of the things Stiglitz proposes make common sense and in fact are already implemented in Dutch society: Good public education, health care that is affordable for almost everybody, decent social safety nets, one person one vote.
(Preface, page xx).
''We didn't understand the true foundation of our well-being – the increases in standards of living as well as the fulfillment of or highest ideas – rested on foundations of science, rational enquiry, and discourse, and the social institutions derived from them, including the rule of law based on democratic processes'' (page 240).
Let's start with some statistics:
- Forty percent of Americans can't cover a four-hundred-dollar calamity, whether it is a child getting sick or a car breaking down (page 5).
- The three richest Americans, Jeff Bezos, Bill Gates and Warren Buffet are worth more than the bottom half of the US population combined (p5)
- Looking at the entire world: 26 individuals have as much wealth as the bottom 50 percent of the world, some 3,9 billion people (p43)
- In the US, one out of five children grow up in poverty (p200).
These statistics are not the unavoidable consequence of laws of nature. They are the result of an economic system that we have built. A made-made system that causes these extreme outcomes should be changed. An economic system where hundreds of millions of people live on a dollar a day should be changed. We need a system that works for more people, that aims to provide equality of opportunity for all.
Stiglitz argues that what we need to change most of all is the way we design and control our markets. He clearly is no fan of completely unregulated, unfettered free markets: ''Markets play an invaluable role in any well-functioning economy and yet they often fail to produce fair and efficient outcomes, producing too much of some things (pollution) and too little of others (basic research)'' (pxxiii).
There are many reasons why markets may not work well: There may be information asymmetries, key markets may be absent (e.g for insuring certain risks), markets may fail to produce ''public goods'' (from national defense to a just legal system), and there may be limited competition. This book focuses mostly on a frequent consequence of limited competition: Abuse of market power.
Abuse of market power can manifest itself in 2 directions: Monopoly and Monopsony .
In a monopoly, there is a single seller, so consumers have only one choice: to buy the product or service from the firm that has the monopoly, or not to buy. An easy example is a pharmaceutical company that has a patent and can ask any price it wants. Stiglitz points out that in order to abuse this kind of market power associated with a monopoly, it is not necessary that there is a complete monopoly: ''The power to sustain prices over costs reflects market power... Even with a few competitors, firms can have some power over price''. Warren Buffet agrees, giving this investment advice: ''The single most important decision in evaluating a business is pricing power. If you've got the power to raise prices without losing business to a competitor, you've got a very good business'' (p48).
These higher prices may mean that consumers are paying more for products than they would have paid in a market with real competition (Perfect competition would drive down prices to just above costs). These higher prices thus mean a surplus transfer of wealth from consumers to market power abusing firms, leading to what Stiglitz describes as ''excess profits''. This is an example of how market power can lead to an increase of inequality: Money, in the form of excess profits, flows from the bottom (the average consumer) to the top (powerful companies, their CEOs and their shareholders, both most likely to be part of the top 1%).
This kind of market power not only manifests itself through higher prices for consumers, but also in other forms of exploiting customers: Arbitration panels (where consumers sign away their right to a case in court and instead agree to settle disputes in arbitration panels that tend to favor big business), price discrimination, conflicts of interests (e.g. when Google favors its own services in internet searches over other companies who offer similar services and who pay Google for advertising).
In a monopsony, there is only one buyer. So all suppliers can only sell their goods and services to one firm. This gives that firm power to set prices as it pleases. Most importantly, it can set the price on labor: Employers, like Walmart in towns and villages where there are few other employment opportunities, can drive down wages.
Obviously, most companies prefer as limited competition as possible, allowing them to use their market power, both monopoly and monopsony, to their benefit. In order to preserve their market power, companies take a page out of Michael Porter's 5 Forces playbook and build barriers to entry. An easy example are patents, as already mentioned. Stiglitz' worry is first, that market power companies dedicate much more energy and innovation to building and improving barriers to entry than to improving products and services, and second, that less innovation in products and services leads to slower growth than would be possible in a market with real competition.
Another way for sustaining market power are preemptive mergers. Stiglitz list the example of Facebook's acquisition of Instagram and Whatsapp: Facebook bought these companies when they were still relatively small, taking possible future competitors out of the market at a moment when anti-trust and anti-competition issues are not yet a concern.
