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Stiglitz writes: "It used to be thought that America's greatest strength was not its military power, but an economic system that was the envy of the world. But why would others seek to emulate an economic model by which a large proportion - even a majority - of the population has seen their income stagnate while incomes at the top have soared?"

Economist Joseph Stiglitz. (photo: Roosevelt Institute)
Economist Joseph Stiglitz. (photo: Roosevelt Institute)


The Age of Vulnerability

By Joseph E. Stiglitz, Reader Supported News

14 October 14

 

wo new studies show, once again, the magnitude of the inequality problem plaguing the United States. The first, the U.S. Census Bureau's annual income and poverty report, shows that, despite the economy's supposed recovery from the Great Recession, ordinary Americans' incomes continue to stagnate. Median household income, adjusted for inflation, remains below its level a quarter century ago.

It used to be thought that America's greatest strength was not its military power, but an economic system that was the envy of the world. But why would others seek to emulate an economic model by which a large proportion -- even a majority -- of the population has seen their income stagnate while incomes at the top have soared?

A second study, the United Nations Development Program's Human Development Report 2014, corroborates these findings. Every year, the UNDP publishes a ranking of countries by their Human Development Index HDI, which incorporates other dimensions of well-being besides income, including health and education.

America ranks fifth according to HDI, below Norway, Australia, Switzerland and the Netherlands. But when its score is adjusted for inequality, it drops 23 spots -- among the largest such declines for any highly developed country. Indeed, the U.S. falls below Greece and Slovakia, countries that people do not typically regard as role models or as competitors with the U.S. at the top of the league tables.

The UNDP report emphasizes another aspect of societal performance: vulnerability. It points out that while many countries succeeded in moving people out of poverty, the lives of many are still precarious. A small event -- say, an illness in the family -- can push them back into destitution. Downward mobility is a real threat, while upward mobility is limited.

In the U.S., upward mobility is more myth than reality, whereas downward mobility and vulnerability is a widely shared experience. This is partly because of America's healthcare system, which still leaves poor Americans in a precarious position, despite President Barack Obama's reforms.

Those at the bottom are only a short step away from bankruptcy with all that that entails. Illness, divorce, or the loss of a job often is enough to push them over the brink.

The 2010 Patient Protection and Affordable Care Act (or "Obamacare") was intended to ameliorate these threats -- and there are strong indications that it is on its way to significantly reducing the number of uninsured Americans. But, partly owing to a Supreme Court decision and the obduracy of Republican governors and legislators, who in two dozen U.S. states have refused to expand Medicaid (insurance for the poor) -- even though the federal government pays almost the entire tab -- 41 million Americans remain uninsured. When economic inequality translates into political inequality -- as it has in large parts of the U.S. -- governments pay little attention to the needs of those at the bottom.

Neither GDP nor HDI reflects changes over time or differences across countries in vulnerability. But in America and elsewhere, there has been a marked decrease in security. Those with jobs worry whether they will be able to keep them; those without jobs worry whether they will get one.

The recent economic downturn eviscerated the wealth of many. In the U.S., even after the stock market recovery, median wealth fell more than 40 percent from 2007 to 2013. That means that many of the elderly and those approaching retirement worry about their standards of living. Millions of Americans have lost their homes; millions more face the insecurity of knowing that they may lose theirs in the future.

These insecurities are in addition to those that have long confronted Americans. In the country's inner cities, millions of young Hispanics and African Americans face the insecurity of a dysfunctional and unfair police and judicial system; crossing the path of a policeman who has had a bad night may lead to an unwarranted prison sentence -- or worse.

Europe has traditionally understood the importance of addressing vulnerability by providing a system of social protection. Europeans have recognized that good systems of social protection can even lead to improved overall economic performance, as individuals are more willing to take the risks that lead to higher economic growth.

But in many parts of Europe today, high unemployment (12 percent on average, 25 percent in the worst affected countries), combined with austerity-induced cutbacks in social protection, has resulted in unprecedented increases in vulnerability. The implication is that the decrease in societal well-being may be far larger than that indicated by conventional GDP measures -- numbers that already are bleak enough, with most countries showing that real (inflation-adjusted) per capita income is lower today than before the crisis -- a lost half-decade.

