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A winner-takes-all-society will fail

Joe Stiglitz makes the sensible point that the “1%” society America has become cannot be sustainably successful. The prosperity of the 1% depends on the prosperity of the 99%.  Gross inequality is also economically inefficient and distorts a country’s politics.

Quote “It’s no use pretending that what has obviously happened has not in fact happened. The upper 1 percent of Americans are now taking in nearly a quarter of the nation’s income every year. In terms of wealth rather than income, the top 1 percent control 40 percent. Their lot in life has improved considerably. Twenty-five years ago, the corresponding figures were 12 percent and 33 percent. One response might be to celebrate the ingenuity and drive that brought good fortune to these people, and to contend that a rising tide lifts all boats. That response would be misguided. While the top 1 percent have seen their incomes rise 18 percent over the past decade, those in the middle have actually seen their incomes fall. For men with only high-school degrees, the decline has been precipitous—12 percent in the last quarter-century alone. All the growth in recent decades—and more—has gone to those at the top. In terms of income equality”.

Now well known facts but the inequality threat to the survival of capitalism is crystallising into a definite focus for dissent. It will impact on Australia.

13 comments to A winner-takes-all-society will fail

  • […] lifestyles, but their fate is bound up with how the other 99 per cent live, writes Joe Stiglitz. Harry Clarke agrees: "the inequality threat to the survival of capitalism is crystallising into a definite focus […]

  • […] lifestyles, but their fate is bound up with how the other 99 per cent live, writes Joe Stiglitz. Harry Clarke agrees: “the inequality threat to the survival of capitalism is crystallising into a definite focus […]

  • anon

    And it’s basically crap thinking and actually dangerous to economic health. Stigliz of course doesn’t mention the fact that most small business in America report as Sub Chapter S corporations which means small business income, some of which still tied up as credit sales, is reported as personal income. The marginal rate for these firms is 44.5% after taking into account healthcare and other incidental costs. That would go up to 53% under Obama.

    Stigliz should retire, he’s a menace and totally dishonest unattractive figure.

    Recently he was found taking advisory fees from the Greek government and touting the view Greece was fine suggesting the Greeks could borrow at the German rates.

    He’s not just wrong all the time, he’s a wholesale liar.

  • NickR

    “Stigliz of course doesn’t mention the fact that most small business in America report as Sub Chapter S corporations which means small business income, some of which still tied up as credit sales, is reported as personal income”

    There are lots of ways that people can measure monetary wellbeing. Examples include pre-govt income, post-govt income, household income, equivalized household income, wealth and a great many other variations. The fact that Stiglitz’s choice of variable is slightly different to yours means nothing. If you don’t like it, re-estimate the income/wealth distributions using the variables like and show that there is a material difference (there probably won’t be).

    “Stigliz should retire, he’s a menace and totally dishonest unattractive figure.”
    This is pure ‘argument through adjective’. I imagine if you had some sort of point you would make it.
    “Recently he was found taking advisory fees from the Greek government and touting the view Greece was fine suggesting the Greeks could borrow at the German rates.”

    Actually he was completely upfront with his advisory role with respect to the Greek Government. Your argument suggests dishonesty that simply isn’t there.

    “He’s not just wrong all the time, he’s a wholesale liar.”

    On what? If you have evidence that Stiglitz is wrong, send it to AER. If you have evidence that he is a liar, why not produce it? Who are we going to trust, the world’s most esteemed economist or an anonymous blog poster?

  • hc

    Thanks Nick I think most of the claims you make about Anon are spot on. Mr. Anon, you have strong views but no arguments. Provide the arguments or shoot through.

  • anon

    No arguments? Then refute the claim that nearly all small business in the US files under chapter S. Something like 75% of small business reports this way.

    Stigliz was on retainer to the Greek government when he went on the BBC to spin for the Greek debt situation. Stigliz had the audacity to say Greece was fine and that they could borrow the 1.5% (the rate available the Germans and Fins etc.)

    Here is shooting his mouth off and receiving the equivalent of a 50 cal at close range from a hedge fund manager for making absolutely insane comments.

    http://www.youtube.com/watch?v=E4MAifsp-8E

    Note how the host actually introduces him as working for the Greek government.

    Editor: Mr Kang’s comments have been edited to remove insulting material. Further difficulties Mr. Kang will result in a permanent ban. Find another site to release your venom.

  • anon

    Why would I want to find another site to release venom, Professor? You’re doing an excellent job right here.

  • NickR

    “No arguments? Then refute the claim that nearly all small business in the US files under chapter S. Something like 75% of small business reports this way.”

    Anon, you appear to be claiming that the distribution of income would be dramatically different if it were not for the rules regarding the reporting of small business income. The point is that the burden of proof is on you here as it is you that is making the claim. Saying that the results will be dependent on this rule and then shouting ‘touché’ is not an argument. If you want to show that this is the case, do it, don’t assert it.

