He especially hates the fact that inequality is increasing. Incomes at the top have increased exponentially over the last few years, but for most Americans there has been no real wage growth since the 1980s. Ninety-three per cent of the benefits of growth in the incipient recovery of 2010 went to the richest one per cent. There are many culprits but banks are especially to blame, as Stiglitz explained at length in his book Freefall (2010). Having caused the problems through untempered greed, they persuaded the authorities to bail them out and then used much of the bail-out money for bonuses, rather than to increase lending as they had promised. In Stiglitz’s view, banking should be an infrastructure service provided at the lowest possible costs, not an opportunity for clever people to find ways to maximise transaction costs so they can keep a larger share, diverting talent from activities that might actually benefit society. Their successes in decreasing regulation, and then in determining the inadequate and misdirected US response to the GFC, were made possible by government’s ‘cognitive capture’ by bankers; senior treasury and finance officials and regulators generally come from banking and often hope to return. Large corporations are similarly influential; they look to secure monopoly positions through regulation and trade treaties and often put a disproportionate amount of effort into avoiding taxes, even though they benefit hugely from government expenditure on education, common infrastructure, and research. The low interest rates they advocate also benefit capital at the expense of labour.

‘Opportunity in America is now inherited. Stiglitz hates this’

The collection starts with an analysis of the forces leading to the GFC. Two articles praise Capital in the Twenty-First Century by Thomas Piketty, with whom Stiglitz is now engaged in a joint project, but while Piketty sees inequality as inherent in capitalism, Stiglitz points to the divergence of outcomes in different countries to argue it must result from policy choices. He finds many of America’s choices damaging, especially deregulating banks, subsidising wealthy agriculturalists (while cutting food programs for the poor), and trade agreements designed to enforce patent restrictions. In a question-and-answer session that completes the collection, he observes that increasing inequality in the United States can be traced to the neo-liberal philosophy of the Reagan administration, but notes that a global phenomenon cannot sensibly be ascribed to any one government.

Joseph E. Stiglitz at the World Economic Forum Annual Meeting, Davos, 2009 (courtesy of the World Economic Forum via Wikimedia Commons)

The articles tackle inequality from every conceivable angle – typology, causes, consequences, policy choices, and international models – ending with Stiglitz’s own prescriptions for change. Unlike his monograph on the same topic, The Price of Inequality (2014), these pieces were written on similar subjects for different publications, which means a fair amount of repetition, but the less structured presentation is not inconsistent with the nature of the topic. The causes and effects of inequality are so complementary, and their relationships so often circular, that a rather random selection of articles for each section is neither displeasing nor illegitimate, though for anyone wanting to explore a specific theme an index would have been useful. Together, the articles provide a wide-ranging, accessible set of arguments about what has gone wrong with the global economy, what caused the problems and what can be done to fix them.

The collection is focused explicitly on the United States, but Stiglitz picks up the same themes in a section on Regional Perspectives that covers a number of other countries, including Australia. He mocks the early ‘debt and deficit disaster’ rhetoric of the Abbott government, but praises the flexible, income-dependent repayment rules of HECS funding, contrasting them favourably with the United States, where, for many, the opportunities offered by a degree are outweighed by the subsequent difficulty of repayment. His first recommendation is improved education for all, and his second is much stronger regulation within a capitalist framework. He would also like to see more progressive taxes, though he is careful not to risk coming across as extreme in the way that made Piketty an easy target for those (and there are many in the United States) who believe the label ‘communist’ can be read as ‘not to be taken seriously’.

‘He mocks the early ‘‘debt and deficit disaster’’ rhetoric of the Abbott government, but praises the flexible, income-dependent repayment rules of HECS funding’

Of course, even a moderately expressed, well-substantiated argument does not always catch on quickly. Stiglitz complains loudly about the ‘cognitive capture’ of government policy by corporate interests and about party funding and lobbying arrangements that allow money to buy influence (which in turn leads to more money for the influencers and so on), but he pays scant attention to the social and emotional obstacles to changing the prevailing paradigm. The majority of today’s most influential economists – academics, journalists, politicians, treasury officials, central bankers, and corporate lobbyists – were brought up when Milton Friedman’s work was becoming fashionable, and many have made their careers out of repeating his beautifully straightforward formulae and extrapolating them to current circumstances. The neo-liberal standpoint also appeals to various human instincts, such as deference to the successful, respect for frugality, and the comfort of thinking everyone can win. There are some signs of movement, not least the attention Piketty has received. The OECD has published a study showing that, between 1990 and 2010, inequality reduced New Zealand’s growth by more than a third, and the IMF’s rhetoric (though not yet its actions) on Greece seems to be changing. An important advance might be for policy-makers to stop assuming that all recommendations from business interests are likely to benefit society.