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435 of 467 people found the following review helpful
5.0 out of 5 stars A Critical Warning for America
The Price of Inequality is an eloquent analysis of inequality in the United States and what it means for our political system, economy and society. The book does a good job of laying out the facts.

One sentence basically says it all: "The top 1 percent of Americans gained 93 percent of the additional income created in the country in 2010, as compared with...
Published on June 8, 2012 by Adam

588 of 682 people found the following review helpful
3.0 out of 5 stars Spot-on diagnosis, but weak medicine?
I'm generally a Republican voter who leans toward the small businessperson's agenda of favoring small government and the lowest practical amounts of taxes and governmental regulations. However, several things have challenged my view in recent years:

* The financial collapse of 2008 took most all of us by surprise. We didn't realize how fragile our economy was...
Published on June 14, 2012 by Alan F. Sewell

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435 of 467 people found the following review helpful
5.0 out of 5 stars A Critical Warning for America, June 8, 2012
The Price of Inequality is an eloquent analysis of inequality in the United States and what it means for our political system, economy and society. The book does a good job of laying out the facts.

One sentence basically says it all: "The top 1 percent of Americans gained 93 percent of the additional income created in the country in 2010, as compared with 2009." Now think of that in terms of a party with 100 people and big pizza with 100 slices. Basically it means that one rich guy gobbles up 93 slices of pizza. The other 99 get to divvy up the other seven.

Stiglitz does an especially good job of refuting the received wisdom among conservatives: that incomes are in proportion to productive contribution to society. Instead, the book shows that much of our extraordinary income concentration is due to "rent seeking" by the wealthy elite, and that very often this involves taking advantage of taxpayers. We have a system that actively redistributes income and wealth from huge numbers of people at the bottom of the pyramid to a tiny number at the very top.

As the book shows, extreme income inequality is really a kind of cancer that infects almost every aspect of our social, political, economic and even legal system. A tiny elite is able to effectively purchase laws and regulations that work in its favor. For example, bankruptcy laws are designed to favor banks over homeowners and holders of student debt, even though the banks have access to much better information and expertise when making these loans. One idea that occurs throughout the book is that we should have "one person one vote" not "one dollar one vote." and yet the evidence is clear we are moving toward even more influence for those with money.
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238 of 261 people found the following review helpful
5.0 out of 5 stars Powerful and persuasive, June 8, 2012
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Income inequality and wealth inequality have skyrocketed in the last 30 years. There is no dispute about this, but there are disputes over both the causes of this phenomenon and its effects.

In one sentence summary for those of you who like a very short review, this book has a threefold agenda. First to document the widely accessible and now well-known phenomenon of inequality, second to explain its cause and third understand its effects.

Also note that Stiglitz's book is very much an elaboration of his 2011 Vanity Fair article "Of the 1%, for the 1%, by the 1%." This article provides an excellent summary of the basic argument.

For those of you who like a longer review I will now provide a rather lengthy summary for those interested in the crucial issues of inequality, which are the root cause of the Occupy movement (see Richard Wolff excellent book _Occupy the Economy_, Occupy the Economy: Challenging Capitalism (City Lights Open Media)) and global tensions (see James K. Galbraith's indispensable _Inequality and Instability_, Inequality and Instability: A Study of the World Economy Just Before the Great Crisis).

Stiglitz's book is really two books, the first book is 290 pages of very well argued and accessible text aimed at the above threefold agenda. The second book is 100 pages of notes, documentation, and very excellent citations and references. My review will concentrate on the text.

In chapter one Stiglitz emphasizes that the phenomena of income inequality has been occurring well before the financial crisis of 2008. Indeed inequality is suggested to be a root cause of the crisis itself. From pre-crisis, 1979 - 2007, the richest 1 percent of Americans received 60 percent of all gains income growth, the richest 5 percent of Americans received 80 percent of all income gains, while the 90 percent of American households receive 8.6 percent. These staggering statistics are completely unprecedented in U.S. history.

Indeed if we look closer most Americans were actually becoming worse off with respect to inflation-adjusted income from 1979 - 2007. Stiglitz writes: "While the top 1 percent was doing fantastically, most Americans were actually growing worse-off" (p. 3), even though real per capita GDP has increased by nearly 80 percent, "most American male full-time workers have seen their income go down" (p. 26).

The wealth inequality (assets such as stocks, bonds, real estate, etc.) is even greater than income inequality (see Edward Wolff's _Top Heavy_ Top Heavy: The Increasing Inequality of Wealth in America and What Can Be Done About It, Second Edition. But worse still, the quality of life, health benefits and job security has drastically deteriorated for most Americans since 1979. The Great Financial Recession has not caused these trends, but has made many of them worse (p. 27).

Both income and wealth inequality is explained by the symbiotic relationship between markets and government. While "market forces help shape the degree of inequality, government policies shape those market forces. Much of the inequality that exists today is a result of government policy, both what the government does and what it does not do" (p. 28).

This latter point is absolutely essential to the argument of the book. Businesses which want to make profits will attempt to circumvent competition and achieve monopoly-like power. This can be difficult, but because of "asymmetric information" (e.g. sellers having more information than the buyer) many industries can accomplish monopoly-like power within the market process.

More importantly to Stiglitz, if monopoly-like power cannot be achieved by means of market processes and marketing, then there is always "rent-seeking" activity.

Rent-seeking is the attempt to obtain windfall profits or "rents" by means of political privilege and advantage. In other words, rather than creating new wealth via new technology, marketing, new efficiencies, a business or industry will attempt to manipulate the political environment of the economic activity through political lobbying (Jamie Galbraith has provided the best and most sustained argument of this behavior in his brilliant book _The Predator State_, The Predator State: How Conservatives Abandoned the Free Market and Why Liberals Should Too, also see Charles H. Ferguson's _Predator Nation_, Predator Nation: Corporate Criminals, Political Corruption, and the Hijacking of America).

