Home > Political Economy, The Economy > “Of the 1%, by the 1%, for the 1%”, Joseph E. Stiglitz

“Of the 1%, by the 1%, for the 1%”, Joseph E. Stiglitz

from Edward Fullbrook

The meaning behind the title, “Of the 1%, by the 1%, for the 1%”, of Joseph Stiglitz’s article in the May issue of Vanity Fair may be lost on non-Americans. It is a play on Abraham Lincoln’s “government of the people, by the people, for the people” which, along with Patrick Henry’s “Give me Liberty, or give me Death”, was once upon a time the most revered set of words in American culture.

Stiglitz begins by noting that 25 years ago the richest 1% of Americans had 33% of the nation’s wealth and took 12% of its yearly income, whereas the corresponding figures today are 40% and almost 25%.  He then offers reasons to believe that not only will the results of this program of massive upwards redistribution of income and wealth be retained but will also be augmented. 

The article’s gist, as its title suggests, is that American democracy has become a sham.  It still maintains the trappings of democracy, but in reality it is a system of government controlled by the richest 1% of its citizens.  The USA today is shaped by “changes in the rules that have been bought and paid for by the financial industry” and by the 1%’s ownership of elected and unelected officials.  Stiglitz elaborates as follows:

The Supreme Court, in its recent Citizens United case, has enshrined the right of corporations to buy government, by removing limitations on campaign spending. The personal and the political are today in perfect alignment. Virtually all U.S. senators, and most of the representatives in the House, are members of the top 1 percent when they arrive, are kept in office by money from the top 1 percent, and know that if they serve the top 1 percent well they will be rewarded by the top 1 percent when they leave office. By and large, the key executive-branch policymakers on trade and economic policy also come from the top 1 percent. When pharmaceutical companies receive a trillion-dollar gift—through legislation prohibiting the government, the largest buyer of drugs, from bargaining over price—it should not come as cause for wonder. It should not make jaws drop that a tax bill cannot emerge from Congress unless big tax cuts are put in place for the wealthy. Given the power of the top 1 percent, this is the way you would expect the system to work.

 

Stiglitz obviously believes that the worst is yet to come.

An economy in which most citizens are doing worse year after year—an economy like America’s—is not likely to do well over the long haul.

He calls attention to the pro-democracy uprisings in Egypt, Tunisia, Libya, Yemen and Bahrain “where wealth is a main determinant of power; where entrenched corruption of one sort or another is a way of life” and where the good of the many is routinely sacrificed for the good of a tiny few. Then Stiglitz poses a big question.

As we gaze out at the popular fervor in the streets, one question to ask ourselves is this: When will it come to America? In important ways, our own country has become like one of these distant, troubled places.

 

Stiglitz’s article may be read here.

  1. April 13, 2011 at 12:01 pm

    Even Larry Summers, this past weekend at a shin dig put on by the George Soros, echoed Stiglitz when he said “Inequity has risen in the last decade, and it will continue to rise.” Read more at http://curiouscapitalist.blogs.time.com/2011/04/12/larry-summers-no-regrets-on-deregulation/

  2. April 13, 2011 at 2:35 pm

    Most chilling is the prospect of the deluge that the 1% are inviting by persisting in their greed.

    Their behavior is like cheating at poker on the Titanic.

  3. Podargus
    April 13, 2011 at 6:44 pm

    Inevitably there will be a reckoning.The longer it is delayed the bloodier it will be.

  4. Thirdculture
    April 13, 2011 at 10:26 pm

    Curioser and curioser!

    As a student of the Chinese Revolution, and looking at it from a political science perspective, I would be very interested in learning the different scenarios proposed for a second US revolution/deluge/reckoning. Is there any scholarship on scenarios?