The report by the International Commission on the Measurement of Economic Performance and Social Progress (which I chaired) emphasized that GDP is not a good measure of how well an economy is performing. The U.S. Census and UNDP reports remind us of the importance of this insight. Too much has already been sacrificed on the altar of GDP fetishism.

Regardless of how fast GDP grows, an economic system that fails to deliver gains for most of its citizens, and in which a rising share of the population faces increasing insecurity, is, in a fundamental sense, a failed economic system. And policies, like austerity, that increase insecurity and lead to lower incomes and standards of living for large proportions of the population are, in a fundamental sense, flawed policies.



Joseph E. Stiglitz, a Nobel laureate in economics, has pioneered pathbreaking theories in the fields of economic information, taxation, development, trade, and technical change. He is currently a professor at Columbia University, and is the author of "The Price of Inequality: How Today's Divided Society Endangers Our Future."

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+60 # Activista 2014-10-14 12:42
"Regardless of how fast GDP grows, an economic system that fails to deliver gains for most of its citizens, and in which a rising share of the population faces increasing insecurity, is, in a fundamental sense, a failed economic system."
USA IS FAILED ECONOMIC (and political) SYSTEM - its militarism destroying the World - and its greed destroying our environment ..
But I doubt that most politicians understand Stiglitz thesis -
 
 
+27 # cicciuzzu 2014-10-14 17:30
They understand but remember for whom they work. The job of politician is a sinecure which requires a large expenditure to get. Smart people don't risk their own funds so would be politicians sell themselves to those willing to risk the money.
 
 
+21 # brux 2014-10-14 17:37
It also means they have to spend a lot of money, but they are subject to the spending of others should they displease them. The problem is that the pool of people who have input and understanding of the system is too small. It is broken and does not work.
 
 
-56 # brux 2014-10-14 17:35
>> IS FAILED ECONOMIC (and political) SYSTEM - its militarism destroying the World

I think you are wrong here .... the US is partially a failed system, yes, I'll grant you that, but our militarism is the thing we are doing right ... even if we make awful mistakes at times and are very nervous about what we are doing.

The biggest most disgusting thing the US ever did was in Viet Nam, and we have no repeated that ... yet. That was idiocy the world has never seen. Nazism was hatred and cruelty, but Viet Nam was just blind ugly stupidity.

At least now our interventions are tied to some kind of logic ... and though it may not seem like it, that is a big advance for this world in history.
 
 
+24 # Texas Aggie 2014-10-14 19:43
even if we make awful mistakes at times

Can you think of anything that we've done right militarily? You might have an argument in Kosovo, but no where else.

And the logic that our interventions are tied to aren't too much different from Germany's logic. They wanted Lebensraum and we want access to raw materials, primarily oil, but other minerals are playing a role in places like Afghanistan. If indeed our interventions were as pure as the military apologists maintain, we would be invading a lot of countries that we claim to have as allies. Bahrain comes to mind, the Central African Republic, Saudi Arabia, Israel, Uzbekistan, and many more.
 
 
-29 # brux 2014-10-15 00:45
I probably should not have said it was what we were doing right ... but the things are 2 -

1) The military and our bases and actions are not going to change or go away anything in the lives of anyone living now.

2) Compared to military empires that used to run the world, the US is far better and more just, despite imperfections.

It's not a question of what we have done right, although, I don't think Iraq was measurably a bad thing compared to like actions of the past 200 years. I am taking the long view here.

If you really cannot see any difference between the US motivations and the Nazis ... I doubt there is anything we have to talk about or can agree on. i think that is just stupid.

--

My point in making, or trying to make this argument, is that Leftists, Liberals and Progressives ... and even Libertarians need to drop certain ideas or expectations of creating a pure government or country, or of getting rid of the military and its based and our international power ... it is a good thing. It is the thing that keeps us all safe and secure.

