Thursday, October 4, 2012

‘American Dream’ Dead, Economist Says

Economist Joseph Stiglitz makes a compelling argument that the American Dream is a myth during a recent interview for Spiegel. He points out that the political system favors the wealthy and that there are more rich people who attained their wealth through market manipulation and cheating the poor than there are of those who earned it by creating something new that people needed. He argues that there is no other industrialized nation that makes its children more dependent on the wealth and education of their parents to succeed in life, which is the very antithesis of American Dream. For more on this continue reading the following article from Economist’s View.

Spiegel interviews Joe Stiglitz:
'The American Dream Has Become a Myth', Spiegel: ...Spiegel: The US has always thought of itself as a land of opportunity where people can go from rags to riches. What has become of the American dream?
Stiglitz: This belief is still powerful, but the American dream has become a myth. The life chances of a young US citizen are more dependent on the income and education of his parents than in any other advanced industrial country... The belief in the American dream is not supported by the data. ...
Spiegel: We thought that as a rule Americans don't begrudge the rich their wealth, though.
Stiglitz: There is nothing wrong if someone who has invented the transistor or made some other technical breakthrough that is beneficial for all receives a large income. He deserves the money. But many of those in the financial sector got rich by economic manipulation, by deceptive and anti-competitive practices, by predatory lending. They took advantage of the poor and uninformed... They sold them costly mortgages and were hiding details of the fees in fine print.
Spiegel: Why didn't the government stop this behavior?
Stiglitz: The reason is obvious: The financial elite support the political campaigns with huge contributions. They buy the rules that allow them to make the money. Much of the inequality that exists today is a result of government policies.
Spiegel: Can you give us an example?
Stiglitz: In 2008, President George W. Bush claimed that we did not have enough money for health insurance for poor American children, costing a few billion dollars a year. But all of a sudden we had $150 billion to bail out AIG, the insurance company. That shows that something is wrong with our political system. It is more akin to "one dollar, one vote" than to "one person, one vote." ...
Spiegel: So your answer to the inequality problem is to transfer money from the top to the bottom?
Stiglitz: First, transferring money from the top to the bottom is only one suggestion. Even more important is helping the economy grow in ways that benefit those at the bottom and top, and ending the "rent seeking" that moves so much money from ordinary citizens to those at the top. ...
Nothing particularly new here, but I wanted to highlight the point about rent-seeking, anti-competitive practices, etc. once again since I don't think this cause of inequality receives enough attention.

This blog post was republished with permission from The Economist's View.

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