  5. Ken Zimmerman
    April 13, 2011 at 10:34 pm

    Question is whose blood? I was in Chile when Salvador Allende was elected President. The first ever elected President of Chile. I was also in Chile when Allende was deposed by the military under Pinochet and the so called “Popular Front” government established (read, single party rule, with no elections and most civil rights suspended). Allende made many mistakes, including promoting Pinochet to command the Chilean Army. Allende rushed too quickly to Socialist reforms and failed to build bridges to Chilean businesses and the Chamber of Commerce. He also had a naive trust that everyone supported democracy. The right and far right parties pushed back. He might have been able to negotiate a settlement with these parties had he been given the chance. He was not. He was removed from office by the military and murdered. But Allende’s mistakes pale by comparison to Pinochet’s crimes — murdering 2,000-3,000 to take power, imprisoning without trial another 80,000, and subjecting 30,000 to 40,000 to torture during his ruling period. Yet if few protested Allende’s murder, even fewer protested Pinochet’s crimes. And when he fled Chile to avoid prosecution but for the rebellious British (who sent him back to Chile despite US objections) he might have faced trial. As it turns out he died (of natural causes they say) before he could go to trial. Also included in his acts as dictator was the privatization of almost every aspect of Chilean economics; the evidence indicating these actions were taken at the insistence of the US. According to Milton Friedman, this privatization lead to the so called economic “Miracle of Chile.” Chile’s GDP grew like never before and the economy expanded. But more than that Friedman contends the free-market economics lead directly to the replacement of military dictatorship in Chile with democracy. But the free-market changes also produced greater economic inequality than ever before in Chile, and welfare indicators such as job security, wages, divorce rates, infant mortality, etc. crashed. And as with much of the “economic gains” attributed to the dot.com, financial, etc. booms in the US, much of the reported economic gains turned out to be chimera. I’m not saying this is the scenario for the US, but it’s something to think about.

  6. Edwin Davis
    April 14, 2011 at 1:47 am

    For me personally, acquiring everything financially and politically is the core
    function for the 1% wealthy. Without a doubt they all have a psychological disorder.
    Can we as a society today just allow this to happen?? Well we are! It should never progressed this far. Listen to everyone other than a few. How can this happen? Where will we be? We’ll be a third world nation. YOU DON’T HEAR A DAMNED WORD ABOUT CHANGING IT AS IS OUR RIGHT!!!

    OBVIOUSLY WE NEED SIMPLY SOMEONE THAT CAN ATTRACT THE MEDIA WITH THE COMMON SENSE APPROACH. CREATE SOMETHING TO STAND FOR AND SHOUT IT!!!

    PERSONALLY I THINK THAT VIOLENCE IS THE ANSWER THAT “CREATES” THE FEAR TO ABSTAIN
    “POST HASTE”. THEN IF FORCED TO USE IT; KNOW THAT WHAT YOU DO SAVES OUR COUNTRY FOR OUR CHILDREN AND MAKES THE WORLD PAY ATTENTION.

    I know it seems simplistic but who wants to sit and read and read.

  7. Edwin Davis
    April 14, 2011 at 1:49 am

    Help! Help!

  8. April 14, 2011 at 7:28 am

    Perhaps the 1% have wanted/planned it this way all along. All they have to do is keep up with the puppet show of government, wars, climate change etc to deflect the debt heavy cattle anger from them while they circle their gold wagons.

  9. Jeff Z.
    April 14, 2011 at 5:25 pm

    Indeed. It comes to the notion that as long as you have the trappings of a democracy, you have a real democracy.

    There are some wealthy people that look at the path our country is taking and recoil in horror. Maybe they lived through some difficult times themselves before they achieved their current status. But the greedier ones get all the press, while the responsible ones, such as those that are members of Responsible Wealth, are mostly ignored.

    http://faireconomy.org/responsible_wealth

  10. Allen Cookson
    April 15, 2011 at 11:21 pm

    There are only two ways I can see the situation improving before social, political and economic catastrophe strikes.
    1. The constitution is amended. No president can do much with antagonistic congressmen and senators. Both parties are in the pockets of the rich 1%. Effective campaign funding caps are vital.
    2. A significant campaign for secession from the Union in progressive states scares the hell out of the 1%. Are there any likely contenders?

  11. Fred Zaman
    September 25, 2013 at 9:36 pm

    JOHN GALT, Wall Street’s Malevolent Counterfactual:
    Might It Be Reality One Day? Or Is It Reality Now?