The financial industry is able to exploit both asymmetric information situations and achieve rents-seeking privilege. Stiglitz writes, "the form of rent seeking that is most egregious - and that has been most perfected in recent years - has been the ability of those in the financial sector to take advantage of the poor and uninformed (p. 32). This is because financial companies almost always know more about their product (mortgage, derivative, stock, etc.) then do their customers, and the industry has been able to minimize any regulation or action by the government to even the playing field.

According to Stiglitz it is rent-seeking activity and the rise of what Jamie Galbraith calls the "The Predator State" that is the main cause of the both wealth and income inequality. According to Stiglitz, the main cause of inequality is not globalization, education, or technological change, although they do play part (p. 30), rather the main cause is political manipulation of rules and regulations by American businesses which have entered American politics through lobbying and financing campaigns (p 40ff).

Also playing a supporting role in the rise of inequality is macroeconomic policy (chapter 9), the decline in unionization, the incentives of corporations, and tax policies of the government.

Thus the causes of inequality are first and foremost (1) rent-seeking activity and the rise of The Predator State, then (2) tax policy, (3) macroeconomic policy (4) corporate governance and regulation, or lack thereof, (5) decline in unionization, (6) globalization, (7) technological change, and (8) education.

Now, importantly only causes (6) and (7) are market determined forces, all other causes and the primary cause are socio-political phenomenon. The good news here, according to Stiglitz is because of these socio-political phenomenon are policy determined, rather than market determined, then a change in policy can reduce most, although not all, of the inequality.

But why should we wish to change inequality at all? Or, what are the costs and benefits of inequality? This is addressed primarily in chapter four "Why It Matters." As society, "We are paying a high price for our large and growing inequality [...]. Those in the middle, and especially those at the bottom, will pay the highest price, but our country as a whole - our society, our democracy - also will pay a very high price" (p. 83). Inequality creates tension between citizens, increases criminality, and lowers life spans (see Richard Wilkenson's impressive work on these issues, The Impact of Inequality: How to Make Sick Societies Healthier, Unhealthy Societies: The Afflictions of Inequality, and The Spirit Level: Why Greater Equality Makes Societies Stronger).

Economically inequality creates instability, lowers output, increases unemployment and decreases GDP, "unequal societies do not function efficiently, and their economies are neither stable nor sustainable in the long term" (p. 84).

Worse still, inequality is correlated with reductions in public investment to infrastructure and education, "massive distortions in the economy (especially associated with rent seeking), in law, and in regulations", and has negative effects on workers' and citizens morale (p. 94).

Stiglitz dedicates a chapter to the negative effects inequality has on democracy (see Larry Bartels, for an excellent argument from which Stiglitz draws, Unequal Democracy: The Political Economy of the New Gilded Age. In other words, inequality is the _real_ road to serfdom and diminished freedom and weakened liberty. Economic inequality is at the same time political disempowerment, which places our "democracy in peril." Drawing heavily from behavior economics, chapter six explains how Americans misperceive the degree of inequality, fail to recognize its causes and misunderstand its consequences.

Chapter seven explains how inequality is now eroding the rule of law and created a nation of injustice and unfairness, diminishing socio-economic opportunities and political participation of citizens. In short, "inequality, combined with a flawed system of campaign finance, risks turning America's legal system into a travesty of justice" (p. 206)

The battle over the budget than is really a battle over inequality, while macroeconomic policy in the United States as made fetish of inflation at the neglect of other fiscal priorities, such as employment, infrastructure, and quality of life and personal security of citizens. "Macroeconomic and monetary policies that result in higher unemployment - and lower wages for ordinary citizens - are a major source of inequality in our society today. Over the past quarter century macroeconomic and monetary policies and institutions have failed to produce stability; they failed to produce sustainable growth; and, most importantly, they failed to produce growth that benefited most citizens in our society" (p. 264).

Stiglitz has solutions! (pp. 265-90) Reclaim the political process, curtail rent seeking activity and diminish political lobbying and the function of "The Predator State." Macroeconomic policy should not fetishize inflation, but emphasis employment policy and public investment in education, technology and infrastructure. Political policy should promote fairness and opportunity, curb excesses at the top, and institute real tax reform aimed at reducing inequality.

A powerful and well-argued book!
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588 of 682 people found the following review helpful
3.0 out of 5 stars Spot-on diagnosis, but weak medicine?, June 14, 2012
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I'm generally a Republican voter who leans toward the small businessperson's agenda of favoring small government and the lowest practical amounts of taxes and governmental regulations. However, several things have challenged my view in recent years:

* The financial collapse of 2008 took most all of us by surprise. We didn't realize how fragile our economy was or how easily it could be brought to the very brink of complete meltdown. The progress of economic recovery has also been astonishingly slow and even now the prospect of another leg down seems to be looming.

* As a student of economics I am familiar with how old-time Progressives approached the depressions of the late 1800s and early 1900s. They recognized that the primary problem was an imbalance between production and consumption. Consumers did not earn enough income to purchase the goods and services that the capitalists produced. They understood that producers and consumers must prosper together, so they lobbied to raise the minimum wage, require the payment of premiums for overtime hours, encourage the formation of labor unions, and enact Social Security and Unemployment programs to provide a floor under purchasing power when the economy went slack. Franklin Roosevelt's New Deal was based on these ideas of raising consumer's purchasing power. I believe they did stabilize the economy in the 1930s and were the basis of our post-WWII prosperity.

