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Thursday, July 19, 2012

Review: The Price of Inequality

The Price of Inequality is a depressing book. It describes how American society has gotten to the point where it is today: where there's effectively a state too weak to provide protection for the poor and investment for the future, while strong enough to do transfer payments to corporations and defend tax cuts for the wealthy.

Stiglitz points out that this state of affairs did not have to be. For instance, rather than giving away broadcast frequencies to corporations for free, the government could raise revenue by auctioning them off. Rather than sell mining and oil extraction rights for pennies on the dollar and then be on the hook for cleaning up the environment after the corporations involved have boosted profits by ignoring safety and allowing oil spills to happen, those extraction rights could have been auctioned off for money. Rather than allowing banks too big to fail to bet using tax payer's monies, those banks could have been taxed to pay for an insurance fund for future bailouts.

Every one of these situations is well-described, and Stiglitz has a very convincing set of references showing how the high tax era in the US coincided with the highest economic growth. So even if you were a member of the 1%, it's still in your interest to have a society with less inequality. Furthermore, he notes that we give very little credit to the federal government for doing things right: that many republicans say things like "Keep your government hands out of my medicare" shows that people are so convinced that government can't do anything right but love their medicare that they somehow think it must be private. For instance, government R&D (basic research) has effectively a 50% higher return than R&D in the private sector. And of course, education has been steadily de-funded over the last 30 years as a result of the low-tax movement, and it has proven high returns as well, both socially as well as to individuals.

What Stiglitz does a poor job doing is offering hope. While he takes a stab at how change for the better could occur in the future, it's weak sauce compared to the historical section of the book. The US is probably headed for a 3rd-world banana republic style inequality, where the poor and the rich live in effectively different countries.

In any case, the book is highly recommended. All voters should read this book, but my guess is not too many people will.

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