Joseph Eugene Stiglitz (/ˈstɪɡlɪts/; born February 9, 1943) is an American economist, public policy analyst, and a professor at Columbia University. He is a recipient of the Nobel Memorial Prize in Economic Sciences (2001) and the John Bates Clark Medal (1979). He is a former senior vice president and chief economist of the World Bank and is a former member and chairman of the (US president’s) Council of Economic Advisers.some ways I one has to recognize that42:32China may have been lucky they began the42:37development strategy just at the moment42:39when the West was very open to importing42:43manufacturing goods it was a moment42:49where because there were a large profit42:54opportunities in the West that sustained42:58the opening with wrong without regard to43:01the effects and workers over the over43:04the effects and the overall economy so43:09in a way China’s success is testimony to43:13the failures of democratic politics in43:16the United States in Western Europe43:19because the rules the game were designed43:26worked to advantage American43:29corporations Western European43:31corporations with no attention paid to43:37the consequences to the workers as the43:41United States d industrialized now some43:43countries in Europe did pay attention43:45and they did have active labor market43:49policies that shifted workers from the43:53old sectors that were dying into the new43:55sectors and Scandinavia has been very43:58good in these active labor market44:00policies which I think are really44:02important in the United States we didn’t44:06do that even though economic theory said44:11opening up of trade between an44:14banks country like the United States and44:16China West events would result in lower44:21real incomes for unskilled workers44:24there’s a missing Stover theorem and it44:28was unambiguously clear even though we44:31were getting cheaper goods real incomes44:34of unskilled workers would go down and44:36it’s only if you had a mystical belief44:39in trickle-down economics would you44:41think otherwise but our politicians did44:44have a mystical belief in trickle-down44:46economics and they asserted this over44:51and over again and so even when you know44:54in the Democratic Party we tried to get44:57Trade Adjustment Assistance we try to44:59have some active labor market policies45:01when we couldn’t because of concerns45:04about austerity and not enough budget45:07concerns they wouldn’t work we went45:11ahead anyway there is a growing sense45:15the United States though that actually45:16the agenda on the right was to increase45:23unemployment and suffering you say why45:26would they anybody you know why do45:29people want suffering well it was part45:32of a concerted agenda if you look at to45:35weaken the bargaining power of workers45:38and drive down the wages which increases45:41profits so if you look at this from a45:45conservative point of view the reforms45:47and our labor laws and reforms in the45:51way antitrust policy was enforced that45:55reform is a not the right word but45:58changes in those laws changes in46:02corporate governance and implicit46:04understandings the legal frameworks and46:08in the investment agreements in the46:10trade agreements the investment46:12agreements they gave more secure46:14property rights if American firms46:16invested abroad than if they vested at46:18home which meant that they were46:21encouraged to invest abroad which also46:24meant that if the firm if workers came46:27to affirming46:28we want higher wages and the firms know46:31if you we give you if you continue to46:35demand higher wages we’re going to leave46:37that was more credible so I think it was46:43a deliberate strategy to drive down the46:45wages of workers and it worked in terms46:50of the economics that I described before46:52it did drive down the wages but it has46:55now led to these this political backlash46:58with which we are dealing so there is a47:04relationship between China’s success and47:07some of the problems that we’re facing47:09it wasn’t inevitable we could have47:11managed it better we should have managed47:14it better but we didn’t but just as a47:16footnote the point I’m making is that47:20that was a particularly47:23Africa won’t be able to follow the47:25manufacturing export-led growth model47:28that led to the success of East Asian47:32countries including China in fact now47:36globally manufacturing employment is in47:40decline in any country that believes47:44that manufacturing should be at the47:46center of their economic policy is47:48misguided it can be part of it it can’t47:52be at the center well let me just47:57conclude by SEP some let me just48:02conclude by a set of remarks about that48:07in a way that pertain to all countries48:10but we’re we’re china realized this in a48:16way more forcefully than many others48:18have and that is that reform is a48:20never-ending process that societies