STIGLITZ AND WAGE INEQUALITY

STIGLITZ AND WAGE INEQUALITY

Joseph E. Stiglitz, who according to Paul Krugman is an “insanely great economist,” has laid out the parameters of what it takes to put together a well-functioning economy. A Nobel Prize winner in economics, Stiglitz writes in his 2016 book (The Euro) that “The mark of a well-functioning economy is rapid growth, the benefits of which are shared widely, with low unemployment.” The trick, of course, since Adam Smith’s “invisible hand” theory of economic equilibrium never existed, is to adopt policies that make such outcomes happen which, unfortunately, necessarily involve politicians and the ideological baggage they bring to policymaking.

Thus an economy that does not enjoy rapid growth or one where the benefits are not widely shared is not a well-functioning economy even if unemployment is low as is the case with our economy today, or even, I would argue, even if unemployment were non-existent. The problem is wage inequality, which is the primary reason we do not have a “well-functioning economy.”

Stiglitz recognizes that economic growth can offset tax cuts over the medium to long term, but it matters to whom such tax cuts are given, and here’s why > Economic growth depends entirely upon aggregate demand and when tax cuts are given in lopsided fashion to the rich and corporate class demand is not stimulated. History teaches us that this coddled class has better places to invest their largesse, like stock buybacks, Swiss bank accounts etc., none of which does anything for demand.

If we are to have a “well-functioning economy” which assures economic growth then our policymakers should legislate lopsided tax cuts and at least a doubling of the minimum wage (which has not been increased since 2009) into a living wage for corporate workers in order to meet Stiglitz’s test of “benefits which are shared widely.” We have failed to do this with our policies of socialism for the superrich and brutal capitalism for corporate workers as one result and lethargic economic growth and puny growth in GDP as another, all against the shameful background of the highest poverty rate in the Western World.

We can do better – much better – if we want to enjoy a “well-functioning economy” and one that fairly and equitably distributes the income and wealth our economy produces. Economics is a man-made system and its hoary traditions can be altered on the basis of history and experience by policymakers to democratically effect the greatest good for the greatest number, so let’s elect people who pledge to adopt policies that bring all of us a “well-functioning economy.” We are rich – our economy produces enormous income and wealth from which all can be fairly compensated if our politicians leave their ideologies at home, so let’s vote for those who leave them there and vote to end wage inequality, the fly in the economic ointment.     GERALD      E