Book Review: The Price of Inequality by Joseph Stiglitz

Introduction and Author Background

In 2013, issues of socioeconomic inequality were perhaps as pressing and problematic as they had ever been. This is the assertion at the crux of Joseph E. Stiglitz's text, The Price of Inequality: How Today's Divided Society Endangers Our Future (ISBN-13: 9780393345063). Released in 2012 by W.W. Norton & Company, the 560-page text is a timely and compelling contribution to the public discourse on the need for greater economic equality in the United States.

Understanding the orientation of the text requires a more complete understanding of its author — an economist, university professor, and winner of the 2001 Nobel Memorial Prize in Economic Sciences. According to his self-composed biography at the Nobel Foundation site, Stiglitz (2001) was born in Gary, Indiana in 1943. By his own account, his interests as a young student led him to become actively involved in his high school debate club. He notes that some of the subjects that stirred the most passion in him as a student would emerge time and again in his later career as issues of great civic importance.

Stiglitz tells us that "the intellectually most formative experiences occurred during the three years 1960–1963 I spent at Amherst College, a small, New England college (at the time, a men's college with around 1,000 students)." (Stiglitz 2001, p. 1) He speaks highly of his experiences at Amherst, where he dedicated the bulk of his undergraduate efforts to physics. By his senior year, Stiglitz reports, he had become enamored of economics and switched courses entirely in order to make it his focus during graduate school. He earned a modest fellowship to assist his transfer to MIT, where he earned his PhD and held an assistant professorship. (Stiglitz 2001, p. 1)

From there, Stiglitz went on to become one of the most decorated, accomplished, and influential economists of the last several decades. According to his Curriculum Vitae (2013), Stiglitz holds honorary doctorates from more than 40 academic institutions, has held professorial positions at a number of top universities, served as the 17th Chair of the Council of Economic Advisers under President Bill Clinton, and held the office of World Bank Chief Economist between 1997 and 2000.

The full scope of Stiglitz's contributions cannot be contained here. However, even a surface view of the author's career reveals an individual highly qualified to offer commentary on the state of the U.S. economy. The highly critical nature of the text in question therefore comes with a strong degree of credibility.

Summary of the Text

Stiglitz makes no mystery of his perspective on economic inequality. From the outset of the text, he makes clear that his perspective is progressive in nature and highly sympathetic to the struggles of the middle class, the working class, and the impoverished. Moreover, the text approaches America's economic inequality as connected to patterns observable on a global scale. According to Stiglitz, the outpouring of protest and discontent that defined the Arab Spring and the Occupy Movement were connected even if separated by wide cultural and geographical gaps. Stiglitz also makes clear, in no uncertain terms, that his point of view has more in common with the protest movement than with the hegemonic forces standing in its way.

Accordingly, Stiglitz observes that "the protesters were right that something was wrong. The gap between what our economic and political systems are supposed to do — what we were told they did do — and what they actually do had become too large to be ignored. Governments around the world were not addressing key economic problems, including that of persistent unemployment; and as universal values of fairness became sacrificed to the greed of a few, in spite of rhetoric to the contrary, the feeling of unfairness became a feeling of betrayal." (p. x)

This passage offers a philosophical framework for the larger part of the text, which takes the view that capitalism has been stifled by a generation of corrupt, entrenched interest groups permeating both industry and politics. This is the prerogative for a text that largely condemns the forces responsible for the economic ailments of inequality and recession. Stiglitz proceeds to lay out an argument that true capitalism should cure rather than intensify socioeconomic inequality. The Price of Inequality asserts that greed and exploitation have created an increasingly sharp wealth divide in which a vast majority of the world's wealth is controlled by a select few — done, Stiglitz argues, at the expense not only of individuals struggling for survival in a stagnant economy but also at the expense of economic stability as a nation and global community.

Critical Analysis of Core Arguments

The Stiglitz text ultimately illustrates that the causes of economic inequality in the United States and the global community alike are threefold. According to Stiglitz, "markets weren't working the way they were supposed to, for they were obviously neither efficient nor stable; the political system hadn't corrected the market failures; and the economic and political systems are fundamentally unfair." (p. xi) Stiglitz then lays out a strategy for addressing these intermingled causes of our current economic problems — but before doing so, the text presents some startling realities.

Regarding the economic situation at the time of writing, Stiglitz lends insight into just how dire circumstances had grown for so many Americans. He describes the array of consequences for poor and middle-class Americans in the fallout from the 2007–2008 financial crisis. While banks and auto companies were awarded bailout money for mismanaging key sectors of the U.S. economy, ordinary citizens were left with a decidedly hopeless set of personal, professional, and financial realities. According to the text, five years into the recovery, "one out of six Americans who would like a full-time job still couldn't find one; some eight million families had been told to leave their homes, and millions more anticipated seeing foreclosure notices in the not-too-distant future; still more saw their lifetime savings seemingly evaporate. Even if some of the green shoots that the optimists keep seeing were, in fact, the harbinger of a real recovery, it would be years — 2018 at the earliest — before the economy returned to full employment." (Stiglitz 2012, p. 1)

A central argument of the text is that considerable damage has been done by an era of crony capitalism, corporate malfeasance, and misguided federal policy. The age of globalization has given way to an unfettered corporatization of American life, in which small businesses, independent entities, and other self-starters are unable to compete. Social mobility has also been stifled, with employment opportunities severely limited for debt-laden college graduates and middle-aged Americans forced into early retirement. Stiglitz adopts the view articulated by the Occupy Wall Street movement — that the 99% had been exploited by the 1% — and provides compelling statistical evidence to suggest that this claim was more than protest rhetoric.