are48:28always changing technology’s changing48:30and therefore the policies that are48:36going to make a society successful have48:38to change in a corresponding way48:41for China China’s entering a new stage48:43of development it’s facing critical48:46problems of inequality health48:47environment livable cities markets won’t48:51solve those problems in fact many of48:53those problems have been created by the48:56fact that they had markets that were too49:00unfettered to under-regulated49:02they’re going to have to regulate them49:04better there are further questions posed49:09by changing globalization the49:12recognition of the risks of excessive49:14financialization the West49:18I believe hasn’t succeeded in adequately49:20taming financial markets as you know49:23this is this week is the 10th49:25anniversary Lehman Brothers and and a49:27lot of people are talking about have we49:29done enough I think it’s absolutely49:32clear no and what’s particularly49:39disturbing is the Trump administration49:41is trying to undo the inadequate things49:44that we’ve already done again I was at a49:48dinner right before the inauguration of49:51Trump where one of his chief economic49:54advisors was there49:56I don’t normally associate with his49:57people might make it clearer but it was50:02an embassy dinner so I and I didn’t know50:06he was going to be there anyway50:10and he was talking about how he was50:16going to deregulate the financial sector50:19within weeks after taking office and the50:26first thing that struck me is he clearly50:28had no idea of our democratic processes50:31yeah he really thought you know Trump is50:34the dictator he gets to write rewrite50:36all the rules no no none of these50:38processes that we put in place as50:40democratic checks against authoritarian50:43leaders no knowledge of that was just so50:46clear but the second point I was going50:50to ask what somebody who asked it before50:51I did quizzically50:55didn’t we have a crisis in 2008 and the51:02implicit answer was that was ancient51:04history and we have to move on but it’s51:09not ancient history and I think the51:12risks are very much with us one of the51:17concerns that I increasingly seeing in51:20China is that as China grows the51:26influence of vested interest will grow51:28and you can feel it already51:32another just a little anecdote every51:36year when I go to China I often talked51:42to the finance minister and I’ve been51:43pushing them to move away from their51:46debt finance growth model to more tax51:50financed in particular I’m telling them51:53they need a carbon tax and it would51:56raise a lot of revenue it would help51:59clean up their air pollution exceed me52:02an obvious idea and the finance minister52:05every year says great idea and he says52:10we have some political problems which he52:14means the auto industry the coal52:16industry this you know steel industry52:18and so forth we’re gonna work on it next52:22year we go through the same conversation52:27as China has grown and it has taken on52:31many of the features of a modern vested52:37interest economy we’re getting change is52:41becoming more difficult and that of52:43course is is very worrisome but the52:49principles that guided China in the52:53first 40 years are likely to continue to52:55be relevant and that by that I mean the52:57pragmatism crossing the river by feeling53:00this still stone they’re going to be new53:02problems not fully foreseen would that53:04appear it will have to address these53:08problems53:09using insights from theory and past53:11experience and the second critical point53:14is openness there is much to be learned53:18from experiences of others and from the53:20ink sykes of non-ideological economic53:23analysis and again we’re in a particular53:29moment where I hate to keep coming back53:34to the United States but we’re a little53:35bit obsessed with with our problems one53:41can’t help but reflect on the closed53:45mindedness of our current administration53:48of not looking around you know if you53:52think you’re number one and you think53:54that you’re the there’s nothing to learn53:57from anybody else that is part of the54:02beginning of the end so we hope that54:05this is just a temporary interlude but54:09as we reflect on what makes I know54:14successful in the ways it is I think54:18there are a lot of lessons for all of us54:19to think about how we can make our own54:21economy successful for all of us thank54:24you54:30
Never in American history has the debate over income inequality so dominated the public square, with Democratic presidential candidates and congressional leaders calling for massive tax increases and federal expenditures to redistribute the nation’s income. Unfortunately, official measures of income inequality, the numbers being debated, are profoundly distorted by what the Census Bureau chooses to count as household income.