* I'm a Reagan Conservative who believes that Reagan's Supply Side agenda of cutting taxes was correct economic policy in the 1980s. However, it is a much different thing to cut maximum marginal taxes from 70% to 28% as Reagan did than to cut them from 39% to 15% (capital gains and dividends) as Bush did. The fact that the economy collapsed in 2008 AFTER we reduced taxes on the higher incomes to their lowest levels since the 1920s and AFTER we repealed the banking regulations such as the Glass-Steagall Act leads me to believe that lowering taxes and deregulating business is not the proper economic policy in all circumstances.

* We have learned that malfeasance and even fraud were abetted and encouraged by too many of our corporate leaders. Companies like Enron, Worldcom, Healthsouth, and Arthur Anderson blew themselves up with accounting frauds. The nation's largest financial institutions like Bear Sterns, Lehman Brothers, Countrywide, AIG, Citibank, Bank America, Merrill Lynch destroyed themselves and very nearly brought down our entire economy by trading in fraudulent mortgage derivatives. I don't buy the conservative/corporate spin that this calamity was caused by too much government regulation. I think any intellectually honest person would have to conclude that it was a case of corporate greed being too little restrained by government oversight.

Thus I am open to the ideas of people like Joseph Stiglitz that I would have scoffed at prior to 2008. I think his most powerful starting point is:

This book is not about the politics of envy: the bottom 99 percent by and large are not jealous of the social contributions that some of those among the 1 percent have made, of their well-deserved incomes.

Stiglitz is right that the Democrats are unlikely to convince the general public that their agenda is correct by engaging in negative attacks on the wealthy. They need to convince voters that reducing income inequality will benefit the wealthy as well as the poor. They must make the case that when the lot of the less-well-off is improved there will be more purchasing power available to consume the goods and services that the wealthy produce by investing in new factories and new technologies, and thus more profits for them too. All must prosper together.

Most of the book is a description of the symptoms of our economic malaise: falling wages and declining employment, and wealth being concentrated among the relative few who enjoy privileged positions in business and government. Most readers will probably agree with Stiglitz's diagnosis that income inequality is the root cause of the Great Recession and our agonizingly slow recovery out of it.

He also makes some crucially important points such as that while there are many people who achieve wealth through product innovation (Bill Gates, Steve Jobs, Sergey Brin, Mark Zuckerberg) there are many others who achieve wealth by conspiring with others to manipulate markets. For example, CEO's who sit on each others' boards of directors collude to raise each others' compensation to levels that would have once been considered unseemly and irresponsible. Thus, wealth tends to become concentrated for reasons that do not always result from the legitimate operation of the free market.

He also explains how businesses often "capture" their intended government regulators, subverting them into becoming enablers of business malfeasance. He explains how the Federal Reserve, which is supposed to promote responsible banking practices, has been "captured" by the big bucks bankers. It has become their creature, dedicated to bailing them out with the taxpayer's money whenever they blow their banks out of the water with reckless speculations. He also makes the point that corporations have succeeded in "framing the debate" to their advantage, i.e. convincing politicians that is OK to vote to use taxpayer money to restore solvency to failed banks, but that is immoral to provide assistance to homeowners facing foreclosure.

He then addresses the macroeconomic picture of our unsustainable budget deficits.

Having gotten off to such a strong start, this book must unfortunately come to the difficult part of putting forth realistic proposals for reform. Like so many others, it is nebulous in its proposed solutions. It mentions unfavorable trade imbalances as costing us jobs, but doesn't say what we should do specifically to correct those imbalances. It laments the passing of the manufacturing economy overseas, but argues against imposing tariffs on imported manufactured goods. It says that labor unions are generally despised, but doesn't say what might be done to restore their respectability. It mentions wonkish-sounding ideas for regulating banks and businesses but doesn't explain them in an inspiring way that would make them popular planks in a campaign platform to carry to the people.

I would have preferred to see a more direct, hard-hitting agenda, in the tradition of a Pat Buchanan or Ross Perot POPULIST ECONOMIC CONSERVATIVISM, maybe something along the lines of:

1. Raise the minimum wage to $20 an hour. The best way to restore purchasing power is to increase the pay of people who work. The objection that raising the minimum wage decreases employment is a fallacy. Raising the minimum wage INCREASES employment by increasing the demand for goods and services.

2. Incentivize companies to increase employment. Any company that lays off its employees will have a surtax imposed on corporate profits. Companies that increase employment will receive a favored tax rate as low as 15%.

3. Raise the maximum personal income tax rate to 70% on incomes over $5,000,000. This will discourage managements from looting companies with excessive compensation. Corporate managements must become focused on the long-term sustainability of the businesses they are entrusted to manage, and not on diverting all of the cash flow into their own pockets. (Stiglitz does discuss the argument in favor of raising taxes on the highest incomes, but perhaps could have more fully explained why it is especially necessary at this point in the economic cycle.)

4. Impose tariffs on goods and services produced in countries that run chronic trade imbalances with us in goods and services we are able to produce domestically. The offending countries will have the option of equalizing the trade imbalance either by increasing their imports of US-made goods and services or of having the imbalance equalized by protective tariffs imposed by us. (Stiglitz actually seems to be much closer to being a free trader.)

5. Re-regulate the banking and financial markets so that banks are no loner able to squander their depositors' money by engaging in reckless speculations in risky markets. We will regulate the stock market in order to make sure that it serves the interests of legitimate investors, not fast-buck artists and hedge funds.

6. Reactivate the Antitrust Division of the Justice Department and use it to fragment the anti-competitive monopolies that have been built up over the previous generations. Businesses will no longer be allowed to suppress competition by buying out their competitors in mergers and acquisitions.

