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May 21, 2015
Rewriting the Rules of the American Economy
    by Robert Kropp

Nobel Economist Joseph Stiglitz and Senator Elizabeth Warren speak at the Roosevelt Institute about the pressing need to rewrite the rules governing the economy in order to lessen inequality. Second of a two-part series.


After the Roosevelt Institute's publication of Rewriting the Rules of the American Economy: An Agenda for Growth and Shared Prosperity, authored by Nobel laureate Joseph Stiglitz, the Institute convened a panel discussion to discuss the report's analysis of growing inequality in the United States, and what can be done to reverse a trend that has been entrenched since 1980.

Before the panel discussion, Stiglitz spoke; afterward, Senator Elizabeth Warren provided her perspective on an issue that has become central to her identity as a spokesperson for the middle class.

Perhaps the central point of Stiglitz's report is this: while wealth has been increasingly concentrated in the hands of a very few, not only the outcomes for the 99% but the strength of the economy itself has been compromised.

In fact, Stiglitz himself said during his remarks at the Institute that the primary reason for the report is because “inequality has gotten much worse.” He pointed out that while inequality has been growing over the past 35 years, it has grown much faster over the past few years. “Starting around 1980, the economy started growing apart, and the economy began to grow more slowly. The two are not separate events,” he said. “The prediction that the economy would grow more quickly has been proven wrong. Drop by drop we've changed over a quarter of a century.”

“Median income today is lower than it was a quarter century ago. And at the bottom, minimum wage is roughly the level it was 45 years ago,” he continued. Furthermore, “After 2009, when the Administration and the Federal Reserve officially said the recession was over, in the following three years 91% of all the gains went to the top one percent. And that said that most Americans were not recovering.”

In her remarks, Warren expounded on Stiglitz's analysis. “From 1980 to 2012, how much income growth did the 90% get? Answer: zero,” she said. “One hundred percent of the entire income growth during the trickle-down era went to the top 10%. The rich and powerful rigged the game, and now they want the game to stay rigged.”

Referring to rampant deregulation and lower income tax rates for the wealthiest, Stiglitz observed, “The prediction that the economy would grow more quickly has been proven wrong. Drop by drop we've changed over a quarter of a century.”

“It's an economic system that has failed, and that forces us to ask, What has gone wrong?” he added. “What are the drivers? Globalization and technology are global. They're affecting all the advanced countries similarly. One aspect of American exceptionalism is that we've succeeded in creating more inequality than any of the other advanced countries.”

The policy choices that were made to create such wealth inequality in the US were political choices, Stiglitz observed; therefore, “We can change the outcomes,” he said.

“If you understand how the rules have created inequality, you understand how to unwind this,” he continued. “You understand how to make our economy more efficient and more equal. The right rules enable greater participation in the labor force, weaken monopoly power, make our corporations more long-term, and change the nature of financialization in our economy.”

In her remarks, Warren said, “This country does not have to choose between the success of its working families and the growth of the economy.”

“Government matters,” she continued. “Policy choices, the laws and rules we make to govern our markets and institutions, matter.”

Some of the solutions outlines in the report and referred to by Warren include: breaking up too big to fail banks; changing tax codes that help reward CEOs with outrageous levels of compensation; investments in infrastructure and transportation; and making education accessible without forcing students to drown in debt.

Both speakers came out strongly against the proposed Trans-Pacific Partnership (TPP). “That trade agreement is another move to increase corporate power at the expense of ordinary individuals, and that will lead to more inequality,” Stiglitz said. “It's a move in the wrong direction.”

And Warren added, “American workers have taken the brunt of bad trade deals.”

“We hope this report will begin a national discussion about the direction we've been on for the last third of a century, a failed experiment,” Stiglitz concluded. “It's time to try something new.”

 

 
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