sábado, abril 16, 2011

Desigualdade nos Estados Unidos - The Economist, Joseph Stiglitz (Vanity Fair)

Artigos sobre a desigualdade na sociedade americana.

American politics
Democracy in America
Inequality: The 1% solution

The Economist, Apr 15th 2011, 15:03 by M.S.

MY COLLEAGUE and I have something in common: we both think (we both think) concentrations of power in alliances between gargantuan business instititutions and gargantuan government institutions are generally terrible. My colleague and I don't have much in common in how we analyse the formation of those concentrations of power, or what we think should be done about them. Another thing my colleague and I have in common is that we each think the other guy's approach to this problem is hopelessly naive. And another thing we don't have in common is that I largely agreed with Joseph Stiglitz's article in Vanity Fair, which my colleague describes as an example of self-refutingly absurd liberal ideology. To sum up the basic thrust of what I agree with in Mr Stiglitz's piece: I think the rich are getting much, much richer, while regular people (in the developed world, which is what we're talking about here) are at best treading water. I think that wealth brings power, and the fact that the rich are getting much, much richer relative to everyone else means that the rich also exert increasing influence over the economy, government and society. I think income mobility and equality of opportunity have declined in America over the past 40 years, to the point where America is now more segregated by class divisions than many European countries. I think a major reason for these shifts has been the increasing dominance, since the Reagan era, of an ideology that is indifferent to or actively celebrates inequality of income. I think this ideology is bad: bad for the economy, bad for society, bad for art and culture, bad for the moral character of those who subscribe to it. My chief difference with Mr Stiglitz is that I think his confidence that inequality will eventually lead to a vociferous political reaction against wealthy financial elites in America is misplaced.

I'm going to get to more fundamental issues, but first, I have to address my colleague's reference to a post by Scott Winship that claims that Mr Stiglitz got all his numbers wrong. The first claim on that post is that the top 1% of American earners take in not "nearly a quarter" of all American income, as Mr Stiglitz says, but 18% of all income, according to figures by Emmanuel Saez and Thomas Piketty, respected economists. But a commenter quickly notes that Mr Winship made a mistake here: he used Messrs Saez and Piketty's figures for income not including capital gains. This is like saying that the Queen of England doesn't really earn that much, if you don't count the money the state pays to maintain her palaces and cover her servants, food, clothes, parties and travel. The top 1% earn a large and increasing portion of their income from capital gains; it's my understanding that for hedge-fund managers, the entirety of their income is counted as capital gains due to the carried-interest rule. Mr Winship has a number of other problems with Mr Stiglitz's figures. And I don't know whose figures are better. But I am confident that on each of these claims, an argument between Mr Winship and Mr Stiglitz is going to come down to an abstruse conflict over different data sets. There is simply no way that Joseph Stiglitz inserted, say, the figure that the top 1% of Americans control 40% of the country's wealth off the top of his head. And all of the authorities Mr Winship cites also agree that inequality of income has grown markedly in America over the past 30 years. Arguing over percentages seems to me, to quote Mr Stiglitz, like an effort to "(pretend) that what has obviously happened has not in fact happened."

More importantly, I don't understand why my colleague, who professes to be rather indifferent to the level of inequality in society, cares whether the top 1% take in 18% or 25% of national income. I tend to think that the fact that defenders of inequality spend so much time trying to fight back on these stats suggests that they are not so confident that there is nothing morally wrong with yawning differences in wealth, or with extraordinary portions of overall income being harvested by those at the very tip of the pyramid.

But a wise blogger once said that it's a good principle to argue about other people's main points, not to quibble over side issues. So let me get to the main thrust of my colleague's point about the liberal "Ouroboros". He agrees that the financial-governmental complex is a new version of the military-industrial complex, which itself is still very much perniciously in business:

The problem is that we are multiplying military-industrial complexes. But this explosion in public-private "partnerships", and the inevitable political corruption and economic distortion they produce, is not at bottom due to a plot of the top 1%. It is due in no small part to the success of progressive ideologues like Mr Stiglitz in arguing for ever greater government control over everything.
I can't find any way to make sense of this argument. Here are some examples of bad public-private partnerships: the growth in outsourcing of military and intelligence missions to private security contractors like Blackwater/Xe; the semi-private for-profit but implicitly state-guaranteed status of Fannie Mae and Freddie Mac; implicit government bail-out guarantees for too-big-to-fail financial institutions (TBTFs) such as Citibank, AIG et al.