In summary:
Surplus transfer of wealth from bottom to top => market power contributes to inequality.
Monopoly => barriers to entry => e.g. patents => sub-optimal product + service innovation => market power contributes to slower growth.
On top of this, inequality itself adversely affects economic performance: ''One of the insights of modern economics is that countries with greater inequality perform more poorly'' (p19).
Stiglitz next concern is that market power gets translated into political power. For instance, with the help of lobbyists, powerful companies buy political influence that allows them to promote legislation that will protect their market power. We enter a vicious circle: More market power leads to more political power leads to more market power. And since market power tends to increase inequality, this affects our societies at large. So ''curbing market power is about more than just economics – about the power to raise prices or lower wages, or to exploit in other ways consumers and workers. Market power gets translated into political power: one can not have a true democracy with the kinds of large concentrations of market power and wealth that mark the US today'' (p77).
And that brings us to Stiglitz' real worry: In the US, a political minority, defending the interests of big business and the very rich, is dominating the majority. The examples are well known: ''Issues like gun control, minimum wage, and tighter financial regulation have had the support of large majorities of Americans but can't be addressed'' (p160).
So Stiglitz argues that in order to reform our economy, we first need to reform our politics. He gives suggestions for reform in 3 areas: Ensuring fairness in voting, maintaining an effective system of checks and balances, and reducing the power of money in politics.
A reformed democracy will allow for the reform of our economic system. Stiglitz argues that we need to abandon the belief that completely unregulated, unfettered markets can solve all of societies problems. We need market regulations to limit the adverse effects of externalities (like pollution) and to limit market power and promote real competition. He observes that ''capitalists economies have always involved a blend of private markets and government – the question is not markets or government, but how to combine the two to best advantage'' (pxxiii). At the end of the book, Stiglitz proposes a mix of markets, government institutions, non-government organizations, cooperatives and universities. This is similar to what Kate Raworth suggests in Doughnut Economics, where she argues for a mix of markets, government, the commons and the household.
Government regulation and legislation should also help to focus on the real sources of the wealth of a nation:
- Knowledge
- Learning
- Advances in science and technology
- Social institutions, like the rule of law, that allow us to both live peacefully with each other and to cooperate together for our common good.
The main driver of new knowledge and learning is basic research. Basic research is a public good, something that on their own, markets will undersupply.
Besides this main argument for regulated markets, People, Power and Profits offers several other insights and ideas:
Our profession shapes us: ''It is not an accident that bankers exhibited the extent of moral turpitude that has been shown: Experiments show that bankers – especially when they are reminded that they are bankers – act in a more dishonest and selfish way. So too for economist: While those who choose to study economics may be more selfish than others, the longer they study economics, the more selfish they become'' (p30). Kate Raworth, in her book Doughnut Economics, also mentions this phenomenon: ''In Israel, third-year economic majors rated altruistic values – such as helpfulness, honesty and loyalty – as far less important in life than did their freshman equivalents''.
Stiglitz extrapolates to how economic models influence us all, even those of us who don't study economics: ''We let the wrong models of human nature drive us to become like the models themselves''. As a result, ''we have become a more selfish society'' (p240).
The US is becoming a ''twenty-first-century inherited plutocracy''. ''Income and wealth from one generation translates into wealth in the next. Advantages – and disadvantages – get transmitted across generations'' (p44). Being born in the right family and in the right neighborhood are now key success factors in life.
The American dream of equality of opportunity is a myth. ''We are so in love with our mythologized self-image that we insist upon its reality even when the facts scream otherwise. For instance, many continue to believe that opportunity is an immutable quality of the country, even though statistics tell us the opposite'' (p224).
The daily Trump show distracts us (p27).
The first element of Corporate Social Responsibility is to pay your taxes (p108).
Individuals often have unrealistic expectations of what wages they should get, and underestimate the value of having a job – not just the income, but the social connections, with important consequences for well being – and the cost of not having a job for future employability (p189).
My observations:
My main problem with this book is that I think Stiglitz is mostly preaching for his own church. To begin with, both the title and the image on the front cover are not likely to attract staunch defenders of unfettered free markets or republicans who adore Reagan's remarks that the government is the problem, not the solution. Also, the way he describes republicans throughout the book doesn't show much intention to reach out to them. Many of his arguments are compelling, but I think that most of his readers will already agree with him before they even started the book.
