My
review of Nobel laureate Stiglitz’s book
The
Price of Inequality: How Today’s
Divided Society Endangers our Future,
(Norton, 2012, 2013) begged some
questions.
Stiglitz writes about
the US for a US audience right now after
the 2008 “Great Recession” as he calls
it. His solutions to US excesses in the
finance and banking community and for
excessive inequality in income and
wealth among US citizens made
informative good sense to me and I’m
sure he will resonate with progressives
in other countries. But there is another
level of inequality.
As Stiglitz of all US citizens knows
from his time with the World Bank and
from his books about making
globalization work, the US sits in a
wider global context. There is indeed a
price of inequality, but global
inequality amongst the nations of the
world is also of concern. And global
income and wealth inequality stands
alongside other global concerns, not
only the environment which Stiglitz
recognizes for the US context, but also
war and peace and nuclear weapons and
population displacements. Stiglitz
paints a bleak picture of the chances of
wisdom and his science of economics
dominating the US political scene of
well-funded vested interests. I suspect
the picture is even bleaker on the full
global stage.
When one surveys the global political
and economic mud flats, some of the
early aggressive efforts to open borders
to capital and trade of the Regan 1990s
era take on some mildly redeeming
features. Bankers and the rich 1 percent
may have financially benefitted
disproportionately, but there was
another dominant policy interest. This
was the time of the ending of the Soviet
empire. A
host of newly independent states
previously without market economies were
emerging from Soviet economics. Borders
were now open to the world for peoples
who previously were not allowed to
leave.
In principle Stiglitz’s notion of what’s
best for economic efficiency, that is
allowing free movement of labour, was a
possibility. But politically this will
always bring its own problems. Mass
population movements to faraway lands,
whether of migrants or of refugees, do
not help to build a new cohesive
society.Removing a major fraction of the
population does not necessarily help. I
for one feared more refugees than the
very large numbers which were produced
by conflicts in the Balkans in the early
1990s. Building these new European
countries into trade, finance and
political dialogues with the US and
other trading states was an important
way of building them into the global
scene. Trade contact can develop mutual
understandings between peoples. It
likely helped these populations to
develop viable new market economies so
that most people could happily remain
there in safety with work and their
traditions.
Enabling development by trade and
finance had been paved by initiatives of
the US after WWII in Europe and in
Japan, then in Korea and finally by
President Nixon with China. Some of
these overlap the periods referred to in
Stiglitz analysis of policy evolution
inside the US. The opening of trade with
China, which led to a loss of
manufacturing jobs in the US, was
the beginning of the end of the Cold War
with the Soviet empire.We
do not know the details of the US China
arrangement, but it was and is priceless
within the wider goals of the US and its
allies. There was and remains a global
peace and evolution dimension. At the
same time, these trade and financial
initiatives reduced global inequality
amongst several nation states. These
results must factor into the equation
concerning the price of inequality for
US citizens in the US.
As an outsider, I note that other
countries than the US pursued similar
policies to open up finance and trade in
the emerging new European market
economies. Stiglitz is of course correct
to note that other countries did not go
as far as the US in policies which led
to high internal inequality of income
and wealth. But the opening up of
markets to a flow of capital and trade
seemed useful for swiftly building the
former “outsider countries” into the
wider European trading market. What
Stiglitz says makes best sense for the
US at this point in human society’s
evolution after the Great Recession, may
not have made most sense at these
earlier points.
Two positive notes for Stiglitz from the
current news: Stiglitz’s ideas might
have an impact outside the US. Changing
the world – except for the US – would
not be a bad accomplishment. For example
the business pages of the 15 November
2013 Globe & Mail reported
“Switzerland’s 1:12 proposal on
executive pay faces vote.” This would
limit an executive’s pay to 12 times
that of the lowest paid worker. The
Globe adds: “Critics say the initiative,
if passed, will make the country one of
the least attractive places in the world
to do business.” Is cost cutting bad for
business? For whom will this be the
least attractive country to do business?
Not for shareholders. Not for most
workers. (The proposal was reported
voted down November 24th - pity!)
Stiglitz assumes the government must
take initiatives, but sometimes the
private sector can take on demonstration
projects. For example it was heartening
to read about IKEA and its aim for
environmental leadership in the 15
November 2013 Globe & Mail. The
Swedish retailer is owned by a
foundation established by its founder
and it has capped profits at 10% of
revenue. It is working with suppliers of
wood and cotton on more sustainable
forestry and agricultural practices.IKEA
is making environmentalism a core
business strategy. The company aims at
100 percent energy independence by 2020.
It owns or is building 157 wind
turbines. And it is putting solar panels
on its roofs. IKEA is not
alone.
To sum up, the US government isn’t all
there is. Governments are not all there
is. And wider global factors such as
building greater global equality must be
there in the background for Stiglitz’s
calculation of the price of equality in
the US. Yes,
the US has big time economic inequality
with all its costs, but some states in
the wider family of nation states have
moved closer to the US in overall
national wealth. And I suggest US
citizens, like the rest of us, will get
some intangible peace and security
benefit from that.
I say that because I think there is a
related book yet to be written which
explores the price of inequalities
amongst nation states using the new post
Great Recession economic insights. Yes,
Stiglitz knows in his book preface of
the link between gross internal
inequalities and unfairnesses and the
related regime changes in Libya and
Tunisia.
Related resentments arise between
citizens of one nation state and those
of another nation when the wealth of the
other nation is extremely different from
that of their own country. Thus there
can be a price of inequality at the
global level. Those of us in the “rich”
zones of the world should take heed.