In the first case, defence and intelligence were formerly government monopolies, and the explosion in extremely profitable outsourcing was a result of the privatisation mania of the 1980s, driven by radical-right free-enterprise fanatics like Eric Prinz. Government control over the military has decreased, not increased, and that trend is certainly not the fault of progressive ideologues. In the case of Fannie Mae and Freddie Mac, LBJ's decision to privatise them was driven by a desire to minimise the government's balance sheet, and had little ideological character; had they remained straight-up government agencies as they were from the 1930s to the late 1960s, they would have played an even more marginal role in the financial crisis. You certainly can't argue that their public-private character resulted from a drive for "ever greater government control over everything"; it was the opposite. In the case of implicit government guarantees for TBTFs, the problem was precisely a lack of explicit rules for government's role regarding systemically important financial institutions, particularly non-bank institutions. The only way to argue that the problem here is too much liberal-driven government involvement would be to argue that we should a) do away with federal deposit insurance and the rest of the New Deal/Basel underpinnings of the modern financial system as they obtain in every developed country, and b) that we should have let the banks, insurers and hedge funds all fail in September 2008. This would not be a serious position and I'm sure my colleague doesn't hold it.

I cannot think of any field in which the growth of public-private partnerships results from "progressive ideologues...arguing for ever greater government control over everything." In every case I can think of, the growth of public-private partnerships is linked to the Washington Consensus-era belief of both conservative and neo-liberal ideologues that anything government can do, the private sector can do better. For that matter, there are plenty of examples of really great public-private partnerships, like many charter schools, or build-operate-transfer deals to get roads, railways, bridges and airports built more efficiently than they might be if done by government. Anyway, the point is that trying to describe the history of the past 30 years, with its great growth in inequality and increasing influence of money on politics, as one of increasingly progressive ideology leading to growing government intervention in the economy seems to me impossibly far-fetched.

The final thing that struck me about my colleague's argument is his objection to Mr Stiglitz's observation that "Wealth begets power, which begets more wealth."

Progressives thrill to this sort of vague slogan, but we are rarely offered an intelligible explanation of how exactly wealth begets power, nor are we offered an intelligible approach to reducing the power of wealth over policy and politics.
Really detailed explanations of how wealth begets power are very valuable, and I agree we should work on more of them. I also agree that figuring out how to reduce the power of wealth over policy and politics is a tough nut to crack. But I really hope my colleague agrees with the basic premise that wealthy people are more powerful than poor people, and that most wealthy people tend to use their power to try to get more wealth. Personally, I think that these disparities of wealth should not be reproduced in the political arena, and that in a truly (hence impossibly) fair democracy, David Koch would literally find it no easier to get the governor of Wisconsin on the phone than my cousin Lisa would. (Actually, it should be easier for Lisa, since she's a Wisconsin voter.) To get anywhere near that kind of fairness, we would have to institute radically different rules for the political game in America, and I don't expect my colleague to share all my beliefs about how to weigh the political equality of citizens against the freedom of billionaires to spend their money on politics. But I do think that if we don't agree that rich people have more political power than poor people and that they use that power to pursue their economic interests, then we've really got a communications problem.


Inequality and politics
Stiglitz and the progressive Ouroboros

The Economist, Apr 11th 2011, 21:30 by W.W.

IOWA CITY - JOSEPH STIGLITZ, an economics professor at Columbia University with a Nobel prize and stints at the White House and the World Bank on his gold-encrusted CV, takes to the perfumed pages of Vanity Fair to decry the alleged rule "Of the 1%, by the 1%, for the 1%". Mr Stiglitz's essay, though riddled with error and confusion, remains an illuminating encapsulation of a certain misguided conception of political economy common on the left.

