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Analysis: A fairer society is not a lot to ask for from the 1 per cent

  • by Joseph E Stiglitz
 

THE protest movement that began in Tunisia in January, subsequently spreading to Egypt and then to Spain, has now become global, with the protests engulfing Wall Street and cities across America.

Globalisation and modern technology now enable social movements to transcend borders as rapidly as ideas can. Social protest has found fertile ground everywhere: a sense that the “system” has failed and the conviction that even in a democracy, the electoral process will not set things right – at least not without strong pressure from the street.

In May, I went to the site of the Tunisian protests; in July, I talked to Spain’s indignados; from there, I went to Cairo’s Tahrir Square; and a few weeks ago, I talked with Occupy Wall Street protesters in New York. There is a common theme, expressed by the OWS movement in a simple phrase: “We are the 99 per cent.”

That slogan echoes an article I recently published, describing the enormous increase in inequality in the United States: 1 per cent of the population controls more than 40 per cent of the wealth and receives more than 20 per cent of the income. And those in this rarefied stratum often are rewarded so richly not because they have contributed more to society – bonuses and bailouts gutted that justification – but because they are, to put it bluntly, successful rent-seekers.

This is not to deny that some of the 1 per cent have contributed a great deal. Indeed, the social benefits of many real innovations (as opposed to the novel financial “products” that ended up unleashing havoc on the world economy) typically far exceed what their innovators receive. But, around the world, political influence and anti-competitive practices (often sustained through politics) have been central to the increase in economic inequality. And tax systems in which a billionaire like Warren Buffett pays less tax (as a percentage of his income) than his secretary, or in which speculators who helped to bring down the global economy are taxed at lower rates than those who work for their income, have reinforced the trend.

The rise in inequality is the product of a vicious spiral: the rich rent-seekers use their wealth to shape legislation in order to protect and increase their wealth – and their influence. But while the wealthy can use their money to amplify their views, back on the street, police wouldn’t allow me to address the OWS protesters through a megaphone. But the protesters are ingenious: they echoed what I said through the crowd, so that all could hear. And, to avoid interrupting the “dialogue” by clapping, they used forceful hand signals to express their agreement.

They have been criticised for not having an agenda, but this misses the point. Protest movements are an expression of frustration with the electoral process. They are an alarm.

On one level, the protesters are asking for a chance to use their skills, decent work for decent pay, a fairer economy and society. Their hope is evolutionary, not revolutionary. But on another level, they are asking for a great deal: a democracy where people, not dollars, matter, and a market economy that delivers.

Joseph E Stiglitz is a professor at Columbia University, a Nobel laureate in economics, and a member of the Scottish Government’s Council of Economic Advisers.

 

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