Also, I think his suggestions often only scratch the surface. When discussing the reform of US democracy, he misses what I think is one of the most important reforms: getting rid of the electoral college. It is strange that he doesn't mention this explicitly, especially since immediately after offering his 6 suggestions for reform, he writes that ''every vote should count equally'' (p162) and mentions that ''two of the three presidents who took office this century did so with a distinct minority of votes'' (p159). When discussing education for workers, he offers few details on how to do this. Other authors, like Zakaria in the Future of Freedom and Friendman in Thank you for being late, give more detailed ideas on political reform and worker education, respectively.
Stiglitz is no fan of a Universal Basic Income (UBI). However, here his opinion seems to be based on belief rather than knowledge or experiment. He simply states: ''I don't believe simply providing income is the right approach: for most people work is an important part of life'' (p191). Perhaps he should pick up Rutger Bregman's book Utopia for Realists, which explores UBI from a pragmatic point of view, analyzing experiments that have been done on UBI, which tend to show that people often don't work less hours when they receive a UBI, and when they do decide to work less, it is most often to take up studies or raise children.
My overall appraisal: An interesting book, which is probably radical for some in the US. For me, living in the Netherlands, many of the things Stiglitz proposes make common sense and in fact are already implemented in Dutch society: Good public education, health care that is affordable for almost everybody, decent social safety nets, one person one vote.
March 4, 2020
Nobel Prize-winning economist Joseph E. Stiglitz is known for his critical views regarding the current state of capitalism and neoliberal economic policies. However, in his latest book People, Power, and Profits: Progressive Capitalism for an Age of Discontent, he has gone further to examine the impact of these economic policies on the lives of ordinary people and how these policies translate into increasing the concentration of power in the hands of a select few.
In the beginning of the book, Stiglitz makes it clear that his aim of writing this book was to find out what ails the United States’ economy and to come up with prescriptions that “will lead to a faster-growing economy, with shared prosperity, in which the kind of life to which most Americans aspire is not a pipe dream but an attainable reality.” He also makes it clear that the key to the wealth of nations lies in “wealth creation” and not in “wealth extraction.” Wealth extraction can be vertical, ie along the class structure, as well as horizontal, ie along national or political borders. He also sets the tone of the book at the end of the preface by declaring that “before economic reform there will have to be political reform.”
Stiglitz further differentiates between wealth creation and wealth grabbing. Wealth creation is achieved through innovation, creating new products, establishing new sectors of the economy etc, whereas wealth grabbing can be plain old corruption, exploitation of labour and so on. These practices, while very effective in exploitation, are somewhat dated. The latest wealth grabbing techniques are mainly one of these two: getting overpaid for selling to the government (defence contractors and drug companies) or underpaying the government for public goods (oil and mining firms and timber firms). Stiglitz minces no words in saying that wealth grabbing is just redistribution of wealth — mostly taking from the poor and giving to the rich — and often destroys a significant amount of wealth in the process.
Stiglitz describes the root cause of all economic woes in these words: “While America doesn’t excel in growth, it does so in inequality: the country has greater income inequality than any other advanced country; in terms of inequality of opportunity it also ranks well toward the bottom.” And the reason for this phenomenon is that the share of those who are at the top of the economic ladder is increasing in the economic pie. Further investigation, according to Stiglitz, reveals that the sole responsibility for this falls on the “deep and pervasive misunderstandings about what makes for a strong economy” and the policies begun under former president Ronald Reagan, ie those under so-called “trickle-down economics.”
Stiglitz rightfully argues that “standard economics textbooks” which are used by the elite class to justify neoliberal economic policies “focus on the importance of competition.” However, the very same policymakers clamour for more and more deregulation of the market forces to allow large enterprises to gain exploitative powers similar to monopolies in order to extract “excess profits.” These excess profits are at the root of growing inequality in the American society. This inequality, in turn, perpetuates the supply of low-wage employees to the big corporations. Thus, in the absence of a competitive economic atmosphere, both consumers and workers are exploited. Stiglitz goes one step further and posits that curtailing market power is not just about economics: “one cannot have a true democracy with the kinds of large concentrations of market power and wealth that mark the US today.” The imbalance in market powers gets translated into imbalance in political power.