Scott Winship does us the service of ferreting out Mr Stiglitz's false and misleading claims. The share of national income and wealth accruing to the top 1% has not grown as much as Mr Stiglitz asserts. Median income has declined only if one omits the value of health benefits. The claim that "All the growth in recent decades—and more—has gone to those at the top", is plainly incorrect. There is little evidence that increasing levels of inequality "undermine the efficiency of the economy". Mr Stiglitz maintains that it is "well-documented" that high levels of inequality lead "people outside the top 1 percent" to "increasingly live beyond their means", but the increase in indebtedness is small, and theories, such as Robert Frank's, connecting middle-class consumption and indebtedness to rising inequality remain speculative. There's more, but fact-checking is tedious business. Please do read Mr Winship's postfor the details.

I'm more interested in the deep commitments framing Mr Stiglitz's essay. Mr Stiglitz offers yet another voicing of the progressive master narrative: that economic inequality becomes political inequality, empowering the richest to bend the political process to their will at the expence of the commonweal. "Wealth begets power, which begets more wealth", as Mr Stiglitz pithily puts it. Progressives thrill to this sort of vague slogan, but we are rarely offered an intelligible explanation of how exactly wealth begets power, nor are we offered an intelligible approach to reducing the power of wealth over policy and politics.

Mr Stiglitz writes:
Monopolies and near monopolies have always been a source of economic power—from John D. Rockefeller at the beginning of the last century to Bill Gates at the end. Lax enforcement of anti-trust laws, especially during Republican administrations, has been a godsend to the top 1 percent. Much of today’s inequality is due to manipulation of the financial system, enabled by changes in the rules that have been bought and paid for by the financial industry itself—one of its best investments ever. The government lent money to financial institutions at close to 0 percent interest and provided generous bailouts on favorable terms when all else failed. Regulators turned a blind eye to a lack of transparency and to conflicts of interest.
I agree with all of this. But, pray tell, what does it have to do with inequality? Would reducing inequality to, say, Canadian levels by means of progressive redistribution help? No, it would not. Making rich people poorer and poor people richer won't strip the financial industry of the resources needed to "buy" the regulations and regulators it wants.

So what does Mr Stiglitz propose we do? He doesn't say, but I'll hazard a guess:get better regulators—regulators who see things Joe Stiglitz's way. If you sense that this is not a serious answer to a serious problem, you are correct. Indeed, it is plausible that economic technocrats such as Mr Stiglitz bear no small part of the blame for the corrupt and baleful state of the financial economy.

As Gabriel Sherman writes in a new New York Magazine article on Peter Orszag and the revolving door between Washington and Wall Street, "The close alliance among Wall Street and the economics departments of the major universities and the West Wing of the White House is the military-industrial complex of our time." Not to say that the military-industrial complex is not the military-industrial complex of our times, nor that the confluence of government and health care is not the military-industrial complex of our times. The problem is that we are multiplying military-industrial complexes. But this explosion in public-private "partnerships", and the inevitable political corruption and economic distortion they produce, is not at bottom due to a plot of the top 1%. It is due in no small part to the success of progressive ideologues like Mr Stiglitz in arguing for ever greater government control over everything.

A political system that enshrines governments' power to grant monopolies and other barriers to economic competition, whether they be direct subsidies to government's chosen champion firms, or less direct subsidies by way of taxes, tariffs, and regulations that disproportionately harm less-favoured firms, inevitably attracts money to politics. Under close inspection, the progressive master narrative is revealed as a tail-chasing, self-consuming progressive Ouroboros. It is an argument against money in politics that argues for precisely the sort of government power that draws money to politics.

