BOOK

Of the 1%, for the 1%

by Christopher Caldwell
The Price of Inequality: How Today’s Divided Society Endangers Our Future
By Joseph E. Stiglitz
W. W. Norton & Co., 448 pages, $27.95
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The Price of Inequality: How Today’s Divided Society Endangers Our Future

Nitpicking and bloviation are the Scylla and Charybdis of popular writing about economics. Economics professors tend either to bombard their readers with equations, theorems, and statistics, or to assume they will be content with airy clichés about competitiveness and growth. Good business writers have long been a dime a dozen in the United States. The list of economics writers who have made themselves beloved of a wide reading public is a very short one. It has included Irving Fisher, John Kenneth Galbraith, and Paul Krugman. Today, it includes, preeminently, University Professor Joseph Stiglitz, whose new book, The Price of Inequality, spent much of the summer on the New York Times extended bestseller list.

Stiglitz is not just a good teacher with a gift for expository prose. He is an academic economist of the first rank. He won the Nobel Prize in economics for 2001, and he is cited by other economists more often than all but three of his colleagues worldwide, according to the Federal Reserve Bank of St. Louis, which charts such things. While his interests are broad, he has done groundbreaking work in the economics of information, focusing on the power it confers on those who have it over those who do not. In other words, his work often has a political edge to it, and his politics are of a radical kind. Although Stiglitz served as the chair of Bill Clinton’s Council of Economic Advisers in the mid-1990s, in his new book he describes the Clinton era as “one of seeming prosperity.” He has harsh words for Clinton-era treasury secretary Robert Rubin and makes veiled criticisms of other officials. Nor does he see eye to eye with Barack Obama. Although Stiglitz defends the 2009 stimulus, he faults the president for mismeasuring the severity of the financial crisis he inherited and of being less aggressive than George H. W. Bush in prosecuting bankers for mortgage fraud. Stiglitz’s profoundest sympathies are with Occupy Wall Street and other expressions of what until a few years ago was called the “anti-globalization” movement. His preferred policy prescriptions include more collective bargaining, more affirmative action, and more government spending. “I entered economics,” he said in his Nobel lecture, “with the hope that it might enable me to do something about unemployment, poverty, and discrimination.”

To look too closely at Stiglitz’s ideology, though, is to focus on what he has in common with a majority of the guests you’ll see on Fox News or MSNBC. What makes Stiglitz worth reading is his acute reasoning, his gift for getting quickly to the philosophical gist of an economic problem, and his agile deployment of data.

It takes Stiglitz less than a chapter to lay out how inequality has increased in the past thirty years. Even if you are familiar with the usual ways of measuring inequality — income shares of quintiles and percentiles, international comparisons of Gini coefficients — he will show you some new ones. For decades after World War II, for instance, productivity and wages were always closely correlated, diverging only around 1980. Other troubling signs began to appear at about the same time. Before then, Stiglitz notes, a recession meant that labor productivity went down. Why? Because firms were doing less with the same number of workers. Bosses would hoard these underutilized workers until good times returned. That doesn’t happen anymore. In recent recessions, labor productivity has gone up. That means employers are ditching workers at the first sign of trouble, and wringing more work out of the desperate ones who remain.

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