What Leftists, Liberals and Progressives need to do and focus on instead is to build a civil society within the US that other countries would be jealous of and want to duplicate. Doing that would be the only to stop war as an method of politics by appealing the better and not the worst nature of people all over the world.
 
 
+5 # Activista 2014-10-16 13:14
The 1990s boom showed that peace is economically far better than war. The Gulf war of 1991 demonstrated that wars can actually be bad for an economy....
War Makes Us Poor ..
War Makes Us Poor | The Big Picture
www.ritholtz.com/blog/2014/04/war-makes-us-poor/
Apr 30, 2014 - Nobel-prize winning economist Joseph Stiglitz says that war is bad for ..... one is likely to mention the role of the Fed in funding US militarism....
 
 
+1 # kalpal 2014-10-18 08:53
There is not a single historical smidgen of evidence that any RW government in the annals of human affairs has built and fostered a successful nation without stealing the assets of other nations and suppressing its own populace. This nothing any liberals, progressives, or lefties aspire to live under. Only an abysmally ignorant twit ever sees anything beneficial arising out of a nation ruled by its RW and hoping that by suppressing those who are the innovators will somehow still aid in the destructiveness that the RW is sure to visit upon this planet.
 
 
+31 # Ken Halt 2014-10-14 22:42
You're kidding, right? Since VN there have been many military adventures that have the exact same theme as VN: making the world safe for US corporate enterprise. The thousand, give or take a few, US military base around the world do not promote democracy, the track record shows a colonial disregard for democratic sentiment and a capitalistic imperative toward resource extraction. The logic is $$$, the medium of subjugation is $$$, and when economic coercion fails, the troops are sent in (read Confessions Of An Economic Hit Man). The US military goes around the world slapping people into submission, and our military aggression incites its victims to retaliate, making the world a more dangerous place for US citizens. Capitalism is a failed system that is destroying/has destroyed the US democracy and is on its way to destroying the viability of life on earth.
 
 
-8 # brux 2014-10-15 00:48
Read my post above ... I think you are reacting emotionally and not thinking, and my point is that when Democrats/Liber als/Progressive s open or stand on no more war, or no more international politics, they are cutting their own throats in step one.

The Left has to focus on what it can do, it must demand social goods, it must demand and inspire the US to be better so that we do not have to conquer other countries, they seek to join us. That is what we lost post-WWII when people turned their back on FDR and starting demonizing fake communists and socialists.
 
 
+16 # jsluka 2014-10-15 01:47
I suspect most politicians do understand, but just don't care.
 
 
+2 # Walter J Smith 2014-10-15 18:23
You are entirely correct, Activista! The US is a seriously failed political economy, with absolutely no national leadership in either of the dominant war-mongering, corporate-nazi parties.

Our time is getting short: vote with courage or prepare for a rapid decline & collapse of social order due to that radical lack of political leadership.
 
 
+19 # brux 2014-10-14 17:30
Because America is well past its initial steps into an development of a totalitarian technocracy build on finance and elitism. It got this way because we preferentially, maybe on purpose or maybe just randomly began to funnel money and power to the biggest psychopaths in our society thinking we were rewarding manliness or something??
 
 
-30 # MidwestTom 2014-10-14 19:01
I had an interesting discussion with a native Venezuelan today. He reported that in Caracas there is a small extremely wealthy group all associated with the government. He said he sees more Porsches and big Audi's than here. He said that in one of the most upscale malls they have soldiers at the doors to keep the normal people out. He said that under socialism the middle class has completely disappeared. The government is extremely corrupt and although the country has substantial reserves, they simply are not paying their foreign bills. Airlines have been discontinuing flights to Venezuela because they cannot get paid, and they are forced to pay exorbitant fees. We are not the only one with an economy being destroyed by government.
 
 
+34 # Texas Aggie 2014-10-14 19:35
What you are forgetting to mention is that Venezuela has always been like that. That is the reason that Chavez was able to rise to power by the ballot box despite the efforts of the CIA. Before Chavez, oil production benefitted only a very small elite who treated the rest of the citizens like dirt, the same way that is happening in the US right now. So what they had is the American model and nothing has changed.
 