The progressive master narrative runs on the fuel of class interest, but it makes an arbitrary exception for members of the progressive technocratic elite, like Mr Stiglitz. This is the loophole through which the Ouroboros escapes self-cannibalism. These men and women, the technocratic elite, in virtue of their superior moral rectitude and mastery of the relevant social science may be trusted with almost unlimited power to manage the nation's economy, wars, and far-flung imperial holdings on behalf of the democratic public. Sure, these godlike king-making powers make professional courtiers of the money men, but not to worry. The public-minded technocrat pledges in his heart of hearts to express only the will of the people, especially the least among us. Thus our Joe Stiglitzes and Samantha Powerses, desiring nothing but the best all of us, stand arm in arm as a sturdy bulwark against the tide of money that threatens to corrupt our politics. Of course, at times the wishes of the people diverge from the opinion of the technocrats. In which case, we cannot but suspect that public opinion has been manipulated by the rich, or by "market fundamentalist" ideologues financed by rich people, such that, as Mr Stiglitz puts it "one big part of the reason we have so much inequality is that the top 1 percent want it that way". If the financial system collapses and cripples the economy, if the American military gets bogged down in a blood-soaked trillion-dollar quagmire, that's because the technocrats in or near positions of power had too little influence, not too much. Or they were the wrong technocrats. Or, if all this seems too far-fetched ... Look! Over there! Inequality!

The nexus of politics and big money is a profound problem, but inequality is at best a manifestation of the problem, not the problem. Inequality is a red herring that draws our attention away from the real, hard task that faces truly public-spirited reformers: how to fix the corrupt and corrupting interface between America's economic and political institutions. We may hope for, but should not expect, useful, impartial advice in this regard from powerful academics holding golden key-cards to the revolving door. And we may hope for, but should not expect, useful advice in this regard from progressives dizzy from chasing their tails. So, instead, we get righteous rants about the injustice and danger of inequality. But should the American public suddenly sweeten to the idea of greater downward redistribution, sending America's Gini coefficient tumbling toward the sweet valley of social justice, it would do little or nothing to alter the venal incentives that account for the multiplying host of military-industrial complexes spreading across America like a cancer.


Of the 1%, by the 1%, for the 1%
By Joseph E. Stiglitz
Vanity Fair, May 2011

Americans have been watching protests against oppressive regimes that concentrate massive wealth in the hands of an elite few. Yet in our own democracy, 1 percent of the people take nearly a quarter of the nation’s income—an inequality even the wealthy will come to regret.

THE FAT AND THE FURIOUS The top 1 percent may have the best houses, educations, and lifestyles, says the author, but “their fate is bound up with how the other 99 percent live.”

It’s no use pretending that what has obviously happened has not in fact happened. The upper 1 percent of Americans are now taking in nearly a quarter of the nation’s income every year. In terms of wealth rather than income, the top 1 percent control 40 percent. Their lot in life has improved considerably. Twenty-five years ago, the corresponding figures were 12 percent and 33 percent. One response might be to celebrate the ingenuity and drive that brought good fortune to these people, and to contend that a rising tide lifts all boats. That response would be misguided. While the top 1 percent have seen their incomes rise 18 percent over the past decade, those in the middle have actually seen their incomes fall. For men with only high-school degrees, the decline has been precipitous—12 percent in the last quarter-century alone. All the growth in recent decades—and more—has gone to those at the top. In terms of income equality, America lags behind any country in the old, ossified Europe that President George W. Bush used to deride. Among our closest counterparts are Russia with its oligarchs and Iran. While many of the old centers of inequality in Latin America, such as Brazil, have been striving in recent years, rather successfully, to improve the plight of the poor and reduce gaps in income, America has allowed inequality to grow.

Economists long ago tried to justify the vast inequalities that seemed so troubling in the mid-19th century—inequalities that are but a pale shadow of what we are seeing in America today. The justification they came up with was called “marginal-productivity theory.” In a nutshell, this theory associated higher incomes with higher productivity and a greater contribution to society. It is a theory that has always been cherished by the rich. Evidence for its validity, however, remains thin. The corporate executives who helped bring on the recession of the past three years—whose contribution to our society, and to their own companies, has been massively negative—went on to receive large bonuses. In some cases, companies were so embarrassed about calling such rewards “performance bonuses” that they felt compelled to change the name to “retention bonuses” (even if the only thing being retained was bad performance). Those who have contributed great positive innovations to our society, from the pioneers of genetic understanding to the pioneers of the Information Age, have received a pittance compared with those responsible for the financial innovations that brought our global economy to the brink of ruin.

Some people look at income inequality and shrug their shoulders. So what if this person gains and that person loses? What matters, they argue, is not how the pie is divided but the size of the pie. That argument is fundamentally wrong. An economy in which most citizens are doing worse year after year—an economy like America’s—is not likely to do well over the long haul. There are several reasons for this.

