Public Employee Press

Book Review
How inequality undermines democracy

After the Occupy Wall Street protestors drew national attention to the gap between the wealthy 1 percent and the 99 percent of average Americans, inequality was a top issue in President Barack Obama's election and featured large in Mayor Bill de Blasio's "tale of two cities" campaign theme.

Pulitzer prize-winning economist Joseph E. Stiglitz's book, "The Price of Inequality," is a powerful economic and political analysis of how the growing divide in income and wealth is undermining our democracy and our standard of living. This book and many others that help us understand our economic system are available for members to borrow from the DC 37 Education Fund library on the second floor at the union.

At the root of today's inequality, Stiglitz says, are fundamentally unfair political and economic systems as well as inefficient and unstable markets and government's inability to correct those market failures.

Conservatives like Mitt Romney are dismissive about inequality.

Some justify inequality from a social Darwinist perspective - the rich deserve their money because they are superior to us. Or, they contend inequality doesn't matter as long as it doesn't hurt the living standards of others.

So, why care about inequality?

From an economic perspective, inequality means too few people have too much money to spend it all and others have too little, which undermines consumer spending, contributing to a lack of demand for goods and services and causing unemployment. Public policies, such as tax cuts for the wealthy and cutting investment in public schools, fuel inequality.

Stiglitiz explains economic policies that make inequality worse: Deregulation helped the unproductive financial sector and its overpaid Wall Streeters reap a greater share of the economy's profits and take advantage of working people, especially minorities, through predatory lending. Gutting personal bankruptcy laws made it more difficult for people to recover from economic setbacks. Private student loans have stuck college graduates with huge debts.

Stiglitz argues persuasively that inequality in the United States is becoming so great that our democracy is "in peril." We have less faith in the fairness of our society with the income divide at its worst since the Great Depression of the 1930s. The proliferation of gated communities undermines our social cohesiveness. Trust in government is at a low. The Citizens United Supreme Court decision that allows unlimited corporate spending in elections shows the unfairness of our political system.

Stiglitz says the fight over government spending at its heart is a battle over inequality. The preoccupation with deficits prevents government policies from addressing inequality. Meeting the interests of bondholders takes precedence over helping the unemployed.

Stiglitz's book can be tough reading, but the author succeeds in presenting technical arguments lucidly and in ripping apart conventional economic theories that rationalize inequality. He debunks the right's contention that the estate tax hurts small businesses, pointing out that the vast majority are too small to be touched.

Promoting full employment, "fair share" tax reform and tempering globalization would help address inequality. Other important steps would include reforming bankruptcy laws, improving corporate governance, making banks more transparent and controlling abuses by the issuers of credit cards.

But ultimately, we need a new social con-tract with its main focus on promoting economic fairness.

— Gregory N. Heires