 
0 # kalpal 2014-10-18 08:56
Only a silly goose imagines that socialism somehow fosters any oligarchy. When that silly goose believes that socialism is a euphemism for "evil" that goose grows sillier.
 
 
+27 # angelfish 2014-10-14 19:47
We are no longer a Country to be envied or admired. Thanks to the dumbing down of the electorate and the elections of Ronald W. Reagan and George W. Bush, two affable morons, we are a sad shadow of our former selves. Sadder still is the fact that their Handlers, those with ALL of the money, LIKE it this way! I have faint hope that Americans will rise up and vote the TeaTHUGlicans OUT and replace them with sane, intelligent, thoughtful, caring individuals. Faint hope, indeed! Oh well, there's ALWAYS le deluge. I just hope to God I'm long gone from this mortal coil. So sad. It really USED to be a wonderful place to live.
 
 
+3 # Walter J Smith 2014-10-15 18:27
Well, the national insecurity frenzy began with Truman, and both US nazi parties have competed with one another for which could crank up the frenzy more with each election.

And both won, every time.

Thanks to the intellectually incompetent editor class in the US.
 
 
+23 # m... 2014-10-14 20:57
The Republican mantra is to declare all of this to be due to personal 'laziness' or personal 'stupidity'… or mythical Socialism creating an 'UnAmerican' social lethargy only a good 'Trickle Down' can cure.

Democrats respond by saying… 'we're not the Republicans' as thy go along to get along.

Many millions of Americans tune into Corporate Conservative Media which dominates the narrative. They come away angry, spiteful and hate-filled towards all the 'socialist, lazy, liberal, unemployed, homeless, 'unAmerican' Americans they blame for all their woes and ills and so, vote 'harder' Republican for even larger doses of the same.

Sadly, voting Democrat seems to lead to little more than a tiny bit of breathing room before the next election.

A man, angry and in great pain, went to the doctor--- 'Hey Doc, every time I hit myself in the head with this hammer, it really hurts, I get a terrible headache and no matter how many times I do it, I get the same outcome and generally feel worse. What should I do..?'

If you travel around in the world, you will find a LOT of people from all over the world who are more or less simply 'jaw-dropped' over what Americans are doing to themselves these days. So much so, that its sadly comical to them, but otherwise something they have little time for in their own busy lives.

I get the impression that if we didn't have a big ass military, we would be 'Northern Ireland' in the minds of most… 'Tragic, but who has time for it'…
 
 
+20 # tclose 2014-10-14 21:08
Not much here that we didn't already know, but it is interesting - and disheartening - to see it reinforced by yet more confirming data. It is so clear to most of us on this site just how pernicious this is, and how damaging this is to any sense of democracy. Why then is it so difficult to get through to the rest of the 99%?

We need to restore the fair taxation we had in the 50s and 60s. The Reagan / Ayn Rand experiment of drastically lowering taxes on the rich has been proved to be a fiscal and social disaster. Lets get back to common sense tax rates.

To get there, we need to overturn Citizens United which allows the rich to poison the message the 99% receives.
 
 
+11 # wantrealdemocracy 2014-10-14 21:45
It's not difficult for the 99% to know how bad things are---but what can we do? The electoral system is corrupted as is the whole of our Congress. We only get to try and figure out which major political party is the most evil so we can vote for the lesser evil. The system is too far gone. We need to rise up in rebellion and call for a Constitutional Convention to update our Constitution. Most importantly we have to mandate that our representatives vote as directed by their constituents. All voting must be done on paper ballots and counted in public view.
 
 
+6 # Regina 2014-10-15 12:40
NO! In a Constitutional Convention those same connivers would wipe out what shreds of freedom we still have. We can go back to paper ballots and open counting without losing the Bill of Rights.
 
 
+11 # skeeter 2014-10-15 14:51
One of the reasons "it is so difficult to get through to the rest of the 99%" is that we live at the mercy of a very effective propaganda system where the role of the media is to articulate the needs of the Oligarchy. Couple that with a failed educational system and a population content to amuse themselves to death and we are left with the current state of affairs.
 
