Income and wealth inequality has been the campaign centrepiece for Democratic presidential candidate Bernie Sanders, who has highlighted the disparity between those at the top and those at the bottom, arguing for instance that “there is something profoundly wrong when the top one-tenth of one per cent owns almost as much wealth as the bottom 90 per cent”. Yet such rhetoric – such as the slogan “we are the 99 per cent” – gained traction during the “Occupy Wall Street” protest movement in 2011, with further emphasis placed on the financial crisis from 2007 to 2008.
And in the American-centric “The Price of Inequality”, Nobel Prize-winning economist Joseph E. Stiglitz – characterising the subsequent phase as the “Great Recession” – alluded to the protest movement, arguing that the divide between the very top one per cent and the 99 per cent has entered public consciousness. For the former there is often a misalignment of social returns and private rewards, and such market failures can take the forms of information asymmetries and (the subsequent creation of) externalities. In addition to, and underlying these economic problems, he added, are political forces which have advantaged “the top at the expense of the rest”.
In this vein, some understanding of economics is perhaps useful to follow Stiglitz’s description of the causes of the inequality (in particular, rent-seeking has allowed the wealthy to disproportionately make an unfair amount of money at the expense of the rest of the country), implications of modern psychology, framing, and perceptions, as well as a laundry list of “budget, tax, and expenditure policies [that] can actually be used to reduce … inequality at the same time that they promote economic growth and bring the deficit under control”.
While Stiglitz does have “an equitable approach” to these solutions, he did not – I thought – spend enough time on “the political reform agenda”, because as straightforward as the economic policies may be, their political feasibility must be evaluated.
There are interesting observations which applies to Singapore and countries around the world too:
– “In a labour market such as the one we have had since 2008, there are many job seekers for every job, and having experience counts. Firms are exploiting this imbalance by providing unpaid or low paid internships, which adds an important element to a resume. But not only are the rich in a better position to get the internship; they are in a better position to afford unpaid work for a year or two”. Such opportunity gaps are emerging in Singapore.
– “Capture occurs partially as a result of revolving doors, where the regulators come from regulated sector and, after their brief stint in government, return to it. “Capture” is partly what is called cognitive capture – in which the regulator comes to adopt the mindset of the regulated”.
– “What is different today is that the one per cent now has more knowledge about how to shape preferences and beliefs in ways that enable the wealthy to better advance their cause, and more tools and more resources to do so”. This relationship between knowledge and power is interesting, and has been applied in other settings too.
In Stiglitz’s preface he wrote that the “we are the 99 per cent” slogan “may have marked an important turning point in the debate about inequality in the United States”. That was in 2012. Four years later in 2016, it would appear that little has changed. “The political and economic reform agenda … assumes that while market forces play some role in the creation of our current level of inequality, market forces are ultimately shaped by politics”, he wrote in the concluding chapter. Stiglitz is right that hope is flickering, and an unequal America may persist for many years to come.