Stiglitz: Inequality Is Not Inevitable

The NY Times just ended an eighteen month series of commentaries on its opinion pages about economic inequality,  The Great Divide, moderated by the Nobel prize-winning economist, Joseph Stiglitz.  I urge you to read the final column in this series, in which Stiglitz declares, Inequality is Not Inevitable.

That economic inequality matters to educational outcomes in public schools has been conclusively demonstrated in research by Stanford University’s Sean Reardon, who has shown that in America we are increasingly raising our children in schools where all the children are poor or schools where all the children are rich, with fewer economically diverse communities where children from a range of incomes are educated together.  School achievement has come to track this growing residential segregation by economics, with poor children lagging farther behind as wealthy children leap ahead.  Here is a summary of Reardon’s research:

  1. By 2009 the proportion of families in major metropolitan areas living in either very poor or very affluent neighborhoods had increased—to 33 percent (from 15 percent in 1970) and the proportion of families living in middle income neighborhoods had declined to 42 percent in 2009 (from 65 percent in 1970), with increased segregation at both ends of the income distribution.  Both high-and low-income families became increasingly residentially isolated in the 2000s, resulting in greater polarization of neighborhoods by income.
  2. Income segregation has grown significantly over four decades for black and Hispanic families, but particularly in the years since 2000.  While income inequality among black families did not grow significantly in the two most recent decades from 1990 to 2009, residential segregation by income did grow considerably among black families.  “Low-income black and Hispanic families are much more isolated from middle-class black and Hispanic families than are low-income white families from middle- and high-income white families.  The rapid growth of income segregation among black families has exacerbated the clustering of poor black families in neighborhoods with very high poverty rates.  And while middle class black families were less likely to live in neighborhoods with low-income black families, this does not mean that middle-class blacks gained access to middle-class white neighborhoods….”
  3. In another report, Reardon demonstrates that along with growing residential inequality is a simultaneous jump in an income-inequality school achievement gap.  The inequality achievement gap between the children with income in the top ten percent and the children with income in the bottom ten percent, was 30-40 percent wider among children born in 2001 than those born in 1975, and twice as large as the black-white achievement gap.

In his recent column, Joseph Stiglitz challenges those who conclude that “violent extremes of wealth and income are inherent to capitalism.”  Stiglitz points to “a wide range of examples… (that) undermine the notion that there are any truly fundamental laws of capitalism… If it is not the inexorable laws of economics that have led to America’s great divide, what is it?  The straight forward answer: our policies and our politics.”  “So why,” wonders Stiglitz, “has America chosen these inequality-enhancing policies?”  The answer:  “The American political system is overrun by money.  Economic inequality translates into political inequality, and political inequality yields increasing economic inequality.”  The very wealthy design the rules of the game through the role of money and power in politics.

A fascinating companion piece to Stiglitz’s commentary is another column, published on Monday by another Nobel Prize winning economist, Paul Krugman.  Krugman describes the role of the American Legislative Exchange Council (ALEC) whose members draft and distribute model laws across the statehouses in search of legislative sponsors who will tailor the generic models to their own states’ needs. ALEC drafts model laws in a range of policy areas, but Krugman’s focus is ALEC’s ongoing effort to promote state tax cuts.  “And what is ALEC? It’s a secretive group, financed by major corporations, that drafts model legislation for conservative state-level politicians.  Ed Pilkington of The Guardian, who acquired a number of leaked ALEC documents, describes it as ‘almost a dating service between politicians at the state level, local elected politicians, and many of America’s biggest companies.’  And most of ALEC’s efforts are directed, not surprisingly, at privatization, deregulation, and tax cuts for corporations and the wealthy.”  Krugman agrees with Stiglitz: money concentrated in the hands of powerful interests promotes inequality—in the case of Krugman’s example, through tax cuts that further concentrate wealth at the top while denying the public sector tax dollars that might enable government to pay for basic services like public schools or to address the needs of those at the bottom.

Who are the victims according to Stiglitz?  The young—with nearly 25 percent of children living in poverty.  Those imprisoned: America has 5 percent of the world’s population and a quarter of the world’s prisoners.  Those whose homes were foreclosed as the banks were bailed out.  Those who are sick, as 24 states have chosen not to expand Medicaid under the Affordable Care Act, thereby denying coverage to our poorest citizens.

According to Stiglitz: “The problem of inequality is not so much a matter of technical economics. It’s really a problem of practical politics.  Ensuring that those at the top pay their fair share of taxes—ending the special privileges of speculators, corporations and the rich—is both pragmatic and fair… If we spent more on education, health and infrastructure, we would strengthen our economy now and in the future… Widening and deepening inequality is not driven by immutable economic laws, but by laws we have written ourselves.”