The published census data for 2017 portray the top quintile of households as having almost 17 times as much income as the bottom quintile. But this picture is false. The measure fails to account for the one-third of all household income paid in federal, state and local taxes. Since households in the top income quintile pay almost two-thirds of all taxes, ignoring the earned income lost to taxes substantially overstates inequality.
How Redistribution Works
Average earned and net income by quintile, 2017
Source: Calculations by authors based on official government data
The Census Bureau also fails to count $1.9 trillion in annual public transfer payments to American households. The bureau ignores transfer payments from some 95 federal programs such as
- Medicaid and
- food stamps,
which make up more than 40% of federal spending, along with dozens of state and local programs. Government transfers provide 89% of all resources available to the bottom income quintile of households and more than half of the total resources available to the second quintile.
In all, leaving out taxes and most transfers overstates inequality by more than 300%, as measured by the ratio of the top quintile’s income to the bottom quintile’s. More than 80% of all taxes are paid by the top two quintiles, and more than 70% of all government transfer payments go to the bottom two quintiles.
America’s system of data collection is among the most sophisticated in the world, but the Census Bureau’s decision not to count taxes as lost income and transfers as gained income grossly distorts its measure of the income distribution. As a result, the raging national debate over income inequality, the outcome of which could alter the foundations of our economic and political system, is based on faulty information.
The average bottom-quintile household earns only $4,908, while the average top-quintile one earns $295,904, or 60 times as much. But using official government data sources on taxes and all transfer payments to compute net income produces the more complete comparison displayed in the nearby chart.
The average bottom-quintile household receives $45,389 in government transfers. Private transfers from charitable and family sources provide another $3,313. The average household in the bottom quintile pays $2,709 in taxes, mostly sales, property and excise taxes. The net result is that the average household in the bottom quintile has $50,901 of available resources.
Government transfers go mostly to low-income households. The average bottom-quintile household and the average second-quintile household receive government transfers of some $17 and $4 respectively for every dollar of taxes they pay. The average middle-income household receives $17,850 in government transfers and pays an almost identical $17,737 in taxes, while the fourth and top quintiles of households receive government transfers of only 29 cents and 6 cents respectively for every dollar paid in taxes. (In the chart, transfers received minus taxes paid are shown as net government transfers for low-income households and net taxes for high income households.)
The average top-quintile household pays on average $109,125 in taxes and is left, after taxes and transfer payments, with only 3.8 times as much as the bottom quintile: $194,906 compared with $50,901. No matter how much income you think government in a free society should redistribute, it is much harder to argue that the bottom quintile is getting too little or the top quintile is getting too much when the ratio of net resources available to them is 3.8 to 1 rather than 60 to 1 (the ratio of what they earn) or the Census number of 17 to 1 (which excludes taxes and most transfers).
Today government redistributes sufficient resources to elevate the average household in the bottom quintile to a net income, after transfers and taxes, of $50,901—well within the range of American middle-class earnings. The average household in the second quintile is only slightly better off than the average bottom-quintile household. The average second-quintile household receives only 9.4% more, even though it earns more than six times as much income, it has more than twice the proportion of its prime working-age individuals employed, and they work twice as many hours a week on average. The average middle-income household is only 32% better off than the average bottom-quintile households despite earning more than 13 times as much, having 2.5 times as many of prime working-age individuals employed and working more than twice as many hours a week.
Antipoverty spending in the past 50 years has not only raised most of the households in the bottom quintile of earners into the middle class, but has also induced many low-income earners to stop working. In 1967, when funding for the War on Poverty started to flow, almost 70% of prime working-age adults in bottom-quintile households were employed. Over the next 50 years, that share fell to 36%. The second quintile, which historically had the highest labor-force participation rate among prime work-age adults, saw its labor-force participation rate fall from 90% to 85%, while the top three income quintiles all increased their work effort.
