A Conversation With Joseph Stiglitz
By Gillian B. White – April 28, 2016
In the ongoing conversation about the growing divide between the rich and poor, there are few voices as prominent as the Columbia professor Joseph Stiglitz, a Nobel-winning economist and a former chairman of the Council of Economic Advisors.
In 2015 alone, Stiglitz wrote two books on the topic, The Great Divide and Rewriting the Rules of the American Economy, based on years of research and expertise about the intersection of economic theory, markets, and policy. Each book highlights a series of problems and challenges that have led to the current state of economic inequality: a faulty tax code that rewards the rich and hampers the poor, an increase in behavior that boosts the economic gains of only a few while extracting more capital from the majority, and a misplaced focus on altering the economy in a way that benefits shareholders, executives, and investors, but not the average worker.
I spoke with Stiglitz about the current conversation about economic inequality, and what his role as an economist is in bridging the gap. The conversation below has been lightly edited for length and clarity.
Gillian B. White: When you look at the data on the economy, it seems like things are getting better. But one of the things that we constantly hear is that those improvements are not being felt in the day-to-day lives of the average American. Can you talk to me about that phenomenon and how it plays into growing inequality?
Joseph Stiglitz: The observation you have is what most people are experiencing. GDP is just the sum total of the output of the economy, it doesn’t say how much of that is going into whose pocket. In the first three years of the recovery, 91 percent of all gains went to the top 1 percent. So the bottom 99 percent saw nothing. Many were actually becoming worse off: Their balance sheet had been destroyed, their major asset has been their home and the value of their home had gone down anywhere from 20 to 50 percent. Then came QE, and it created a stock-market but the average American has very little in the stock market. Overall ownership of stocks, is much more concentrated than the concentration of wealth itself, so QE was basically a gift to the 1 percent.
The people at the bottom are not doing very well, and wealth inequality, in that sense, has gotten worse. There are so many of these dimensions where the statistics that the Federal Reserve and the administration don’t connect with the lives of ordinary Americans.
White: Do you think any of the groundwork has been laid to reduce that inequality going forward?
Stiglitz: We’re in a little bit of better place, but not a lot better. It’s obviously better to have 5 percent unemployment than 10 percent unemployment. And there’s been the beginning of a housing recovery that has helped restore some of the wealth of ordinary Americans. But the damage that has been done is very deep and has persistent effects. The labor force participation rate of people in their 40s, 50s, is still lower than it’s been in decades. People who lost their jobs in 2008, didn’t get jobs in 2009, ‘10, ‘11, maybe aren’t likely to get a job ever. If they do, it’s not going to be anywhere near as good as their old job. There are many people for whom they lost their job at 50 or 55 and are unlikely to ever work again. The scar is permanent.
Another aspect of what I would say is the imperfect recovery, is that the marginalized groups remain marginalized. And while they’ve benefitted, the levels of unemployment are still very very high.