♠ Posted by Emmanuel in Labor at 6/10/2012 04:08:00 PMWhile Joe Stiglitz is pretty hirsute himself, he's certainly no match for Karl Marx when it comes to luxuriant facial hair. Esquire considers Herr Marx's to be one of the best beards in history, and who am I to disagree. However, it seems Stiglitz is not only aping Marx's grooming habits but also his argument on the economy-wide effects of rising inequality. Return to the classic argument about the internal contradiction of capitalism that when wealth is increasingly concentrated in fewer hands, demand for the goods and services made by the capitalists will eventually dissipate, eventually threatening the sustainability of the entire capitalist system.
With labour's share of income plummeting in a highly racialized and inequitable society like the United States, Stiglitz is not exactly the first to notice this trend. Other mainstream economists like Nouriel Roubini having noted the same. Anyway, Vanity Fair has an excerpt of his new book The Price of Inequality where he observes:
When too much money is concentrated at the top of society, spending by the average American is necessarily reduced—or at least it will be in the absence of some artificial prop. Moving money from the bottom to the top lowers consumption because higher-income individuals consume, as a fraction of their income, less than lower-income individuals do...
The relationship is straightforward and ironclad: as more money becomes concentrated at the top, aggregate demand goes into a decline. Unless something else happens by way of intervention, total demand in the economy will be less than what the economy is capable of supplying—and that means that there will be growing unemployment, which will dampen demand even further. In the 1990s that “something else” was the tech bubble. In the first decade of the 21st century, it was the housing bubble. Today, the only recourse, amid deep recession, is government spending—which is exactly what those at the top are now hoping to curb.While I appreciate the Marxist turn, I would have liked to have seen more numbers to back up this stock assertion. As far as I can tell, Americans are still spending their brains out with household savings rates still nowhere near double digit percentages and consumption accounting for 70% of the US GDP.
BTW, the rest appears to be a rehash of what I among several others have noted on why the "American Dream" is a sick joke on the aspirations of those who still believe in that downwardly-mobile place [1, 2, 3]. Elsewhere it's an anti-finance screed you've probably seen many, many times before.