To that point, Stiglitz notes that "America has been growing apart, at an increasingly rapid rate. In the first post-recession years of the new millennium (2002 to 2007), the top 1% seized more than 65% of the gain in total national income. While the top 1% was doing fantastically, most Americans were actually growing worse off." (p. 2) The text provides a stark indictment of a leadership comprised of politically ambitious figureheads and entrenched corporate interests, the result being that the interests of the general public are either marginalized or defied altogether in favor of a continually widening gap between rich and poor.

Premise, Relevance, and Evidence

The overarching premise of The Price of Inequality is that the unequal and exploitative nature of the current American economic system is not only ethically wrong but will also lead to a continued unraveling of the U.S. economy and way of life. This view is supported by a wealth of evidence from the contemporary economic landscape. Few things could be more relevant to public discourse than a piercing examination of the causes of harsh inequality that many have come to accept as normal. Moreover, the text makes a compelling case that this economic philosophy will prove to be the undoing of wealthy and poor Americans alike.

One review from The Jefferson Institute (2012) notes that the Stiglitz text is a troubling harbinger of economic crises yet to come. (Chinni, p. 1) The reviewer connects economic trends cited by Stiglitz to concur with the author's argument, observing that "recent figures from the Federal Reserve show that the median family has assets (including their house but subtracting their mortgage) of roughly $77,300. The top 10% of families have nearly $1.2 million. That's the kind of gap not seen since the 1920s, just before the Great Depression." (Chinni, p. 1)

The course principle which emerges with the greatest clarity in the Stiglitz text relates to the prioritization of public service in governance. In a course on public administration, government agencies are understood as inherently designed to serve the civic needs of various publics. Stiglitz argues that while this is the grand purpose of government, that priority has been eclipsed by the opportunities for personal enrichment that drive so many officeholders today. For Stiglitz, public administration has become highly distorted by self-interest and political careerism, translating into a genuine exploitation of the avenues historically designed to meet collective service needs — channels that have become the very instruments by which the wealthy have effected a massive and damaging wealth transfer over the past decade and a half.

One of the greatest strengths of the text is the author's credibility on the subject. Armed with a deep history of involvement in America's economic life, Stiglitz marshals a wealth of evidence to support his argument. Perhaps the most compelling statistical point concerns the limited opportunities for socioeconomic mobility in the United States. The notion of the U.S. as a land of opportunity is more than a little ironic when one considers that the country is consistently outperformed in class mobility by other industrialized nations. Stiglitz compares the U.S. to Denmark and Britain, finding that while their respective performances are not ideal, they are considerably better than that of the United States. According to Stiglitz, "the chances of moving up in America, though, are markedly smaller (only 58% of children born to the bottom group make it out), and when they do move up, they tend to move up only a little. Almost two-thirds of those in the bottom 20% have children who are in the bottom 40%." (p. 18–19) These figures underscore a text that makes a compelling case: the United States struggles with economic inequality both relative to other nations and relative to the promises of its own political and governmental philosophy.

Conclusion and Recommendations

The Price of Inequality is a powerful and important text that brings its reader current on the pressing subject of global and domestic economic inequality. Joseph E. Stiglitz writes with an authoritative voice that ultimately lends considerable fortitude to such otherwise countercultural movements as the Occupy Wall Street protesters. By offering an informed and expert assessment that essentially echoes the rhetorical claims of the protest movement, Stiglitz succeeds in giving credible and informative grounding to what might otherwise be dismissed as radical or subversive. The result is a vital critique of our economy, politics, and culture that is as rewarding in its optimism as it is damning in its indictment.

As a reader with a strong interest in social justice and the implications of an unequal economic landscape, this proved to be an extremely satisfying read. The author's experience in the field and his distinctively progressive voice render it an important text for anyone with a passing or serious interest in understanding America's current economic crisis. Perhaps even more importantly, this text has the potential to be a genuine eye-opener for those resting on the comfortable assumption of American economic superiority. In his comparisons and connections to other nations, Stiglitz dispels any false sense of patriotism in favor of a truly critical examination of American economic dysfunction. The text comes highly recommended for a broad spectrum of readers. One would hope that the more people read this book, the greater the collective awareness will become that change is both needed and urgent.

Works Cited

Chinni, D. (2012). 'The Price of Inequality' and 'The Betrayal of the American Dream.' Jefferson Institute.

[University]. (2013). Curriculum Vitae — Stiglitz. Gsb.columbia.edu.

Edsall, T.B. (2012). Separate and Unequal. The New York Times.

Stiglitz, J.E. (2001). Biographical. The Nobel Foundation.

Stiglitz, J.E. (2012). The Price of Inequality: How Today's Divided Society Endangers Our Future. W.W. Norton & Co.

Stiglitz, J.E. (2013). Student Debt and the Crushing of the American Dream. The New York Times.