Best Of Joseph E. Stiglitz's "People, Power, Profits"

Here is a selection of memorable quotes from People, Power, and Profits: Progressive Capitalism for an Age of Discontent by Joseph E. Stiglitz

The true wealth of a nation is measured by its capacity to deliver, in a sustainable way, high standards of living for all of its citizens. This in turn has to do with sustained productivity increases, based partly on investments in plants and equipment, but most importantly, in knowledge, and in running our economy at full employment, ensuring that the resources we have are not wasted or simply sitting idly by. It most definitely does not have to do with just the accumulation of financial wealth or gold. Indeed, I will show that the focus on financial wealth has been counterproductive—its growth has come at the expense of the real wealth of the country, helping to explain the slowdown of growth in this era of financialization.

p. 9

Over time, a rich set of truth-telling, truth-discovering, and truth-verification institutions evolved, and we owe to them much of the success of our economy and our democracy.? Central among them is an active media. Like all institutions, it is fallible; but its investigations are part of our society's overall system of checks and balances, providing an important public good.

p. 11

Here is my deepest worry for the future: The truly greedy and shortsighted in the 1 percent have come to understand that the globalization, financialization, and other elements of the current economic rulebook are not supported by the vast majority of Americans, and understandably so. For these, this has one deeply disturbing implication: if we let democracy run its course, and if we believe in a modicum of rationality on the part of voters, theywill choose an alternative course. In their pursuit of their naked self-interest, these super-rich have thus formulated a three-part strategy: deception, disenfranchisement, and disempowerment. 

Deception:They tell others that policies like the 2017 tax bill to further enrich the rich will actually help ordinary Americans, or that a trade war with China will somehow reverse deindustrialization. 

Disenfranchisement:They work hard to make sure that those who might vote for more progressive policies can't or don't, either by making it hard for them to register, or by making it difficult for them to vote. 

And finally, disempowerment: they put sufficient constraints on government so that, if all else fails and a more progressive government were elected, it couldn't do what is needed to reform our politics and economy.

p. 27

Whatever the reason, we neglected those who suffered as the country went through the process of deindustrialization. We ignored the stagnation of wages and incomes, and the growing despair. We thought that the "cover-up"—a housing bubble that created temporary jobs in construction for some of those who had lost industrial jobs-was a real solution.

p. 21

But even most of those at the top—if they truly understood their self-interest-should be supportive of more egalitarian policies, and this is even more the case for the 99 percent below who are being hurt by today's inequality. Even those in the top 10 percent who have seen a modicum of growth worry about falling down the rungs of the ladder. Even many of those in the 1 percent are hurt: In other countries, the rich are forced to live in gated communities and are constantly worried about their children being kidnapped. The country's overall growth is being hurt, and that too hurts the 1 percent, much of whose wealth derives from money that trickles up from below; when there is less wealth below, there is less wealth to trickle up. One of the insights of modern economics is that countries with greater inequality (especially when inequality becomes as large as in the US, and engendered in the way that it is in the US) perform more poorly. The economy is not zero sum; growth is affected by economic policy—and actions that increase inequality slow growth, especially over the long run.

p. 19

Our universities and science research centers have also done more than just advance knowledge: they have attracted to our shores some of our leading entrepreneurs. Many were drawn here by the opportunity to study at these great universities. Between 1995 and 2005, for example, immigrants founded 52 percent of all new Silicon Valley companies. Immigrants also founded more than 40 percent of the companies on the 2017 US Fortune 500 list.

p. 16

While it is illegal to do so, many of our leading firms have gotten together, usually in secret, to keep wages low; and it is only through litigation that these misdeeds have been brought to light Under Steve Jobs, Apple got together with Google, Intel, and Adobe to agree not to "poach" each others' employees-that is, they agreed not to compete.The affected workers sued against this anticompetitive conspiracy; the suit was settled for $415 million. Disney and a host of film studios similarly paid a huge settlement in a lawsuit charging them with an illegal antipoaching conspiracy Even fast food franchise agreements have antipoaching provisions. Competition, they knew, would drive up wages. Many contracts have restrictions on an individual accepting a job from a competitor, the effect of which too is to reduce competition and wages.

p. 65-66

In no arena is competition more important than in the marketplace for ideas. A well-informed citizenry is essential for a well-functioning democracy. A media that is controlled by only a few companies or wealthy individuals will result in their views dominating the national discourse.Yet a large share of the electorate get their political information from a small number of news sources, typically television networks. Today, in too many communities across the country, an extreme conservative perspective dominates the media.