Stiglitz is cautious in discussing ideas like these. I get the impression (by his frequent use of the term "public investment") that his true agenda may be to pay lip service to reforming the private sector while funding a massive expansion of government ownership of the economy. If I am understanding him correctly, he is like Robert Reich in favoring a big-government economy whereby the Federal Government would own and operate bullet trains, wind farms, research and development parks, urban mass transit, jobs training schools, and so on. This is where I as a quasi-Conservative take issue with Stiglitz: I believe that government should REGULATE the economy but should not OWN it.

I also take issue with Stiglitz's using much of the book to bolster his idea that, "The failures in politics and economics are related" and then going on and on about there being too much big-money influence in politics. IMO, the Democrats are failing at the ballot box because they are pushing agendas that primarily benefit big-government elitists, not the majority of the voters who work in the rank-and-file jobs of the private sector. Let the Democrats and Progressives hone their agenda until it DOES benefit the rank-and-file and see if they do not get better results.

Stiglitz makes the Liberal economic case in a gentlemanly way that will not offend Conservatives. In fact the book seems designed to change the perceptions of Conservatives and Centrists by educating them in a well-reasoned, congenial way to the need for greater government oversight of the economy. I think Conservatives who read the book in good faith will broaden their thinking beyond the ideologically rigid "business good, government bad" platitudes of sophomoric conservatism.

However, the LACK OF BOLDNESS in stating specific reforms that would make our capitalist system work more toward the interests of the rank-and-file private sector workers may disappoint Progressives! It will take specific legislation, not just generalized theories to make a meaningful dent in the inequality problem. Thus, the book offers a spot-on diagnosis followed by weak medicine. So long as Democrat-leaning economists like Stigliz focus their efforts on indirect solutions like growing the public sector instead of dealing directly with low wages and job insecurity in the private sector, the Democrats aren't likely to attract enough voters to enact any of their agendas. One needs look no further than to the recent results in Wisconsin.
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29 of 32 people found the following review helpful
5.0 out of 5 stars Made me want to cheer and cry!, July 5, 2012
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As a professor of business and economics for many years, this book made me alternately want to cheer and cry; cheer for the well-researched documentation, the obvious cause and effect of our economic and political policies currently failing most Americans, so obvious since at least 2000, while still showing the possible pathways for reinvigorating our American society, and cry for the accurate description of our current state of affairs and how difficult the proposed changes to get us back on track will be. I will be handing this book off to another professor who is running for State Senate this year so that she may also have this valuable resource.

Especially noted are pages 95 through 104 with the discussion regarding "How Inequality Makes for a Less Efficient and Productive Economy." Rental income not producing real goods, financing of wars, lack of negotiation in government contracts with inelastic oligopoly industries such as medical insurance and oil extraction, these are expenses that especially hurt the middle-class taxpayer while providing no additional benefit.

I very much would also like to mandate this reading to every member of Congress so that they would have an example of how the other class lives, as they seem to have forgotten.
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40 of 49 people found the following review helpful
5.0 out of 5 stars Excellent Insights from A Respected Economist!, June 8, 2012
Our economic system isn't functioning well, nor is our political system working to correct it. Besides the obvious high unemployment problem, we also have a problem with economic inequality. Economic inequality is not just a moral issue - it has severe economic consequences as well. The top .1% of earners now take three times the share of income they did in 1980, with the top 1% now raking in 20% of income (double that of 1980) and holding 40% of wealth. We have more inequality than any other advanced nation. In the 'recovery' of 2009-10, 93% of income growth has gone to the top 1%. The six Walton heirs control more wealth than the bottom 30% of society. Stiglitz tells us that the marginal propensity to consume declines at higher incomes, thus creating an incentive for government to create bubbles for the rest of us. Most Americans are now worse off than they were 15 years ago.

Contending that a rising tide lifts all boats does not excuse these changes - the number in the middle class has declined and those remaining have seen their incomes fall, 16% of Americans lack insurance, one in seven are on food stamps, and nearly 1/3 of mortgages are under water. (Houses have gone from being 'piggy-banks' funding vacations, educations, and retirements, to being a burden.) Our closest counterparts in inequality are Russia and Iran. Neither can these inequalities be justified by higher productivity by CEOs and greater contributions to society and their companies - those who helped bring on the Great Recession with predatory lending and other practices went on to receive large bonuses and pay far exceeding their peers in other nations - taking advantage of deficiencies in corporate governance.

Growing inequality is the flip side of shrinking opportunity. There is less equality of opportunity in the U.S. now than in any advanced industrial country. It has also attracted far too many of our most talented young people into finance and speculation rather than areas leading to a more productive and healthy economy. A third problem is that growing inequality has brought under-investment in infrastructure and basic research.

Those in the 1% rarely serve in our military. Globalization and automation has contributed to inequality. Internships disproportionately are awarded to children of the well-off - both because of their connections and their greater ability to survive without income for a prolonged period. Our judicial system is another factor - the powerful are better able to tolerate its delays.

Monopoly power further contributes to inequality - two examples are Microsoft (Bill Gates) and telecommunications (Carlos Slim). Microsoft has provided little innovation, taking advantage of its strength in operating systems to crowd out others in word processing, spreadsheets, browsers, search engines, and media players. We give priority in bankruptcy to those holding derivatives, but educational loans cannot be discharged through bankruptcy - creating a form of indentured service.

Other factors contributing to growing inequality include laborsaving technologies that reduce the demand for many middle-class, blue-collar jobs, globalization, the decline of unions (from representing a third of American workers to about 12%), and tax policy. Lowering tax rates on capital gains (eg. restructuring companies, speculation), the means through which the rich receive a large portion of their income, has made after-tax inequality even worse. Lax enforcement of anti-trust laws, especially during Republican administrations, has been a godsend to the top 1%. Manipulation of the financial system, enabled by changes in the rules, government lending to financial institutions at close to 0%, providing generous bailouts, the non-negotiable Medicare drug benefit (a $500 billion 'gift' over ten years) have also contributed.

