Joseph Stiglitz: Why Even Talk About Income Inequality?

Wealth and income inequality in the United States is large and growing. "The upper 1 percent of Americans are now taking in nearly a quarter of the nation's income every year. In terms of wealth rather than income, the top 1 percent control 40 percent," writes economist Joseph Stiglitz. "Twenty-five years ago, the corresponding figures were 12 percent and 33 percent."

One common response to these figures is, "So what?" Why should you care how much someone else earns?

It's a fair question. I sat down with Stiglitz, the Nobel prize-winning economist, last week in his office at Columbia Business School. Here's how he responded (transcript follows):

Joseph Stiglitz: What has happened in the United States, particularly in the last 30 years, even more in the last ten years, is that inequality has grown out of bounds. The top 1% has doubled the percentage that it did just 30 years ago. The top 1/10th %, three to four times what they got.

So inequality has been growing, and even more disturbing is that there has been a lack of equality of opportunity. Americans really believe the American Dream, everybody can make it. The statistics don't show that. The statistics show that the child, American child's lifetime prospects is more dependent on the income/education of his parents than in almost any other of the industrial countries. The notion of "American Dream" is a myth.

We probably always exaggerated this ability to move. We celebrated it of course with the Horatio Alger stories of rags to riches, just by stint of hard work. And America has always been a country where a few people have made it. Those are newsworthy because they're so rare. If it was happening every day, you wouldn't make a news story about it. The fact is that things have gotten much worse, I'd say probably in the last 30 years, one of the reasons for that is what's been happening to our education system.

We have an education system that is very dependent on where you live. Where you live depends on what you can afford. We've become a more economically segregated society; that is to say, rich people live in their communities, poor people live in their communities much more than it used to be the case. So that means that this access to the kind of education that would allow you to compete in a 21st century economy is not there for those who are in the bottom of our income distribution.

It’s one thing if the reason people at the top are there because they’ve made larger contributions to our society, they’ve made the size of the economic bite better, bigger, then everybody would benefit.

The fact of the matter is that while the rich have been going up, those in the middle have actually been going down. Median income, income in the middle today is lower than it was in 1996, over a decade and a half ago. So it isn’t as if everybody benefits from what’s sometimes called trickle-down economics; some of the gains at the top have been at the expense of the bottom and the middle.


Read/Post Comments (13) | Recommend This Article (15)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 17, 2013, at 3:16 PM, deadcarp wrote:

    There is an elephant in the room that perhaps the Nobel prize winner should at least acknowledge. Income disparity as measured by household income indeed has widened with much of this due to single adult households. With the aging of our population and the marked increase in "single moms" the two wage earner household income is becoming more rare. Not coincidentally children raised without two parents in the home fare more poorly in areas of academics, health and incarceration. Thus less economic mobility as well.

    But then we have non-judgment...

  • Report this Comment On April 17, 2013, at 3:31 PM, mdk0611 wrote:

    Interesting. The Top 1% take in 25% of income as opposed to 12% 25 years ago, however their share of wealth has grown from 33% to 40%, roughly 1/2 the increase in income. Sounds like they're paying a lot of taxes.

    BTW - Stiglitz gets to play sloppy facts again by implying that everything has doubled.

  • Report this Comment On April 17, 2013, at 3:54 PM, SpaceVegetable wrote:

    What baloney. The wealthy are not "taking in" money, they are "earning" it. Use of that terminology is all that is needed to see the bias in this article. Anyone can succeed in this country. The problem is that far too many don't want to put in the effort to do so. It's a lot easier to complain and demand that the government take from someone else and give to you, after all. The politics of envy only lead to oppression and a slow erosion of our rights. The far left likes to talk about the American Dream, but don't want anyone to actually achieve it because it's far easier to control people when they are dependent.

    I grew up poor and decided I didn't want to remain that way, so I set my goals and did the work needed to reach them. I now make a comfortable living. And that is in spite of a physical disability. There was no *luck* involved in my own success. There was not any "knowing the right people" or other reason that some like to use to dismiss the achievements of others. I simply busted my backside studying and working hard so I could reach the goals I set for myself. It's hardly my fault that others don't do the same.

    Yet articles like this do nothing but blame the wealthy for reaching their Dreams, as though they somehow disadvantaged others by doing so. This is not true. The economy isn't a fixed "pie" where you get less because I get more. That's just not how it works. Unfortunately, too many people can't even do the basic math required to realize this. I see it more as a failing in our schools and our government for encouraging the victim mentality that leads so many to focus more on other people's earnings than their own potential and path to their American Dream.

  • Report this Comment On April 17, 2013, at 3:56 PM, SpaceVegetable wrote:

    FYI, the top 25% of income earners pay 86% of all income taxes. Seems to me they already pay more than their "fair share." (is anyone else as sick of the phrase "fair share" as I am? )

  • Report this Comment On April 18, 2013, at 3:21 PM, MartyTheCanuck wrote:

    To me, the transcript is a great endorsement for school vouchers.

  • Report this Comment On April 18, 2013, at 4:11 PM, XXF wrote:

    The study "Economic Mobility of Families Across Generations" attempts to draw the exact same conclusion, that economic mobility is dead in the US. What they found, which they present as proof positive that no one can move economically in the US, is that 42% of individuals born into the bottom quintile of income stay there as adults. The corollary to that statement is that 58% of people born into that quintile move up during the course of their life!

