Tue, Jul 24, 2012 - Page 12 News List

Book review: The Price of Inequality: The Avoidable Causes and Hidden Costs of Inequality

A Nobel prize-winning economist’s latest book passionately spells out how ‘free market fundamentalism’ hurts the 99 percent

By Yvonne Roberts  /  The Guardian, London

The Price of Inequality: The Avoidable Causes and Hidden Costs of Inequality, by Joseph E. Stiglitz.

The ancient Greeks had a word for it — pleonexia — which means an overreaching desire for more than one’s share. As Melissa Lane explained in last year’s Eco-Republic: Ancient Thinking for a Green Age, this vice was often paired with hubris, a form of arrogance directed especially against the gods and therefore doomed to fail. The Greeks saw tyrants as fundamentally pleonetic in their motivation. As Lane writes: “Power served greed and so to tame power, one must tame greed.”

In The Price of Inequality, Joseph E. Stiglitz passionately describes how unrestrained power and rampant greed are writing an epitaph for the American dream. The promise of the US as the land of opportunity has been shattered by the modern pleonetic tyrants, who make up the 1 percent, while sections of the 99 percent across the globe are beginning to vent their rage. That often inchoate anger, seen in Occupy Wall Street and Spain’s los indignados, is given shape, fluency, substance and authority by Stiglitz. He does so not in the name of revolution — although he tells the 1 percent that their bloody time may yet come — but in order that capitalism be snatched back from free market fundamentalism and put to the service of the many, not the few.

In the 1970s and 80s, “the Chicago boys,” from the Chicago school of economics, led by Milton Friedman, developed their anti-regulation, small state, pro-privatization thesis — and were handed whole countries, aided by the International Monetary Fund (IMF), on which to experiment, among them Thatcher’s Britain, Reagan’s America, Mexico and Chile. David Harvey’s A Brief History of Neoliberalism (OUP, 2005) describes how the democratically elected Salvador Allende was overthrown in Chile and the Chicago boys brought in. Under their influence, nationalization was reversed, public assets privatized, natural resources opened up to unregulated exploitation, the unions and social organizations were torn apart and foreign direct investment and “freer” trade were facilitated. Rather than wealth trickling down, it rapidly found its way to the pinnacle of the pyramid. As Stiglitz explains, these policies were — and are — protected by myths, not least that the highest paid “deserve” their excess of riches.

Publication Notes

The Price of Inequality: The Avoidable Causes and Hidden Costs of Inequality

By Joseph E. Stiglitz

448 pages

Allen Lane

Hardcover: UK

In 2001, Stiglitz, a former chief economist at the World Bank, and arch critic of the IMF, won the Nobel prize for economics for his theory of “asymmetric information.” When some individuals have access to privileged knowledge that others don’t, free markets yield bad outcomes for wider society. Stiglitz conducted his work in the 1970s and 80s but asymmetric information perfectly describes the Libor scandal, rigging the interest rate at a cost to the ordinary man and woman in the street. Stiglitz details the profound consequences — not just of the current financial meltdown but of the previous decades of neoliberal interventions on the incomes, health and prospects of the 99 percent and the damage done to the values of fairness, trust and civic responsibility.

In the process, Stiglitz methodically and lyrically exposes the myths that provide justification for “deficit fetishism” and the rule of austerity. If George Osborne is depressed at the ineffectiveness of Plan A, he should turn to Stiglitz’s succinct explanation on page 230 to feel truly miserable. Cutting spending, reducing taxes, shrinking government and increasing deregulation destroys both demand and jobs — and doesn’t even benefit the 1 percent.

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