The near-term outlook is for even more inequality. Wealth begets power, which begets more wealth. Just recently the supreme Court has enshrined the right of corporations to buy government by removing limitations on campaign spending. One result - pharmaceutical companies received a trillion-dollar give through legislation prohibiting the government's Medicare program from bargaining over price. Economic globalization encourages competition among countries for business, driving down taxes on corporations, weakens health and environmental protections, and undermines 'core' labor rights.

The 'trickle down' effect has brought American youth unemployment to around 20%, one in six Americans wanting full-time employment are unable to get one. What we really have is 'trickle up.' Stiglitz wonders when the popular protests in Libya, Egypt, Greece, Spain (50% youth unemployment), etc. will come to America.

Economic inequality acerbates political inequality, increased importance of money. Only 20% of America's young people voted in the last election, increasing the importance of money in boosting voter turnout. Australia mandates voting.

The 'good news' is that this is not inevitable. The number one first step towards rectifying this inequality, per Stiglitz, is to make the 1% pay their taxes. The Bush tax cuts increased inequalities and encouraged speculation. We also need to curb the rich taking advantage of government - free bank monies, below-market natural resource leases on federal lands. Reducing the power/amount of lobbying would help accomplish this. Providing improved access to education is also needed - Stiglitz likes the Australian approach where student loans are paid back according to income.

Bottom-Line: Economic inequality is killing the American dream by failing to deliver on the promise of improving the standards of living for most citizens. Economic inequality is also creating unequal opportunity, and our most valuable asset, our people, are not being fully used. Children of those at the top doing poorly at school have greater opportunity than children at the bottom who do well. Further, it will lead to more political instability, lower economic growth and less productivity. We've been misinformed into believing that efforts to reduce inequality would harm the economy - per Stiglitz doing so would help.
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13 of 15 people found the following review helpful
5.0 out of 5 stars A 99 Percent Review, August 12, 2012
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The Price of Inequality: How Today's Divided Society Endangers Our Future by Joseph E. Stiglitz

"The Price of Inequality" is one of the most compelling economic books about the excessive inequality in the United States. It does a fabulous job of explaining three interlinking themes: that inequality is cause and consequence of the failure of the political system, and contributes to the instability of our economic system, which in turns contributes to inequality. Winner of the 2001 Nobel Memorial Prize for Economics and acclaimed professor and author, Joseph Stiglitz, provides the reader with a quote-fest of a book that addresses not only the reasons for such a financial divide but provides pragmatic economical ways to tackle them. This enlightening and pragmatic 449-page book is composed of the following ten chapters: 1. America's 1 Percent Problem, 2. Rent Seeking and the Making of an Unequal Society, 3. Markets and Inequality, 4. Why It Matters, 5. A Democracy in Peril, 6. 1984 Is Upon Us, 7. Justice for All? How Inequality is Eroding the Rule of Law, 8. The Battle of the Budget, 9. A Macroeconomic Policy and a Critical Bank By and for the 1 Percent and 10. The Way Forward: Another World Is Possible.

1. A well-written page-turner of a book that is accessible to the masses. A quote fest.
2. It's always a treat to read a book from an expert who knows what he is talking about and how to relay it to the public.
3. Great format. The author starts each of the ten chapters with a quick synopsis and closes out with concluding comments.
4. This book succeeds in getting to the heart of the thesis: why inequality is growing to the extent it is and what the consequences are. Stiglitz is relentless in his pursuit and we are the beneficiaries.
5. Why are economic system is unfair? Answered to satisfaction. Eye-opening information.
6. "While there may be underlying forces at play, politics have shaped the market, and shaped it in ways that advantage the top at the expense of the rest". It's a quote fest alright.
7. The 1 percent in perspective. " For an even more striking illustration of the state of inequality in America, consider the Walton family: the six heirs to the Wal-Mart empire command wealth of $69.7 billion, which is equivalent to the wealth of the entire bottom 30 percent of U.S. society. The numbers may not be as surprising as they seem, simply because those at the bottom have so little wealth".
8. How government policies shape inequality. "A major theme of this book is that inequality is the result of political forces as much as of economic ones".
9. There is so many mind-blowing facts in this book, " A little-noticed change in legislation, for example, can reap billions of dollars. This was the case when the government extended a much-needed Medicare drug benefit in 2003. A provision in the law that prohibited government from bargaining for prices on drugs was, in effect, a gift of some $50 billion or more per year to the pharmaceutical companies". Oh yeah, it's like that.
10. How societal norms shape inequality. How globalization as it has been managed contributes to inequality. Interesting stuff.
11. The true role of government and how our government failed the 99%. "The United States spent far more on its big bank bailout, which helped the banks to maintain their generous bonuses, than it spent to help those who were unemployed as a result of the recession that the big banks brought about. We created for the banks (and other corporations, like AIG) a much stronger safety net than we created for poor Americans".
12. The effects of inequality on national output and economic stability, and its impact on economic efficiency and on growth.
13. Some very key points that will stick with me, "The 2010 decision in the case of Citizens United v. Federal Election Commission, in which the Supreme Court essentially approved unbridled corporate campaign spending, represented a milestone in the disempowerment of ordinary Americans". A need to reform our political process.
14. How the 1 percent convinces the 99 percent that they have shared interests. It's about shaping perceptions.
15. The battle over laws and regulations that govern our economy and how they are enforced. How the powerful have turned America's legal system into a travesty of justice.
16. A great section on predatory lending. How the banks won at the expense of America. And an infuriating section on student loans.
17. How surpluses under Clinton were turned to deficits under the influence of four major forces. The budget in perspective.
18. Practical recommendations to reduce the deficit. "lowering the taxes on firms that created jobs and invested in America and raising taxes on those that didn't".
19. A section on debunking myths: the supply-side myth, the raising taxes on millionaires will hurt small businesses and therefore cost jobs myth, the government-run programs must be inefficient myth, blame the poor myth, the austerity myth, and the failed stimulus myth.
20. Understanding the real role of policy makers. "A central theme of the book is that some of the policy choices have simultaneously increased inequality, benefitting those at the top-- and hurt the economy".
21. "The Fed gambled, in trusting that banks on their own could manage risk--a gamble that paid off handsomely for the banks, and especially for the bankers, but in which the rest paid the price. The Fed could have curbed the reckless and predatory lending, the abusive credit card practices, but chose not to do so. Again, the banks were the winners; the rest the losers". I just can't word that any better.
22. The obsession with inflation. A good section.
23. Ending on a positive note. " This book is not about the politics of envy: the bottom 99 percent by and large are not jealous of the social contributions that some of those among the 1 percent have made, of their well-deserved incomes. This book is instead about the politics of efficiency and fairness. The central argument is that the model that best describes income determination at the top is not one based on individuals' contributions to society (the "marginal productivity theory" introduced earlier), even though, of course, some at the top have made enormous contributions. Much of the income at the top is instead what we have called rents".
24. A list of recommendations in narrative format that shows what needs to be done to create reforms we need in our economics and our politics.
25. A comprehensive notes section.