    If the people were randomly placed in quintiles by a 5-sided die and then randomly moved you would expect 20% of people to remain in the quint that they began in. That leaves 22% of the lowest quint as the "unjustly persecuted for being born poor." Rather than stating that these individuals are put there by the man or any of that jazz why not consider some of the other factors that might have impacted them. Here are just a few thoughts:

    1) Being raised to believe that success is evil and to revile those who achieve great things.

    2) Being raised to believe that school is for nerds and that there is no need to graduate high school.

    3) Being raised to believe that your existence and comforts are owed to you.

    All of these are ideas that the "evil elite" try to disabuse from the poor. The poor are provided with free education for 12 years and for those who choose to excel additional collegiate education free of charge. There is not recognition of these things that clearly are opportunity among the least productive section of society and as long as people keep coddling this notion there will always be an unproductive class with their hands out.

    There is no shortage of opportunity, there is a shortage of appreciation for opportunity.

  • Report this Comment On April 18, 2013, at 4:17 PM, SyDVooh wrote:

    It seems that the "poor" are largely those sitting on their butts, collecting welfare checks and other benes taken from working taxpayers. So, gee, why are the "poor" at the bottom of the economy? Because they don't do anything, except leech off the taxpayers. How do we remedy the "poor's" position? Pay them more taxpayers money, for them to sit around doing nothing?

    By the way, what is considered "poor" here, in the USA, would be considered middle class in most other countries. Why do you think we have such a huge illegal alien problem? Because millions of non Americans, would like to have the chance to be "poor" American style.

  • Report this Comment On April 18, 2013, at 4:26 PM, hbofbyu wrote:

    Time could have been saved from having to read the over-simplified and underwhelming statements of Mr. Stiglitz with a simple chart. Tell us something that everyone in America doesn't already know.

    In 1979 I earned minimum wage of $2.50/hr. I purchased lunch on my break for $3.00 (on rare occasions). Today a minimum wage job pays $8.50 and the same lunch is $6.00. Which scenario is better? (hint, in 1979 I had to work longer to pay for food, clothes and housing/sq/ft).

    My point is that you can make everyone better off but if someone else is making out like a bandit you are going to be dis-satisfied. Human nature.

    People don't care if they are rich until they see someone else with more. Nobody knows what rich is unless you look at others for comparison. And then people will complain to the point of revolution.

  • Report this Comment On April 18, 2013, at 4:42 PM, sanfordrich wrote:

    It's not baloney. I agree that inequality is a huge problem. The fact that such a large percentage of total taxes is paid by so few AND the marginal tax rates are historically LOW is indicative of the problem. Inequality not only impacts educational opportunities but is probably the main driver of our slow economic growth. How can one expect an economy to grow when so many people are unemployed or just "getting by" day to day? There is very little additional purchasing power among the masses and the few people (relatively few) with most of the resources can/will only spend so much. Demand for our economy's output and therefore our foolish investments would be much better off if wealth was not so concentrated.

  • Report this Comment On April 18, 2013, at 4:54 PM, XXF wrote:

    @sanfordrich

    How many more educational opportunities do we need to provide? Free schooling through high school and free or nearly free collegiate schooling is provided for from the income generated by the wealthy. It doesn't seem to be a shortage of opportunity, but a shortage of taking advantage of those opportunities.

  • Report this Comment On April 18, 2013, at 5:32 PM, hbofbyu wrote:

    Don't confuse Wall Street with the common rich.

    I have no illusions concerning the evils of the greedy bastards of Goldman Sachs, the central banks and all their revolving doors of indulgence. Wealth without work (or relatively very little).

    Blame the rich all you want for America's woes. The common rich who earned their keep are not the problem. In fact they are the great examples we need. The blame goes to greed, self indulgence and the disintegration of the traditional nuclear family. Dare I say "values" anymore without people rolling their eyes?

    America is children raising children - literally; figuratively in other instances. Wall street bankers are children in a moral sense.

  • Report this Comment On April 18, 2013, at 5:55 PM, famiglia112 wrote:

    I have to echo MartyTheCanuck; this sounded like a huge endorsement for the voucher system to me.

  • Report this Comment On October 12, 2013, at 2:28 AM, Mattg1204 wrote:

    I believe many of you have missed the point. The inequality in opportunity is the problem. The poor man/woman does not have an opportunity to rise the ranks of social standing. Even if proper merits are in order some still can't not achieve what a man/woman who come from a family with wealth can. A school in Harlem cannot be compared to a school in Orange County. Just like the state university I attend cannot be compared to Harvard or Yale. These schools are for the elites and I do not hold it against them! However, I do wish more people were given opportunity based on their merits rather than their wealth. For, then the inequality would at least seem somewhat more reasonable in my mind. I'm not asking for a handout or a voucher, just an opportunity to prove that I am just as intelligent as any wealthy kid out there, even if my wallet happens to be empty. For, we can all agree some inequality is understandable in the game but we all should have a fair chance to play it and I don't believe in 21st century America we do. Thanks Stiglitz for articulating what most are afraid to do.

Add your comment.

DocumentId: 2368682, ~/Articles/ArticleHandler.aspx, 4/23/2014 11:05:32 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 16,511.16 -3.21 -0.02%
S&P 500 1,878.74 -0.81 -0.04%
NASD 4,144.71 -16.75 -0.40%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes


Advertisement