With advancement in science and technology, we are fast moving towards knowledge economies. This phenomenon is driven by a sustained process of research and development in all fields of knowledge. Innovations are patented to benefit the researchers and the organisations that employ them. However, there is a time limit for these patents, after which they become common property of all mankind because that helps in boosting further innovation. The debate around Intellectual Property Rights is also being tipped in the favour of big corporations since they do not want to part with their monopolistic powers even over very old inventions. Stiglitz stresses the need to re-evaluate the trade-off between privatising and providing public access to the patents.
Stiglitz has also critiqued the role of the financial sector in exacerbating the economic woes of society. Banks — that are supposed to intermediate between those who have savings and those who want funds for investments — have increasingly engaged in highly speculative lending practices, completely ignoring financial prudence. This behaviour led to the financial crisis of 2007. However, the “government provided massive largesse to the banks and the bankers — without any sense of accountability for the crisis that they had created, and with miserly help for the workers and homeowners.” And what little oversight was established by the government over the banking sector in 2010 — to avoid any future financial meltdown — has been rolled back in 2018, underlining the kind of power the financial sector wields in Washington.
Stiglitz further argues that new technologies, such as artificial intelligence, big data and gene sequencing, need to be closely monitored so that they cannot be used against the common good. We have already seen how companies such as Cambridge Analytica used digital data to undermine the democratic process.
Finally, all the economic analyses of Stiglitz are concluded in minimising the influence of wealth in American politics to ensure that government policies are directed towards public welfare instead of benefiting only the elite class.
Although this book, like Stiglitz’s previous works, has been well received by a great number of experts and the general populace at large, some critiques from the proponents of neoliberal policies have been presented. Having found it difficult to undermine the basic premises of Stiglitz, most of these critiques are focused on some minute detail of his prescriptions for the ailing politico-economic system that desperately needs to be reformed. Some of these critiques accuse Stiglitz of spreading pessimism and paint him as some kind of doomsday prophet, but Stiglitz is not a doomsday prophet. This is evident from his concluding remark, that “it is still not too late to save capitalism from itself.”
Source: https://www.dawn.com/news/1535837/non...
In the beginning of the book, Stiglitz makes it clear that his aim of writing this book was to find out what ails the United States’ economy and to come up with prescriptions that “will lead to a faster-growing economy, with shared prosperity, in which the kind of life to which most Americans aspire is not a pipe dream but an attainable reality.” He also makes it clear that the key to the wealth of nations lies in “wealth creation” and not in “wealth extraction.” Wealth extraction can be vertical, ie along the class structure, as well as horizontal, ie along national or political borders. He also sets the tone of the book at the end of the preface by declaring that “before economic reform there will have to be political reform.”
Stiglitz further differentiates between wealth creation and wealth grabbing. Wealth creation is achieved through innovation, creating new products, establishing new sectors of the economy etc, whereas wealth grabbing can be plain old corruption, exploitation of labour and so on. These practices, while very effective in exploitation, are somewhat dated. The latest wealth grabbing techniques are mainly one of these two: getting overpaid for selling to the government (defence contractors and drug companies) or underpaying the government for public goods (oil and mining firms and timber firms). Stiglitz minces no words in saying that wealth grabbing is just redistribution of wealth — mostly taking from the poor and giving to the rich — and often destroys a significant amount of wealth in the process.
Stiglitz describes the root cause of all economic woes in these words: “While America doesn’t excel in growth, it does so in inequality: the country has greater income inequality than any other advanced country; in terms of inequality of opportunity it also ranks well toward the bottom.” And the reason for this phenomenon is that the share of those who are at the top of the economic ladder is increasing in the economic pie. Further investigation, according to Stiglitz, reveals that the sole responsibility for this falls on the “deep and pervasive misunderstandings about what makes for a strong economy” and the policies begun under former president Ronald Reagan, ie those under so-called “trickle-down economics.”