1. The strength of this book is clearly explaining how we got to this level of inequality, the biggest weakness is the level of the cure not necessarily matching the disease. I feel that the recommendations covered in this book are good, it just doesn't live up to the diagnosis. I also disagree with a few of the recommendations. Getting the marginal tax back to 70% seems unfair even to this progressive-minded reviewer.
2. A little repetitive.
3. Some of the material in this book will make your blood boil.
4. Charts and illustrations would have added value.
5. The notes section was very comprehensive but a formal bibliography never hurts.

In summary, this is a fantastic book. I really enjoyed it. Stiglitz has a great command of the topic and is able to convey his thoughts in a lucid an accessible manner. His arguments are sound and quite compelling and backed by countless references. If you want to learn how we got to this level of inequality, this is a fantastic book that covers it with expertise. I highly recommend it!

Further suggestions: "Red Ink: Inside the High-Stakes Politics of the Federal Budget" by David Wessel, "The Benefit and The Burden: Tax Reform-Why We Need It and What It Will Take" by Bruce Bartlett, "It's the Middle Class, Stupid!" by James Carville and Stan Greenberg, "End This Depression Now!" by Paul Krugman, "Beyond Outrage: What has gone wrong with our economy and our democracy, and how to fix them" by Robert B. Reich, "The Republican Brain: The Science of Why They Deny Science- and Reality" by Chris Mooney, "Winner-Take-All Politics: How Washington Made the Rich Richer--and Turned Its Back on the Middle Class" by Jacob S. Hacker, "Screwed: The Undeclared War Against the Middle Class - And What We Can Do about It (BK Currents (Paperback))" by Thom Hartmann, "The Monster: How a Gang of Predatory Lenders and Wall Street Bankers Fleeced America--and Spawned a Global Crisis" by Michael W. Hudson, "Perfectly Legal..." by David Cay Johnston, and "The Looting of America" by Les Leopold.
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13 of 15 people found the following review helpful
5.0 out of 5 stars Like a Rosetta Stone for understanding the other political books, July 3, 2012
Tom Sales (McKinney, TX) - See all my reviews
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Other reviewers describe The Price of Inequality as "gentlemanly," a "laying out of the facts," "explains all the elements ... from both sides," "an interesting look at what went wrong with today's economy." I think they're right about the tone Stiglitz sets in analyzing how we have gotten to this point, but really as he works through his analysis he goes quite far in placing blame. My only regret is in not having read this book first rather than some of the "political" books I read leading up to this one.

The metaphor that kept occurring to me was that this was like the Rosetta Stone that enabled scientists to finally figure out what Egyptian hieroglyphs meant. In a similar way Stiglitz's straightforward explanations about the economic causes and effects help to now better understand the arguments that other authors have been making about our current dysfunction. Where Mann & Ornstein and Dionne offer political and historical analyses; where Murray argues that the victims are to blame; where Hayes critiques the meritocracy; and where Mooney looks at conservative thinking scientifically -- all these books look at different aspects and consequences and they're all good books, but they don't get at the root cause of our problems the way The Price of Inequality does. Stiglitz is able to set the proper cause-and-effect context because he is a Nobel Prize for Economics winner, a policy-maker in the Clinton administration and at The World Bank, and he has had the advantage of working in global environments where assumptions were different than our own. The fact that he does this in a "gentlemanly" way makes it all the more thought-provoking.

But Stiglitz does get to the part where he assesses blame and he doesn't pull any punches when he describes how the banks and financial sector have been extremely effective at getting what they want. Where MSNBC and some of these other books imply that the Right has gone too far and that they are an endangered party, Stiglitz describes how they are actually representing the most powerful interests. And how they have convinced many that only if they -- the top 1 percent -- are successful, can the rest of us can then succeed as well.

He explains how the events of 2008--which demonstrated how precarious things had really become--have pushed us further toward inequality and how the courts, the Fed, the so-called "budget crisis," and media coverage are regrettably all in on the game. As paranoid as that might sound, Stiglitz carefully explains how that could have happened: "The Fed, of course, never set out to increase inequality--either by the benefits it proffered to those at the top or by what it did to those in the middle and the bottom. Indeed ... most of its board members probably truly believed that its policies--lax regulations, fighting inflation, helping banks that are so essential to the functioning of our economy--would promote growth from which all would benefit."