First, growing inequality is the flip side of something else: shrinking opportunity. Whenever we diminish equality of opportunity, it means that we are not using some of our most valuable assets—our people—in the most productive way possible. Second, many of the distortions that lead to inequality—such as those associated with monopoly power and preferential tax treatment for special interests—undermine the efficiency of the economy. This new inequality goes on to create new distortions, undermining efficiency even further. To give just one example, far too many of our most talented young people, seeing the astronomical rewards, have gone into finance rather than into fields that would lead to a more productive and healthy economy.

Third, and perhaps most important, a modern economy requires “collective action”—it needs government to invest in infrastructure, education, and technology. The United States and the world have benefited greatly from government-sponsored research that led to the Internet, to advances in public health, and so on. But America has long suffered from an under-investment in infrastructure (look at the condition of our highways and bridges, our railroads and airports), in basic research, and in education at all levels. Further cutbacks in these areas lie ahead.

None of this should come as a surprise—it is simply what happens when a society’s wealth distribution becomes lopsided. The more divided a society becomes in terms of wealth, the more reluctant the wealthy become to spend money on common needs. The rich don’t need to rely on government for parks or education or medical care or personal security—they can buy all these things for themselves. In the process, they become more distant from ordinary people, losing whatever empathy they may once have had. They also worry about strong government—one that could use its powers to adjust the balance, take some of their wealth, and invest it for the common good. The top 1 percent may complain about the kind of government we have in America, but in truth they like it just fine: too gridlocked to re-distribute, too divided to do anything but lower taxes.

Economists are not sure how to fully explain the growing inequality in America. The ordinary dynamics of supply and demand have certainly played a role: laborsaving technologies have reduced the demand for many “good” middle-class, blue-collar jobs. Globalization has created a worldwide marketplace, pitting expensive unskilled workers in America against cheap unskilled workers overseas. Social changes have also played a role—for instance, the decline of unions, which once represented a third of American workers and now represent about 12 percent.

But one big part of the reason we have so much inequality is that the top 1 percent want it that way. The most obvious example involves tax policy. Lowering tax rates on capital gains, which is how the rich receive a large portion of their income, has given the wealthiest Americans close to a free ride. Monopolies and near monopolies have always been a source of economic power—from John D. Rockefeller at the beginning of the last century to Bill Gates at the end. Lax enforcement of anti-trust laws, especially during Republican administrations, has been a godsend to the top 1 percent. Much of today’s inequality is due to manipulation of the financial system, enabled by changes in the rules that have been bought and paid for by the financial industry itself—one of its best investments ever. The government lent money to financial institutions at close to 0 percent interest and provided generous bailouts on favorable terms when all else failed. Regulators turned a blind eye to a lack of transparency and to conflicts of interest.

When you look at the sheer volume of wealth controlled by the top 1 percent in this country, it’s tempting to see our growing inequality as a quintessentially American achievement—we started way behind the pack, but now we’re doing inequality on a world-class level. And it looks as if we’ll be building on this achievement for years to come, because what made it possible is self-reinforcing. Wealth begets power, which begets more wealth. During the savings-and-loan scandal of the 1980s—a scandal whose dimensions, by today’s standards, seem almost quaint—the banker Charles Keating was asked by a congressional committee whether the $1.5 million he had spread among a few key elected officials could actually buy influence. “I certainly hope so,” he replied. The Supreme Court, in its recent Citizens United case, has enshrined the right of corporations to buy government, by removing limitations on campaign spending. The personal and the political are today in perfect alignment. Virtually all U.S. senators, and most of the representatives in the House, are members of the top 1 percent when they arrive, are kept in office by money from the top 1 percent, and know that if they serve the top 1 percent well they will be rewarded by the top 1 percent when they leave office. By and large, the key executive-branch policymakers on trade and economic policy also come from the top 1 percent. When pharmaceutical companies receive a trillion-dollar gift—through legislation prohibiting the government, the largest buyer of drugs, from bargaining over price—it should not come as cause for wonder. It should not make jaws drop that a tax bill cannot emerge from Congress unless big tax cuts are put in place for the wealthy. Given the power of the top 1 percent, this is the way you would expect the system to work.