    Consider what one day might happen if, due to unbridled competition, the economic power of the “free market” becomes concentrated in the hands of a select few on Wall Street. Will there then be a propensity for an aristocratic “shadow government” to emerge that secretively, subversively behind the scenes, exerts both social and political control over the economic transactions of the “free market”? Which then results in an ever increasing gap in the incomes of the wealthiest 1%, versus that of the 99%. If such were to emerge, the aristocratic shadow government of the capitalist class, what would it do behind the scenes institutionally, and behind closed doors at the executive level in order to limit competition? How would it justify to itself its control of the free market? And just how would it manifest and justify itself in public? How would the public recognize such? Here considering this “counterfactual” of the malevolent capitalist class, the shadow government that thus might emerge, out of the wealthiest 1%, in order to limit competition is dubbed JOHN GALT; thereby reinstituting on Wall Street the profoundly radical “John Galt” in Ayn Rand’s novel “Atlas Shrugged.” JOHN GALT, capitalism’s aristocrat’s shadow government of the free market, radically transforms capitalism’s apologetic, free market narrative. Competition in capitalist society will always be limited; whether by capitalists for their own benefit alone, or by government that promotes the general welfare. The counterfactual JOHN GALT constantly works to insure that the first dominates society.

  12. Robert Locke
    September 26, 2013 at 12:10 am

    Forget about the US; it is a lost cause. But things are not going so badly elsewhere. Everybody talks about how Frau Merkel’s triumph is a victory for conservatives, but it really isn’t. The real story was in the failure of the Liberals (FDP) to get into the German Bundestag (their share of the votes dropped from 15% to less than five). The FDP is the businessman’s party of the 1%. The Left really won the election. So Ms Merkel is forced to turn to three parties to form a government (the Left, the former East German Socialists, the Greens, or the Social Democrats). They will ask for minimum wages, tax of the rich, etc. No 1% takeover going on here. But its a tough fight.

  13. Rob
    May 12, 2016 at 2:41 pm

    I fear for my children and children’s children.

  14. January 12, 2017 at 7:23 am

    Inequality: Market failure or theory failure?
    Comment on Edward Fullbrook on ‘“Of the 1%, by the 1%, for the 1%”, Joseph E. Stiglitz’

    Every economist can know from the Palgrave Dictionary that the profit theory is false (Desai, 2008). Or, as Mirowski put it, “… one of the most convoluted and muddled areas in economic theory: the theory of profit.” In other words: the confused confusers of economics have NO idea what the pivot of their subject matter is.

    It is pretty obvious that without the true profit theory there is no true distribution theory.#1 So everybody can know for sure, without bothering much about the insane behavioral assumptions of utility and profit maximization, that the standard marginal theory of income distribution must be dead wrong. More, because neither Walrasianism, Keynesianism, Marxianism, nor Austrianism gets profit right all other distribution theories are false, too. This includes the theory of rent seeking which stood in the center at this year’s ASSA discussions.

    The trouble with distribution theory started with Ricardo who got the distinction between wage, profit, and rent wrong.#2 Then Marx got the class theory of profit wrong.#3 Neoclassical marginal distribution theory, of course, is unsurpassable idiocy, but Keynesianism did not perform much better, and Heterodoxy has actually multiple profit theories that do not fit together.#4

    Distribution theory has always been the deepest point in the swamp of economics. Do not expect that orthodox or heterodox economists who spent their clueless lives there will find a way out any time soon. The profit theory is false since Adam Smith#5 and the folks at the ASSA are lost in a parallel universe. Let this sink in: NOT ONE of the participants has an idea about the pivotal concept of economics.

    Economics has produced NOTHING of scientific value in the last 200+ years. The current state of economics is that of a cargo cult or fake science.#6 The proof is in the distribution theory.

    Egmont Kakarot-Handtke

    #1 See ‘Essentials of Constructive Heterodoxy: Profit’
    https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2575110
    #2 See ‘When Ricardo Saw Profit, He Called It Rent: On the Vice of Parochial Realism’
    https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1932119
    #3 See ‘Profit for Marxists’
    https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2414301
    #4 See ‘Heterodoxy, too, is scientific junk’
    http://axecorg.blogspot.de/2015/09/heterodoxy-too-is-scientific-junk_85.html
    #5 See ‘The Profit Theory is False Since Adam Smith. What About the True Distribution Theory?’
    https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2511741
    #6 See ‘The real problem with the economics Nobel’
    http://axecorg.blogspot.de/2016/09/the-real-problem-with-economics-nobel.html

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