All of these books sound the alarm that something is wrong that needs to be fixed. Stiglitz gives us an insider root-cause view of what those things are. This is a hard read, requiring concentration and a calmness one needs to not get angry at the perpetrators. Hopefully over the next year as the candidates who effectively frame the problem of inequality emerge victorious from the 2012 campaign and election, we will start to recognize that a disappearing middle class must be addressed or we will never get back to growth and demand that will benefit the bottom, middle and--yes--the top layers of our economy and society, as well. Read this book to understand all the others.
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10 of 11 people found the following review helpful
5.0 out of 5 stars Choose one: More inequality, Less inequality, or Status Quo, September 16, 2012
Paul Froehlich (Schaumburg, Illinois, USA) - See all my reviews
Unfortunately, people rarely question their premises, ignoring or explaining away disconfirming evidence that challenges strongly held beliefs. That's human nature.

Consequently, conservatives are unlikely to change their minds in the event they read THE PRICE OF INEQUALITY: How Today's Divided Society Endangers Our Future (Norton, 2012). Nobel Prize winning economist Joseph E. Stiglitz analyzes the causes and consequences of America's widening economic inequality - the highest in the developed world - and recommends policies to reverse that trend.

Conservatives justify inequality, invoking Ayn Randian principles, but Stiglitz challenges their premises, marshalling the evidence and explaining it in a way non-economists can understand.

One conservative premise is that growing economic inequality is good for the economy. Stiglitz documents just the opposite, and the IMF agrees, concluding in 2011 that "longer growth spells are robustly associated with more equality in the income distribution."

When most of the economic growth goes to the 1%, as it has been in recent years, there is less demand in the economy than there would be if growth were shared by most Americans, who tend to spend almost every penny.

Another conservative premise is that economic reward is directly tied to economic contribution to society. That belief has been belied by the bonuses paid to the bankers who helped cause the 2008 bank crisis, and by the profits enjoyed by the subprime mortgage industry and by for-profit colleges whose students often drop out and are left with crushing debt and worthless degrees.

Our growing inequality occurs along with declining economic mobility. The American Dream is more a memory of the distant past than a current reality, where success depends more on parental income and education than on anything else.

"We will never create a system with full equality of opportunity," writes Stiglitz, "but we can at least create more equality of opportunity." I'm not sure Romney and Ryan would agree.

The Price of Inequality: How Today's Divided Society Endangers Our Future
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43 of 56 people found the following review helpful
2.0 out of 5 stars Deeply disappointing, November 9, 2012
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I seem to be far outside the mainstream here, but it would be hard for me to be more disappointed in this book.

The topic, of course, is incredibly important. At some point, there comes a level of inequality that casts doubt on the ethical foundation of a liberal (in the classical sense) economic system. Also, as Dr. Stiglitz points out, at some point the majority begins to feel so disenfranchised that it looks instead to the option of a populist, totalitarian regime that is even worse - Dr. Stiglitz specifically cites Hugo Chavez's Venezuela, which I agree is the perfect example. I also agree with him that there is an underlying thread woven through the Occupy Movement, the Tea Party, the Arab Spring movements, and many others - the feeling that those in power are not representing the interests of everyone else.

However, I find very little insight into root causes or solutions in this book. It suffers from both shoddy, loose analysis, and a politicized tone that is condescending and unhelpful. I find these flaws so disturbing because I'm sure that Dr. Stiglitz must know better, at least from an analytic standpoint.

With respect to the loose analysis, some examples:

1. In the introduction, Dr. Stiglitz says "markets are supposed to be stable... the virtue of the market is supposed to be its efficiency." Any rational observer of markets over the course of human history knows that markets are not, and never have been, stable (think Tulip Mania, Railroad Mania, Roaring 20's, Bubble, you name it). Furthermore, any rational observer knows that markets are not perfectly efficient - they are just more efficient than the alternatives. In Dr. Stiglitz's defense, my doctoral studies in accounting taught me that the academic profession has dedicated literally tens of thousands of articles to analyzing the efficient market hypothesis - but it's still obviously wrong.

2. Dr. Stiglitz uses statistics in a way that would lead me to seriously considering firing an employee who presented me similar analytics. Only 4 pages in, he presents a statistic indicating the percentage of income received by top earners thirty years ago. In the next sentence, he indicates the multiple of top earners' income to bottom earners' at present. He presents these statistics as though they were comparable, but they are measuring entirely different things. This loose analysis is pervasive. It may be that the statistics do show inequality has increased - in fact I strongly suspect they have - but you can't tell because he does such an awful job of presenting them.

3. Much of the analysis is so cursory and facile that it looks like an undergraduate term paper, not the work of a renowned professional and Nobel prize winner. For example, he says that in the 1950s, blue collar workers' income rose due to a spirit of equality arising from WWII. Would it not be more believable to think that the fantastic proportionate gain in US industrial output (and concordant growth in incomes) arose because every single other industrial power in the world, without exception, had its industrial base bombed into virtual nonexistence during the war? That type of loose analysis doesn't mean the overall thesis is wrong... but if his attempts to find root causes are so feeble, how can we draw conclusions with respect to remediation?

4. In cases where he does look to other countries, that analysis is also superficial. He approves of Sweden, which indeed has both high income growth and high equality of income - but he seems to disapprove of privatization (which Sweden has done extensively in the last decades, leading to much of its income growth) and he ignores the fact that Sweden has an unusally high level of *wealth* inequality. He approves of Brazil, but I see nothing to approve of in a system so heavily burdened by stifling bureaucracy, incomprehensible tax codes, pervasive corruption, and rampant incompetence - and he ignores the fact that the growth of Brazil's middle class is based entirely on a consumer lending bubble fueled by "hot money" which, when it collapses, will make the US recession look like a walk in the park. For reasons I can't understand he seems to ignore Germany, which has actually managed to achieve growth, balanced finances, and blue collar advancement through a combination of vocational training and cooperation between labor and corporate management.