Competition does make a difference. An alternative newspaper in a city can keep both the city council and the dominant newspaper in check. Moreover, a consolidated media is easy to capture by wealthy individuals. Accordingly, media company mergers and abuses of market power need to be held to an even higher standard than those in other sectors. 

p. 75-76

We have never treated our senior citizens well-for too many, as they aged and their skills were no longer needed, we said thank you for their years of service and sent them out to pasture. These "forced" retirements, when individuals were able and willing to work, were a waste of human resources; but the cost for the economy as a whole was manageable when those over fitty were a small fraction of our labor force. This won't be true going forward: unless we do something, a faster pace of innovation may lead to sending off more to an earlier retirement. With an aging population, the costs to our society will be even greater. Just as we need to change our workplace to accommodate families with children, and especially women, we need to change it to accommodate our older workers. It helps that some of the efforts to increase flexibility (for instance, more flexible hours, more scope for part-time work, and more opportunities for working from home, much easier in today's world of the internet will work for both.

p. 181-182

This book began by emphasizing that the true source of a country's wealth—and therefore increases in productivity and living standards— is knowledge, learning, and advances in science and technology. It is this, far more than anything else, that explains why living standards today are so much higher than they were two hundred years ago—not only the increase in our material goods, but also the longer lifespans and better health throughout our lives.

p. 183-184

Stiglitz on 'Place-based policies'

As government pursues labor market and industrial policies, it needs to be sensitive to questions of location. Too often economists ignore the social and other capital that is built into a particular place. When jobs leave a place and move elsewhere, economists sometimes suggest that people should move too. But for many Americans, with ties to families and friends, this is not so easy; and especially so since with the high costs of child care, many people depend on their parents so they can go to work. Research in recent years has highlighted the importance of social bonds, of community, in individuals' well-being. More generally, decisions about where to locate are not efficient.

Too many people may want to crowd into the big urban centers, causing congestion and putting strains on local infrastructure. Among the reasons that factories moved to rural areas in the Midwest and South was that wages were low, public education ensured that workers had enough skills nonetheless to be highly productive, and our infrastructure was sufficiently good that it was easy to get raw materials into the factories and the finished goods out. But some of the same forces that had led to low wages are now contributing to the problem of deindustrialization. Wages were low in part because of lack of mobility—with perfect mobility, wages (skill-adjusted) would be the same everywhere. But this lack of mobility is key to understanding why deindustrialization is so painful.

p. 187-188

Most of the time, the measures described so far will enable the economy to achieve full employment. Still, it is far from certain that that will be the case in the economy we are moving toward. So strong has been the influence of "market ideology" in our thinking that most economists believe that full employment should and can be achieved relying largely on the private sector, if only the government exercises fiscal and monetary policy correctly. But what happens if that is not so?

There is an alternative: government hiring workers. In twenty-first-century America, we should recognize a new right—the right of every person able and willing to work to have a job. And if the market fails, and if our fiscal and monetary policies fail, the government needs to step into the breach. People care about economic security, and the increase in security that this backstop would provide would be of inestimable value. Besides, there is much work that needs doing. Many of our schools are dilapidated, in need of repair, or at least of painting. Our cities could be cleaned up and beautified. As we saw earlier, it is a shame that there is work that needs to be done and people wanting to do that work, and yet our economic and financial system is failing both our society and these individuals.

India has provided such a guarantee (of one hundred days of work) to its rural citizens willing to do unskilled manual labor, and some fifty million Indians a year have taken advantage of the scheme. If a Poor country like India can afford it, so can the United States. There, it's had a further advantage-it has helped drive up rural wages, reducing extreme poverty; there's a good chance that it would help drive up wages at the bottom in the US, and that would in turn help reduce inequality.

p. 196-197

And because the country has become more economically segregated, with poor children increasingly living in neighbourhoods with other poor children, our local education system results in large and increasing disparities in education. The children in rich communities are thus able to get a better education than those in poor communities. That pattern continues at colleges and universities, as tuition has increased far faster than incomes of those in the middle and bottom of the income ladder. The only way that children from poorer families can get a college education often entails crushing debt. They face an unpleasant choice: forego a college education, condemning themselves to a life of low wages; or get a college education, bringing with it a debt burden that will last a lifetime. 

Good, public education for all is thus at the center of any agenda of equality and equality of opportunity. This will require increased national spending. How can we expect education to attract good teachers when the gap between their pay and those in banking and elsewhere in our society is so large, and how can we expect a high quality of education everywhere when the gaps between local communities' resource base is so large? 

p. 200-201