Any debate about further redistribution of income needs to be tethered to these facts. America already redistributes enough income to compress the income difference between the top and bottom quintiles from 60 to 1 in earned income down to 3.8 to 1 in income received. If 3.8 to 1 is too large an income differential, those who favor more redistribution need to explain to the bottom 60% of income-earning households why they should keep working when they could get almost as much from riding in the wagon as they get now from pulling it.
Black workers have received far smaller pay increases in recent years compared with other racial groups, despite unemployment for black Americans trending at historic lows.
For all U.S. workers, inflation-adjusted median weekly earnings rose 5.3% in the first quarter of 2019 compared with when the recession began in late 2007, according to a Wall Street Journal analysis of Labor Department data released Tuesday.
.. The disparity suggests black workers aren’t benefiting to the same degree as others from what is by several measures the best labor market in nearly half a century.
Black unemployment last year fell to the lowest level on records dating back to the 1970s. But the rate, an average of 6.8% in the first quarter, was well above the overall rate of 3.9%.
“In a hotter economy, it’s important to be looking at the structural issues that may be inhibiting black workers from seeing better gains.” said Valerie Wilson, an economist and director of the Economic Policy Institute’s program on race, ethnicity and the economy.
One of those is racial discrimination, she said. Other factors are lack of jobs near where black workers live and a reluctance of employers to hire those with criminal backgrounds. More prisoners are black than white, according to the Justice Department, despite black people accounting for about 13% of the U.S. population. And reports have shown black men receive longer sentences than white men for similar crimes.
Coca-Cola slashed its median pay figure by two-thirds after it finished shifting North American bottling operations to franchisees and acquired a controlling interest in African operations. The 2017 median worker was an hourly full-timer in the U.S. making $47,312, while last year’s made $16,440 as an hourly full-timer in South Africa.
In its proxy statement, Coca-Cola said it intends to shed the African operation again after making improvements and offered an alternative median employee excluding that unit: an hourly full-timer in the U.S. making $35,878, about 25% less than his or her 2017 counterpart. A company spokesman declined to comment further.
If Jeff Bezos walks into a bar, the average wealth of the bar’s patrons suddenly shoots up to several billion dollars — but none of the non-Bezos drinkers have gotten any richer.
.. Since the 1970s, however, the link between overall growth and individual incomes seems to have been broken for many Americans. On one side, wages have stagnated for many; adjusted for inflation, the median male worker earns less now than he did in 1979. On the other side, some have seen their incomes grow much faster than the income of the nation as a whole. Thus C.E.O.s at the largest companies now make 270 times as much as the average worker, up from 27 times as much in 1980.
.. similar disconnect between overall growth and individual experience seems to lie behind the public’s lack of enthusiasm for the current state of the economy and its disdain for the 2017 tax cut. G.D.P. numbers have been good in recent quarters, but much of the growth has gone to soaring corporate profits, while median real wages have gone nowhere
.. But how do facts like these fit into the overall story of economic growth? To answer this question, we need “distributional national accounts” that track how growth is allocated among different segments of the population.
.. Producing such accounts is hard but not impossible. In fact, the economists Thomas Piketty, Emmanuel Saez and Gabriel Zucman have already produced estimated accounts with considerable detail over the past half century. The main message is one of growth going disproportionately to the top and not shared with the bottom half of the population, but there are also some surprises in the other direction. For example, the middle class, while still lagging, has done better than some common measures indicated thanks to fringe benefits.
.. In a reasonable world, then, something like the Schumer-Heinrich bill would become law in the near future. In the real world, of course, the proposal will go nowhere for the time being — because Republicans don’t want anyone to know what distributional national accounts might reveal.
.. By now everyone knows that conservatives routinely yell “socialist!” whenever anyone proposes doing something to help less fortunate members of our society — which is a key reason so many Americans now think favorably of socialism: If guaranteed health care is socialism, bring it on. But the right doesn’t just cry foul at any attempt to limit inequality; it does the same thing whenever anyone tries to talk about economic class, or measure how different classes are faring.