5. Some of his industry-specific analysis is simply wrong. He disapproves of the "deregulation" of the telecom industry. That baffles me. In what sense is the industry de-regulated? Is he referring to the 1982 Modification of Final Judgment against AT&T which broke up a private monopoly? Is he referring to the 1996 Telecommunications Act that established local competition? I can assure him (as something of a subject matter expert in telecommunications regulation) that telecom is still very much regulated in the United States - and in fact, I can give him specific examples of unintended regulatory arbitrage (mostly by new entrants) that argue that one must be very, very careful when regulating. Similarly, he decries the lack of "government-imposed" accounting standards during the era. First, accounting standards are not imposed by the government, although the SEC can issue Staff Accounting Bulletins. Second, before the crash, accounting standard setters in fact imposed draconian, Byzantine standards around revenue recognition, stock option expensing, and hedge accounting - all of which were directed towards the's business practices, all of which were hard to understand, and all of which were probably wrong-headed at inception. Lack of accounting regulation had nothing to do with the bubble. Regulation is not bad - but over-regulation and bad regulation are.

6. Dr. Stiglitz picks and chooses his villains on a clearly political basis. I can understand his demonizing Carlos Slim for simply taking over a state-owned business, but did Bill Gates really contribute nothing to the world through the creation of Microsoft? And if Gates is a villain, why is Marc Andreessen, a multi-millionaire investor, a hero? (I have nothing at all against Marc Andreessen, who was at the University of Illinois with me, though I don't recall having met him - I continue to get a kick out of the fact that I was one of the earliest users of Mosaic, after which I said, "why would anyone ever want to use this thing?" - not my finest prediction.) If rich investors are all villains, why isn't the super-rich Warren Buffett a villain (other than the fact that he is a regular champion of Democratic causes)?

7. He fails to provide any data analysis at all in support of some of his arguments. He argues that without inheritance taxes, the super-rich will eventually take over the country, economically and politically. I happen to agree with him, and I support a punitive inheritance tax for public policy reasons, although I would consider it theoretically unfair. However, he provides no support (even anecdotal) for this position. And in fact, if we look at the wealthiest Americans, the top three (Gates, Buffett and Ellison) all became wealthy in their lifetimes. It is true that if the Walton family fortune was combined, they would be wealthier still - but the US is not currently dominated by inherited dynasties.

8. In other cases, he lays out a "Big Idea" and then simply leaves it lying on the table unsupported even by argument. For example, he states that the government has moved away from funding basic research because the super-rich who dominate the government and corporations have no interest in funding basic research. That seems like a provocative notion, and plays into the idea that extractive economies (such as oil-based economies) have no interest in developing human capital. So I eagerly awaited his anlaysis, which turned out to be that the rich have no need for government health care, and can live in gated communities, and so forth... which related to basic research not at all.

9. Dr. Stiglitz betrays what I consider a disturbing political bias when he caricatures "the Right" (his capitalization) as a dark force opposed to equality. Perhaps he missed Paul Ryan's speech in which Mr. Ryan expressed how unacceptable it was that children born to lower income families tended to remain stuck in the lower income tiers. Perhaps he missed the constant articles in the Wall Street Journal decrying the unfairness of poor families being condemned to bad schools. And when he associates "the Right" with "millionaires and billionaires" perhaps he is unaware that the "Big Three" of Gates, Buffet and Ellison are all Democrats.

10. Finally, Dr. Stiglitz's policy prescriptions seem unbelievably simple-minded for a man of his intellectual achievements. He notes in concluding that if the government redistributed more wealth, it would result in... redistributed wealth. The argument is literally no deeper than that.

In conclusion, without knowing Dr. Stiglitz's credentials, I would have concluded this was the work of a political hack with only a passing familiarity with economics. Yes, many of the underlying points are valid - people are self-interested, regulatory capture occurs, Wall Street somehow (amazingly, after the crisis) commands a totally disproportionate share of US income, wealth and power tend to travel together - but where is the analysis that should come from a scholar of Dr. Stiglitz's caliber? I understand this is a book for popular consumption, not an economics text, but that is no excuse for lack of scholarship from an author who clearly knows better.
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21 of 26 people found the following review helpful
5.0 out of 5 stars Superb Book, June 17, 2012
Correction of income inequalities was one of the things our government imposed on Japan and Germany after WWII. Correction of income inequalities is what Brazil has concentrated on in their last 3 administrations - a policy that has brought Brazil into the realm of major world economic powers. Failure of the US to correct income inequalities in the Philipines when we took it over in 1898 was a major factor in the continuance of the instabilities the Philipines has had ever since.

Income inequality is a bad thing, as succinctly pointed out by the author of this book, yet the US has, for various reasons, fallen into this unfortunate situation. Income inequality in a country, if it gets bad enough, leads to revolution. If not that bad it just leads to chronic discontent among the majority of the population. What amazes me about the voters in the US is why the majority, very few of whom are ever going to be rich, continue to elect politicians who can be bought off by the rich, at the expense of the middle class.

This book has a thorough explanation of this whole issue and is worlds apart from the polemics widely distributed over Facebook and the Internet. As far as trickle-down economics is concerned, statistics do not show that it creates any growth - unless, of course, you're talking about the growth of the deficit. I would recommend this book to anyone of either party who wishes to at least become informed about this issue. It's not a matter of freedom, liberty, or idealistic slogans of any sort. Stiglitz merely reasserts what is already readily apparent in the history of countries that have allowed such income disparities to exist.
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The Price of Inequality: How Today's Divided Society Endangers Our Future
The Price of Inequality: How Today's Divided Society Endangers Our Future by Joseph E. Stiglitz (Paperback - April 8, 2013)
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