Monday, October 29, 2012

Stiglitz Debunks Romney's Economic Myths

Joseph E. Stiglitz, Nobel laureate in economics, writes in "Some Are More Unequal Than Others" that "America's inequality is greater than other advanced countries' "–and that the Romney campaign defends or dismisses such inequality through economic myths. Stiglitz debunks each one:

America is a land of opportunity. While rags-to-riches stories still grip our imagination, the fact of the matter is that the life chances of a young American are more dependent on the income and wealth of his parents than in any of the other advanced countries...

Trickle-down economics works (a k a “a rising tide lifts all boats”). This idea suggests that further enriching the wealthy will make us all better off. America’s recent economic history shows the patent falsehood of this notion. The top has done very well. But median American incomes are lower than they were a decade and a half ago...

The rich are the “job creators,” so giving them more money leads to more and better jobs. ...Romney’s own private sector history gives it the lie. As we all know from the discussion of Bain Capital and other equity firms, many made their money not by creating jobs in America but by “restructuring,” “downsizing” and moving jobs abroad... Many, if not most of the crucial innovations in recent decades, from medicine to the Internet, have been based in large measure on government-financed research and development...

The cost of reducing inequality is so great that, as much as idealists would like to do so, we would be killing the goose that lays the golden egg. In fact, the engine of our economic growth is the middle class. Inequality weakens aggregate demand, because those at the middle and bottom have to spend all or almost all of what that they get, while those at the top don’t...

Markets are self-regulating and efficient, and any governmental interference with markets is a mistake. The 2008 crisis should have cured everyone of this fallacy... ...we grew much faster, and more stably, in the decades after World War II than in the period after 1980, when we started stripping away the regulations. And in the former period we grew together, in contrast to the latter, when we grew apart.

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