 
+16 # skeeter 2014-10-14 21:52
Let's face it folks...our political leaders have failed us...our business leaders have failed us...our media/entertain ment leaders have failed us...They have conspired (I'm not exaggerating!) to rig the system against us to benefit themselves...to shut us out...and they won't stop until they take it all... they won't be satisfied with half a loaf...they want every last crumb. This is the terrible logic of unfettered capitalism...a predatory economic system and a mean-spirited culture where the only value is the value of money.
 
 
+9 # brux 2014-10-15 00:49
Yep ... they are the people we reward best on our society and our economy ... the cold-bloodest psychopaths ... and we wonder why things are not working and falling apart?
 
 
+12 # walt 2014-10-15 05:56
Joseph Stiglitz makes excellent points with this one. The sad part is that nothing will change until people in the USA demand that corporate lobby money be removed from politics and government. Wall Street and other lobbies own it all. We saw Wall Street and banksters walk away free after cheating the people out of their homes and savings. That not only angers us all but also contributes to the lack of faith in the entire system and the horrible image of America around the world.

As for the health care in America, we've even left that in the hands of the profit-makers. Not to mention the corporately-dri ven Republicans who would even take away what the ACA (Obamacare) gave the people. This is the USA, Inc. where anything can and will be marketed for profit while people wonder where "government of, by, and for the people" has gone.
 
 
+11 # chickelly1@gmail.com 2014-10-15 06:20
Those who make the most from our Marketplace should pay the most to keep it running and expanding by education, infrastructure and upward mobility. This is good business and will increase their wealth and Community
 
 
+8 # PAJohn 2014-10-15 07:26
Joe Stiglitz is wrong. The current vogue among pundits is to decry the failure of our economic system. That’s a mistake. Economics is the study of what happens when certain decisions and actions are allowed or taken. Our economic system is doing pretty much what it was designed - or has evolved - to do: Take as much wealth as it can from those who have too little and concentrate it in the hands of those who have too much. Evidently it is working as intended or expected.
The system failure, both here and abroad, is political. We all have stood by and allowed the wealthy to take over our rule, both here and abroad. That’s called Plutocracy: Rule by the wealthy. Dick Cheney said "It’s out due!" Sez who?
 
 
+3 # RobertMStahl 2014-10-15 11:10
The stench always takes the form of slime which gets credit for being moss.., or lichen. A CEO of EGN who never paid an iota of attention to the contribution made in a symmetrical fashion, not mildly arrived at over time by me, walked away with hundreds of millions of dollars that was, largely, due to the prior inability of networking the oil patch (for mid sized companies) in Windows what was, formerly, DOS, putting the company on the front line of development for the years from '97 to '06 while I was there, and after. They have not grown, really, from that point. MW went on to become CEO of UAB Children's Hospital construction consortium, worth many millions more, while asking Walmart shoppers to fund the losses involved with completing that boondoggle of Larry Silverstein intelligence. Why are there, now, two pyramids, one on the West Coast, one on the East, if it weren't for the long run of insanity directed by these thoroughly unaware, or out of step with time 'individuality' motivated jerks?

Anywho, this is his legacy:
http://www.dailykos.com/story/2014/10/14/1336495/-NASA-Methane-hot-spot-in-U-S-is-triple-the-size-of-previous-estimates?detail=email
 
 
+6 # socrates2 2014-10-15 17:31
The foundation of any political system is its economic system. Constitutions, policies, and laws are formulated to promote, protect and defend (or kill to advance and impose) the economic status quo. Or, in plain English, "Follow the money."
Believe otherwise at your risk.
That said, at present we have state policies specifically designed to siphon the production wealth of the 99% in order to transfer it to the 1%. The media and their well paid pundits sit as mere apologists and distractors for this state-sanctione d plunder. Those in the know give this process a number of labels: "corporate socialism," "crony capitalism" and the latest favorite, "plutonomy."
Back in the day, the same clear-headed folks saw the world divided into two camps: the oppressed, exploited class and the oppressor class. Different names, same result.
Be well.
 

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