America’s inequality distorts our society in every conceivable way. There is, for one thing, a well-documented lifestyle effect—people outside the top 1 percent increasingly live beyond their means. Trickle-down economics may be a chimera, but trickle-down behaviorism is very real. Inequality massively distorts our foreign policy. The top 1 percent rarely serve in the military—the reality is that the “all-volunteer” army does not pay enough to attract their sons and daughters, and patriotism goes only so far. Plus, the wealthiest class feels no pinch from higher taxes when the nation goes to war: borrowed money will pay for all that. Foreign policy, by definition, is about the balancing of national interests and national resources. With the top 1 percent in charge, and paying no price, the notion of balance and restraint goes out the window. There is no limit to the adventures we can undertake; corporations and contractors stand only to gain. The rules of economic globalization are likewise designed to benefit the rich: they encourage competition among countries forbusiness, which drives down taxes on corporations, weakens health and environmental protections, and undermines what used to be viewed as the “core” labor rights, which include the right to collective bargaining. Imagine what the world might look like if the rules were designed instead to encourage competition among countries for workers.Governments would compete in providing economic security, low taxes on ordinary wage earners, good education, and a clean environment—things workers care about. But the top 1 percent don’t need to care.

Or, more accurately, they think they don’t. Of all the costs imposed on our society by the top 1 percent, perhaps the greatest is this: the erosion of our sense of identity, in which fair play, equality of opportunity, and a sense of community are so important. America has long prided itself on being a fair society, where everyone has an equal chance of getting ahead, but the statistics suggest otherwise: the chances of a poor citizen, or even a middle-class citizen, making it to the top in America are smaller than in many countries of Europe. The cards are stacked against them. It is this sense of an unjust system without opportunity that has given rise to the conflagrations in the Middle East: rising food prices and growing and persistent youth unemployment simply served as kindling. With youth unemployment in America at around 20 percent (and in some locations, and among some socio-demographic groups, at twice that); with one out of six Americans desiring a full-time job not able to get one; with one out of seven Americans on food stamps (and about the same number suffering from “food insecurity”)—given all this, there is ample evidence that something has blocked the vaunted “trickling down” from the top 1 percent to everyone else. All of this is having the predictable effect of creating alienation—voter turnout among those in their 20s in the last election stood at 21 percent, comparable to the unemployment rate.

In recent weeks we have watched people taking to the streets by the millions to protest political, economic, and social conditions in the oppressive societies they inhabit. Governments have been toppled in Egypt and Tunisia. Protests have erupted in Libya, Yemen, and Bahrain. The ruling families elsewhere in the region look on nervously from their air-conditioned penthouses—will they be next? They are right to worry. These are societies where a minuscule fraction of the population—less than 1 percent—controls the lion’s share of the wealth; where wealth is a main determinant of power; where entrenched corruption of one sort or another is a way of life; and where the wealthiest often stand actively in the way of policies that would improve life for people in general.

As we gaze out at the popular fervor in the streets, one question to ask ourselves is this: When will it come to America? In important ways, our own country has become like one of these distant, troubled places.

Alexis de Tocqueville once described what he saw as a chief part of the peculiar genius of American society—something he called “self-interest properly understood.” The last two words were the key. Everyone possesses self-interest in a narrow sense: I want what’s good for me right now! Self-interest “properly understood” is different. It means appreciating that paying attention to everyone else’s self-interest—in other words, the common welfare—is in fact a precondition for one’s own ultimate well-being. Tocqueville was not suggesting that there was anything noble or idealistic about this outlook—in fact, he was suggesting the opposite. It was a mark of American pragmatism. Those canny Americans understood a basic fact: looking out for the other guy isn’t just good for the soul—it’s good for business.

The top 1 percent have the best houses, the best educations, the best doctors, and the best lifestyles, but there is one thing that money doesn’t seem to have bought: an understanding that their fate is bound up with how the other 99 percent live. Throughout history, this is something that the top 1 percent eventually do learn. Too late.