The Vicious Cycle of Economic Inequality

The refrain for some time now has been that the economy will decide the upcoming U.S. election. But Joe Stiglitz offers some much needed focus to this discussion.

“America’s growing inequality is likely to play an important role in this election,” he says. “And rightly so.”

Writing for Politico, Stiglitz – a Nobel laureate and INET Advisory board member – notes that America’s economy has become more and more like the foundering economies where “too much of society’s resources go to attempts to grab a larger share of the oil wealth, too little to expanding the economy.”

“What we don’t realize is the extent to which the United States, too, has become a rent-seeking society,” he writes, echoing the theme of his new book The Price of Inequality: How Today’s Divided Society Endangers Our Future.

And this dynamic creates a vicious feedback loop where “Economic inequality feeds into inequalities of political power, leading to still more economic inequality.”

This growing disparity in income and wealth has very real negative effects, with increased political instability and economic stagnation. Putting it simply, “inequality, especially of the U.S. variety, is bad for growth,” Stiglitz says.

At other periods in U.S. history, the country has reached similar breaking points and found the collective will to change course. But does this time offer the same hope?

“The question is,” Stiglitz says, “Will we do so again?”

While the US election remains the short-term focus, decades of inequality won’t be overturned so quickly. Stiglitz’s pregnant question will loom large for much longer.

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