    “Stigliz had the audacity to say Greece was fine”

    While this video is quite old, Stiglitz was pointing out that if other countries were prepared to stand behind Greece, the risk associated with Greek debt would go down and they would be able to manage their servicing costs. Unless I am very much mistaken this is a standard and well accepted viewpoint. This doesn’t prove anything in particular, but fund manager Hendry (Eclectica) has, to my knowledge, had a pretty miserable time of it of late, which perhaps indicates that his views on sovereign debt aren’t spot on.

    “Note how the host actually introduces him as working for the Greek government.”

    Yes, it is notable that they clearly indicated that Stiglitz was advising the government. What would you expect?

    Lastly it seems strange to reprimand somebody for (nonexistent) snarking and then follow up immediately with a snark.

  • anon

    “Anon, you appear to be claiming that the distribution of income would be dramatically different if it were not for the rules regarding the reporting of small business income.”

    You seem to have difficulty with comprehension. Included in the 1% of income earners that seems to have the most focus these days (and whom Stigliz was discussing) are the tax returns of small business in the US. I also mentioned that 75% of small business file as Sub S which is captured as personal income. Consequently Stigliz and the rest of the lying lunatic Democratic party wants to raise taxes on small business. 75% of them to be exact. That’s the evidence.

    This is astonishing as even the Australian Greens here, hardly a moderate leftwing party, but a far left one has advocated for a tax cut on small business. Sitgliz, you and the professor are even further to the left of the Australian Greens on this issue. This is amazing.

    “The point is that the burden of proof is on you here as it is you that is making the claim.”

    I have, several times in fact but you seem to have issues with comprehension. Let me repeat again: 75% of small business report as sub Ss, which is taken as personal income.

    “While this video is quite old, Stiglitz was pointing out that if other countries were prepared to stand behind Greece, the risk associated with Greek debt would go down and they would be able to manage their servicing costs.”

    Not at first he wasn’t. He was suggesting that Greece could borrow at German rates if other countries showed solidarity. That means European slaves should be financing a cheating and dishonest government ably supported by a decadent population that votes them in.

    “Unless I am very much mistaken this is a standard and well accepted viewpoint.”

    Is it? Is that way Greek bondholders are now asked to take large haircuts on Greek debt?

    “This doesn’t prove anything in particular, but fund manager Hendry (Eclectica) has, to my knowledge, had a pretty miserable time of it of late, which perhaps indicates that his views on sovereign debt aren’t spot on.”

    I don’t think he has been a failure at all and this year he has made a decent amount of money betting against some European sovereigns. However this is neither here or there because what is important is his responses to the spinner.

    “Yes, it is notable that they clearly indicated that Stiglitz was advising the government. What would you expect?”

    I wouldn’t expect any economist with an ounce of integrity to go on a program and spin for that miscreant nation. Stigliz has no integrity. If a fee is involved he’s spin for Zimbabwe.

  • rog

    Not sure if Anon is confusing personal income with corporate.

  • anon

    If you’re not sure why are you commenting?

    This explains why most small business files under chapter S Corps and not as regular corporations which would attract double taxation of any dividend distribution.

    “An S corporation, for United States federal income tax purposes, is a corporation that makes a valid election to be taxed under Subchapter S of Chapter 1 of the Internal Revenue Code.

    In general, S corporations do not pay any federal income taxes. Instead, the corporation’s income or losses are divided among and passed through to its shareholders. The shareholders must then report the income or loss on their own individual income tax returns. This concept is called single taxation; if the corporation is taxed as a C corporation, it will face double taxation, meaning both the corporation’s profits, and the shareholders’ dividends, will be taxed.

    S corporation status provides many of the benefits of partnership taxation and at the same time gives the owners limited liability protection from creditors. The S corporation rules are contained in Subchapter S of Chapter 1 of the Internal Revenue Code (sections 1361 through 1379). S status combines the legal environment of C corporations with U.S. federal income taxation similar to that of partnerships.

    Like a C corporation, an S corporation is generally a corporation under the law of the state in which the entity is organized. S corporations are separate legal entities from their shareholders and, under state laws, generally provide their shareholders with the same liability protection afforded to the shareholders of C corporations. For Federal income tax purposes, however, taxation of S corporations resembles that of partnerships. As with partnerships, the income, deductions, and tax credits of an S corporation flow through to shareholders annually, regardless of whether distributions are made. Thus, income is taxed at the shareholder level and not at the corporate level. Payments to S shareholders by the corporation are distributed tax-free to the extent that the distributed earnings were not previously taxed. Also, certain corporate penalty taxes (e.g., accumulated earnings tax, personal holding company tax) and the alternative minimum tax do not apply to an S corporation.”

    The dirty, nasty little secret about Stigliz and other assorted leftwing riff raff is they of course don’t mention any of this.

  • rog

    Stiglitz referred to “Americans” not corporations. If you have evidence that disproves this then provide it.

  • anon

    “If you have evidence that disproves this then provide it.”

    Stigliz works from Columbia university and I’m sure he has an email, so go ask him if he took out income reported indirectly through s corps. He obviously didn’t because he would have said so.