‘The Price of Inequality’ – Stiglitz lecture at the LSE

Yesterday, on 29th June 2012, I went to Joseph Stiglitz lecture at the Old Theatre (The London School of Economics and Political Science). after getting the ticket by luck (specifically because the tickets were allocated by ballot). In this talk, he want to address the consequences of inequality that we are facing today. Since 1980, inequality is growing fast, the 1% keeps growing in numbers, but the majority keep suffering. According to Stiglitz, the USA have the most inequality compared to all of the other industrial countries. He suggests that we need to follow Brazil, which is a country that has faced great inequality before and in fact, can decrease that numbers after reform – even if inequality is still quite high. Some people argues that we should only care about outcome, in this sense, equality of opportunity. But even in that department, US still lacks. There are tremendous amount of wealth that goes to the very top. That is why we are faced with cuts in public spending, high unemployment and wages are keep getting lower and lower. Moreover, median wages are decreasing but tuition fees are raising high. People with insufficient education will not get jobs in the future, but they cannot even afford education as well. He pointed out that if mobility of labor is as free as the mobility of the capital, the world will be a better place because it will result in high wages rather than competition-based low wages that are resulted from free market capital. The problem with most democracy in the world is that the decision will be based on the median voters. So if half of the people agree with something and half of the others disagree, the median will be the decider. Democracy today is also based on what he called ‘the power of money’ where electorates are determined by money and there is a disillusionment in the government’s power. It is more like ‘1 dollar 1 vote’. There are less of young people who vote in the USA. This is creating a very vicious circle in the government. The government provide houses that the poor cannot even afford and they care less about sustainable economy – the one who actually count the consequences of global warming to the equation (Stiglitz think that it is very important for the future sustainability). Stiglitz gave a great insight to the world of macroeconomics – explaining that 80% of American poor spent 110% of their income. He jokingly said that ‘you don’t have to be a Nobel Prize Winner to know that this is unsustainable’. What is more striking is that the rich 1% do not spent more than their income, even if in the other side of the road the poor have to spend everything that they have. It is also funny that USA did not support the right to survive – which is health care. In his lecture, Joseph Stiglitz want to give us hope – he mentioned that we all know what is needed to be fixed, and we can start with them. Some of them are monopolies and bankruptcy tax. He also told the audience that some of the 1% actually wanted change too, such as Waren Buffett. He realizes that he need to share prosperity in the society and he knows exactly that he have to pay more tax than a secretary. Many people in the top actually contribute to change. He reminds us that we need to realize the consequences if we do not change. Economic inequality means inequality in politics: the power distribution would not be fair and it creates vicious circle in the democratic government that we all dream about. Stiglitz also argues that democracy is like selling ideas – just like how cigarettes thrive in our society even if we know that it is actually dangerous for our health (past propaganda in the USA about how cigarettes does not harm our health and people believe it, cigarettes are successful). Democracy sounded good because they promote it very well – democracy cannot live as we want them to be because it lives with capitalism, which is a system where we all learn to market our product. We now live where our central banks get captured by those they supposed to regulate. We all need to remember that GDP does not measure social progress in our society. USA and Japanese case sounds similar, but is in fact very different. In the past, Japan had the problem of liquidity trap – but time is in fact very different now with industrialization and globalization. Japan’s population growth is also really slow compared to that of Americans – Japanese unemployment rate is in fact very low and they have good safety net. In America, 1 of 6 American cannot get jobs and there is no safety net at all. He also disagrees that people should not borrow anymore when they are in debt. On the end of the talk, I have the opportunity to get his book signed by him. I cannot wait to read his new book that I already have, ‘The Price of Inequality’.

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