‘the price of inequality’

Samuel Brittan reviews The Price of Inequality: How Today’s Divided Society Endangers Our Future, by Columbia University economist Joseph Stiglitz (Allen Lane/WW Norton, 2012). The review is not very positive, even though Brittan shares Stigliz’s concern that the share of personal incomes going to the top 1 per cent more than doubled (to 18%) while “the real income of the median US family fell 7 per cent”.

[Stiglitz’s] thesis is that through a mixture of lobbying, misuse of regulation, business capture of politics and much else, [economic] “rents” have been pushed to higher and higher levels.

Moreover, the “top 1 per cent” are hardening into a hereditary elite. Interestingly, this is almost identical to the thesis put forward recently by Luigi Zingales, a free-market economist who left his native Italy for Chicago Business School to escape “crony capitalism”, only to find it gathering force in the US.

When it comes to remedies, Stiglitz is unsurprising. His initial ideas, such as curbing excessive financial risk-taking, making banks more competitive and transparent, and curbing the powers of chief executives, might well appeal to many Conservative members of the UK’s Commons Treasury Committee. But when he goes on to advocate top tax rates above 70 per cent, active steps to manage the trade balance, curbs on globalisation, and restoring union powers, my sympathy begins to wane. There is an argument to be had on all these issues. But … I find more refreshing Zingales’s proposals in A Capitalism for the People for a “pro-market but not pro-business agenda”.

Samuel Brittan, “The Price of Inequality“, Financial Times, 14 July 2012.

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