The American Economy Is Rigged
(And what we can do about it)
by Joseph E. Stiglitz, November 2018 Issue
Americans are used to thinking that their nation is special. In many ways, it is: the U.S. has by far the most Nobel Prize winners, the largest defense expenditures (almost equal to the next 10 or so countries put together) and the most billionaires (twice as many as China, the closest competitor). But some examples of American Exceptionalism should not make us proud. By most accounts, the U.S. has the highest level of economic inequality among developed countries. It has the world’s greatest per capita health expenditures yet the lowest life expectancy among comparable countries. It is also one of a few developed countries jostling for the dubious distinction of having the lowest measures of equality of opportunity.
The notion of the American Dream—that, unlike old Europe, we are a land of opportunity—is part of our essence. Yet the numbers say otherwise. The life prospects of a young American depend more on the income and education of his or her parents than in almost any other advanced country. When poor-boy-makes-good anecdotes get passed around in the media, that is precisely because such stories are so rare.
Things appear to be getting worse, partly as a result of forces, such as technology and globalization, that seem beyond our control, but most disturbingly because of those within our command. It is not the laws of nature that have led to this dire situation: it is the laws of humankind. Markets do not exist in a vacuum: they are shaped by rules and regulations, which can be designed to favor one group over another. President Donald Trump was right in saying that the system is rigged—by those in the inherited plutocracy of which he himself is a member. And he is making it much, much worse.
America has long outdone others in its level of inequality, but in the past 40 years it has reached new heights. Whereas the income share of the top 0.1 percent has more than quadrupled and that of the top 1 percent has almost doubled, that of the bottom 90 percent has declined. Wages at the bottom, adjusted for inflation, are about the same as they were some 60 years ago! In fact, for those with a high school education or less, incomes have fallen over recent decades. Males have been particularly hard hit, as the U.S. has moved away from manufacturing industries into an economy based on services.