Stiglitz rightfully argues that “standard economics textbooks” which are used by the elite class to justify neoliberal economic policies “focus on the importance of competition.” However, the very same policymakers clamour for more and more deregulation of the market forces to allow large enterprises to gain exploitative powers similar to monopolies in order to extract “excess profits.” These excess profits are at the root of growing inequality in the American society. This inequality, in turn, perpetuates the supply of low-wage employees to the big corporations. Thus, in the absence of a competitive economic atmosphere, both consumers and workers are exploited. Stiglitz goes one step further and posits that curtailing market power is not just about economics: “one cannot have a true democracy with the kinds of large concentrations of market power and wealth that mark the US today.” The imbalance in market powers gets translated into imbalance in political power.
With advancement in science and technology, we are fast moving towards knowledge economies. This phenomenon is driven by a sustained process of research and development in all fields of knowledge. Innovations are patented to benefit the researchers and the organisations that employ them. However, there is a time limit for these patents, after which they become common property of all mankind because that helps in boosting further innovation. The debate around Intellectual Property Rights is also being tipped in the favour of big corporations since they do not want to part with their monopolistic powers even over very old inventions. Stiglitz stresses the need to re-evaluate the trade-off between privatising and providing public access to the patents.
Stiglitz has also critiqued the role of the financial sector in exacerbating the economic woes of society. Banks — that are supposed to intermediate between those who have savings and those who want funds for investments — have increasingly engaged in highly speculative lending practices, completely ignoring financial prudence. This behaviour led to the financial crisis of 2007. However, the “government provided massive largesse to the banks and the bankers — without any sense of accountability for the crisis that they had created, and with miserly help for the workers and homeowners.” And what little oversight was established by the government over the banking sector in 2010 — to avoid any future financial meltdown — has been rolled back in 2018, underlining the kind of power the financial sector wields in Washington.
Stiglitz further argues that new technologies, such as artificial intelligence, big data and gene sequencing, need to be closely monitored so that they cannot be used against the common good. We have already seen how companies such as Cambridge Analytica used digital data to undermine the democratic process.
Finally, all the economic analyses of Stiglitz are concluded in minimising the influence of wealth in American politics to ensure that government policies are directed towards public welfare instead of benefiting only the elite class.
Although this book, like Stiglitz’s previous works, has been well received by a great number of experts and the general populace at large, some critiques from the proponents of neoliberal policies have been presented. Having found it difficult to undermine the basic premises of Stiglitz, most of these critiques are focused on some minute detail of his prescriptions for the ailing politico-economic system that desperately needs to be reformed. Some of these critiques accuse Stiglitz of spreading pessimism and paint him as some kind of doomsday prophet, but Stiglitz is not a doomsday prophet. This is evident from his concluding remark, that “it is still not too late to save capitalism from itself.”
Source: https://www.dawn.com/news/1535837/non...
December 30, 2019
Joe Stiglitz, one of our most distinguished economists, takes on the many problems facing the US - with special emphasis on inequality & closely related issues. While his coverage of our economic issues is both broad and deep, cataloging problems, causes & solutions, he does not shy away from pointing out the fact that it is the disfunction of our political system, especially but not exclusively the disfunction of the Republican Party that has caused, furthered and enabled our economic malaise. Stiglitz does his expected marvelous job with his economic analysis but there are other sources (Saez & Zucman) as an important example whose ideas cover certain subsectors more completely and in greater depth. I wish these excellent economists & thoroughly decent human beings had more influence!
March 20, 2020
Author and Nobel Prize winner Stiglitz covers many themes and 40 years of the decline of civilization for the middle class in America in his excellent book, People, Power and Profits.
Repeated programs of low taxes for the rich and corporations by Reagan, Bush and Trump have accelerated the divide between the wealthy and the rest of Americans. Trickle-down economics has not worked; growth has never trickled down. As Stiglitz states “There is a class war in America and the rich have won.”
Stiglitz provides insightful analysis of market power that has resulted in less competition, exploitation and slow wage growth of workers, higher prices and excessive profits. Over time, there has been more concentration of market power and profits among a few firms at the top in many sectors of the economy creating effective barriers to entry.
The US and developing countries both benefited from globalization in the past 30 years. Lower cost goods from low cost labor overseas benefited US companies and consumers but US workers have suffered and been displaced. Part of the backlash in the current administration has been nativist political leaders blaming migrants, immigrants, bad trade deals and globalization for the problems of deindustrialization. Meanwhile tax laws have royally rewarded corporations for manufacturing overseas. And Stiglitz claims that that the US has used intellectual property (IP) laws to protect US corporations while developing countries have been stymied from IP protections of their own. For example, big pharma in the US has used IP to block less expensive generic medicines from developing countries.
