Stiglitz says that most Americans are worried about the basics of the American economy: education, jobs, savings, and retirement. They are well aware that life in America is not good for the middle and working classes. In the 2008 economic crisis ten million families lost their homes, 8.7 million workers lost their jobs. And, these problems are not recent; there have been decades of meager pay for the American middle and working classes. Actually middle class life styles are now out of reach for most Americans. The stock markets and the fortunes of the wealthy are the only things that are soaring. All the increases from increased productivity are going to the 1%. 91% of all the income increase from 2009 to 2012 went to the 1%.
Yes, there is high headline unemployment right now, but it isn’t real for the 99%. The workforce participation rate is lower now than it was in the 1970’s. This is because unemployment rates include involuntary part-time workers, and low-paid fast food workers and as well as those who have given up looking. Black unemployment is even worse, it is twice that of whites and this has been true for over fifty years.
People everywhere are hungry for widely shared prosperity. And worst of all , there is no plan of any kind for escaping this morass. One very obvious idea says Stiglitz is that we could simply rewrite the rules of the American economy for everyone, not just the 1%. This is one of the main ideas of this book.
Stiglitz says that the rules that are presently shaping our economy are incorrect and outdated and we need to throw them out. For example, the idea of “Surplus Side” economics is an old idea that is totally incorrect. The term “surplus side” says that economic regulation and the disincentives imposed by high taxes on the rich plus the costs of welfare for the poor limit economic growth. Stiglitz says this is all nonsense.
“Supplus side” economics, which was first introduced in the Reagan era, was a sharp break from the Keynesian economics which worked very well in post war America in the 1950s and 1960s. Keynesian economics correctly says that insufficient demand is almost always the real reason for low growth. Actually, says Steiglitz (and all other liberal economists), “supply side” economics leds only to deregulation which puts money in the pockets of the rich and to lowering tax rates for the wealthy, to cuts in welfare for the poor and to cuts in public investment in schools and parks and highways.
We now know that the benefits of deregulation and tax cuts do not trickle down as politicians like Reagan claimed. All they do is increase wealth for the 1%, increase inequality and lower economic growth.
We now know that markets don’t exist in a vacuum, they are shaped by our legal system and our political institutions and we can change these things. Many economists now realize that we can improve economic performance and reduce inequality at the same time. We do not need to choose between economic growth and prosperity for all. These things come together in one package. The old economic rules no longer work. And they actually they never did work.
Demand for real change in economic rules is now growing. Even though wages are stagnant, Stieglitz says that productivity is still growing. Unfortunately the incomes of CEOs and Bankers are the only thing that benefit from this though. 80% of all new job growth is in low wage jobs and in low paid retail.
But, says Stiglitz, the public knows what is going on. They know that the old economy is not working.
The article is still in progress. It will be finished soon.