.. My favorite example here is still former senator Rick Santorum, who denounced the term “middle class” as “Marxism talk.” But that was just an especially ludicrous version of a general attempt on the right to suppress talk about and research into where the economy’s money goes. The G.O.P.’s basic position is that what you don’t know can’t hurt it.
And to be fair, progressives like the idea of distributional accounts in part because they believe that more knowledge in this area would help their own cause.
For a second month in a row, annual inflation fully offset average hourly wage growth in June, leaving workers’ real hourly earnings flat from a year earlier despite falling unemployment and a generally strong economy. Production and nonsupervisory employees, a category which includes blue-collar workers, saw their real average hourly wages fall 0.2% in June from a year earlier after a similar slip in May.
.. While workers made up for higher prices by working slightly more hours per week, the stagnation of Americans’ purchasing power underscores questions about the extent to which workers are benefiting from an economy that by many other measures is booming.
.. “Wage growth remains surprisingly weak,” said David Kelly, chief global strategist at J.P. Morgan Asset Management, in a note to clients earlier this week. “The remarkable ability of firms to lure more workers back into the labor force and get stronger productivity gains from them without raising wages is a clear positive for profits.”
.. in June, Fed “participants generally agreed that the economic expansion was progressing roughly as anticipated, with real economic activity expanding at a solid rate, labor market conditions continuing to strengthen, and inflation near the Committee’s objective,” according to meeting minutes released last week.
Economists said Thursday’s data generally supported their view that inflationary pressures are gradually picking up.
.. The impact of those tariffs, should they take effect, won’t be negligible, economists say.
Ian Shepherdson, chief economist at Pantheon Macroeconomics, said the goods subject to the proposed tariffs account for almost 6% of the core CPI, meaning that a 10% levy would lift the index by up to 0.6 percentage point.
.. “The Fed can’t stand back and ignore a hit of this size, given the tightness of the labor market,” Mr. Shepherdson said in a note to clients dated Thursday. “People will seek to be compensated for the squeeze on their real incomes as a result of higher prices, and their chance of being able to force employers to pay up is better now than at any time since the crash.”
If things go as planned, one day soon Chinese trains will pull into Kathmandu, Nepal, on a new railroad built to lessen the landlocked Himalayan country’s dependence on India.
.. It’s time to acknowledge that in raw economic terms China has comprehensively outpaced India. If winning regional influence depends on building ports and railroads abroad, or dazzling visitors with skyscrapers and broad boulevards at home, then India’s prospects look bleak.
Compared with China, however, India remains a bastion of free speech, minority rights and judicial independence. New Delhi ought to play to these traditional strengths by deepening them.
.. On Monday, China blocked HBO.com after comedian John Oliver ran a segment that discussed Mr. Xi’s alleged touchiness about his purported resemblance to Winnie the Pooh.
.. it wasn’t always a certainty that China would pull ahead. According to the World Bank, as recently as 1990 India’s per capita income ($364) was higher than China’s ($318). Paradoxically, China’s communists unleashed market forces more effectively than their democratically elected counterparts in India.
.. Four years ago, Mr. Modi looked set to enact the sweeping reforms India needs to eradicate poverty and catch up with China. But despite a few successes, such as a national goods and services tax and a bankruptcy law that makes it easier to exit a failed business, the Indian prime minister disappointed. He more resembles his lackluster socialist predecessors than a market-friendly East Asian leader.
.. India’s archaic labor laws suppress job growth by making it extremely hard to fire workers during a downturn.
.. With a per capita income of $8,100, the average Chinese is nearly five times as rich as the average Indian. The gap has widened over the past 10 years.
.. 48 of the world’s 100 tallest buildings are in China. None are in India.
.. the ruling Bharatiya has earned a reputation for intimidating reporters with massive lawsuits, pressuring media barons to sack unfriendly editors, and using lap-dog television channels and a vicious troll army to smear political opponents.