The chapter on the dysfunctional finance systems replays all the events and conditions leading to the 2008 recession. The banking and finance industry profited mightily from deregulation at the expense of society. Regulations are not bad…laws are meant to protect citizens and our environment. The potential damage from reckless deregulation of the energy industry, arrogant disregard of climate control, and a health industry that fails to provide care for all are detailed with supporting references.
The second half of the book presents solutions and a plea for progressive capitalism. Unfortunately restoring economic balance, wealth distribution and income equality are easier said than done and extremely challenging from both an economic and political perspective. The two essential reforms—curbing the influence of money and reducing the disparities of wealth-- are worthwhile goals to achieve a decent life for all Americans. Is it possible? Not without monumental or revolutionary change.
Repeated programs of low taxes for the rich and corporations by Reagan, Bush and Trump have accelerated the divide between the wealthy and the rest of Americans. Trickle-down economics has not worked; growth has never trickled down. As Stiglitz states “There is a class war in America and the rich have won.”
Stiglitz provides insightful analysis of market power that has resulted in less competition, exploitation and slow wage growth of workers, higher prices and excessive profits. Over time, there has been more concentration of market power and profits among a few firms at the top in many sectors of the economy creating effective barriers to entry.
The US and developing countries both benefited from globalization in the past 30 years. Lower cost goods from low cost labor overseas benefited US companies and consumers but US workers have suffered and been displaced. Part of the backlash in the current administration has been nativist political leaders blaming migrants, immigrants, bad trade deals and globalization for the problems of deindustrialization. Meanwhile tax laws have royally rewarded corporations for manufacturing overseas. And Stiglitz claims that that the US has used intellectual property (IP) laws to protect US corporations while developing countries have been stymied from IP protections of their own. For example, big pharma in the US has used IP to block less expensive generic medicines from developing countries.
The chapter on the dysfunctional finance systems replays all the events and conditions leading to the 2008 recession. The banking and finance industry profited mightily from deregulation at the expense of society. Regulations are not bad…laws are meant to protect citizens and our environment. The potential damage from reckless deregulation of the energy industry, arrogant disregard of climate control, and a health industry that fails to provide care for all are detailed with supporting references.
The second half of the book presents solutions and a plea for progressive capitalism. Unfortunately restoring economic balance, wealth distribution and income equality are easier said than done and extremely challenging from both an economic and political perspective. The two essential reforms—curbing the influence of money and reducing the disparities of wealth-- are worthwhile goals to achieve a decent life for all Americans. Is it possible? Not without monumental or revolutionary change.
November 26, 2020
This book is mostly about economics—showing that our current situation is the predictable consequence of flawed choices in the past, and that there are alternatives that will make matters better. But a recurring theme in this book is that politics and economics are intertwined. Our economic inequalities get translated into political inequalities, reverberating back with rules exacerbating these inequalities even more. So too, our economic failures reverberate on our political system.
May 30, 2019
This is my assessment of the book People, Power and Profits by Joseph Stiglitz according to my 6 criteria:
1. Related to practice - 4 stars
2. It prevails important - 3 stars
3. I agree with the read - 4 stars
4. not difficult to read (as for non English native) - 3 stars
5. too long and boring or every sentence is interesting - 2 stars
6. Learning opportunity - 4 stars
Total 3.33 stars.
1. Related to practice - 4 stars
2. It prevails important - 3 stars
3. I agree with the read - 4 stars
4. not difficult to read (as for non English native) - 3 stars
5. too long and boring or every sentence is interesting - 2 stars
6. Learning opportunity - 4 stars
Total 3.33 stars.
June 25, 2020
Very interesting book. I have learnt about the link between politics and economics, as well as the role states should play in society and markets.
I give 4 stars for some vague justifications but the content is quite good.
Overall really interesting and I recommend
I give 4 stars for some vague justifications but the content is quite good.
Overall really interesting and I recommend
December 13, 2020
While i don’t necessarily agree with all ideas in the book it is an interesting one to read to understand this particular angle. Some facts stated are true and have further implications than just usa; some ideas are from my perspective not applicable, others- should not be applied.
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