RICH AND POWERFUL - WAKE UP

‎"THE PRICE OF INEQUALITY"
' BY PROF. JOSEPH STIGLITZ, COLUMBIA UNIVERSITY.
The author PROF. JOSEPH STIGLITZ, is Nobel Laureate.
He is one of the few economists who predicted the financial crisis of 2008, and is also credited with starting the "1% versus 99%" debate. He argues that economic inequality leads to instability. He says (and warns) that much of the inequality in the US arises out of rent-seeking- monopoly, exploitative practices by banks and corporate exploitation of public resources. In the Indian context, you will call it corruption but we call it corruption American style, where you give away natural resources below market prices. India is doing it now but America has a long history of doing this.
There is clear association between inequality and instability.
People at the top don't spend too much, (not in absolute terms but proportion of income basis), they save a lot but people at the bottom spend everything.
So you redistribute income from the bottom to the top and demand goes down. That makes an economy weak. That is what happened in the US. We would have had a weaker economy, but the Feds stepped in by creating a bubble that created more demand to offset the demand that was going down. Of course, creating a bubble was creating instability.
Both the IMF and the UN commission that the author chaired came to the conclusion that inequality was one of the major causes for the crises. It is not the direct, precipitating cause that bad lending was, but bad lending was a result of deregulation and the interest rates that were itself a result of inequality. If we don't improve inequality and don't do something else, it is going to be hard to get back to robust growth and prosperity. We are likely to have another housing bubble.
American politics is money-intensive and money-driven. Each of the candidates is expected to spend a billion dollars. When you spend so much, you have to go where the money is, and money in America is at the top. Therefore it is not a surprise that in the campaign you don't hear a lot of discussion about inequality and the 1%.You don't bite the hand that is feeding you in the middle of an election.
GDP IS NOT THE RIGHT WAY TO MEASURE A COUNTRY'S REAL STRENGTH- In China, if you take into account the environmental degradation and resource depletion, growth is much less that what it seems. You need to debate that in India. your GDP is going up, you have per capita highest number of billionaires but at the same time you have many people in poverty. So the GDP per capita doesn't capture what is happening. In India, the progress in the middle and at the bottom has been less than what
GDP in itself would like you to believe.
FDI in retail in Indian economy-
Wal-Mart is able to procure many goods at lower prices than others because of the huge buying power they have and will use that power to bring Chinese goods to India to displace Indian production. ...Some of the profits of companies like Wal-Mart come from free riding on our society. They don't provide healthcare benefits and assume that the spouses of the workers get healthcare benefits from their other employees or thought some other mechanism. They might not be a good employer.
24 oct 2012