The consequence wrought by greedy financiers.

• Author: Thomson, James W.
• Position: Economics

PERHAPS THOSE raucous Occupy Wall Street protesters got it right by charging that greedy financiers have destroyed the American Dream. After all, the promise of the U.S. is that it is the one place where anyone, if they work hard enough, can get ahead and prosper. That vision has held true from Andrew Carnegie's U.S. Steel Corporation up through Mark Zuckerberg's Facebook. After the 2008 financial crisis, income inequality has soared to levels not seen since the "gilded era" preceding the Great Depression. Opinion polls indicate that many citizens have lost their faith in the country and the statistics support those fears. For the OWS group that claims to speak for 99% of all citizens, its main grievance is that the richest one percent take home almost one-quarter of the nation's income every year and control about 40% of the nation's wealth.

According to Nobel Prize-winning economist Joseph Stiglitz, about 25 years ago, the corresponding statistics for the richest one percent were 12% and 33%, respectively. In terms of income inequality, the U.S. now lags behind much of Western Europe, while the nations that are closest to the U.S. are Russia (run by its oligarchs) and Iran (with its mullahs). Historically, the most unequal societies were in Latin America but, many of these nations, particularly Brazil, recently have taken steps to reduce poverty while the inequality in America has increased.

Stiglitz, an outspoken liberal, nonetheless is agnostic (carefully so) about the myriad causes of income inequality, but he is not shy about discussing its harmful consequences. Stiglitz's line of reasoning is based upon his assumption that income inequality cannot be dismissed as a passing concern because he believes that the economy will not do well over the long nm if most citizens are losing ground year after year. He maintains that income inequality will result in severely reduced economic opportunities for most individuals, and that the phenomenon has occurred because special interest groups have taken unfair advantage of their political influence to secure preferential tax treatment, thereby distorting the nation's economic efficiency. Stiglitz also believes that this concentration of wealth makes it much more difficult for the government to engage in collective actions in such vital areas as the nation's aging infrastructure, troubled educational system, and technological requirements.

With these remarks, Stiglitz has presented a traditional liberal brief that favors a more equitable distribution of wealth in terms of three core principles: equalitarianism, economic efficiency, and a more important role for government. However, his conclusions only serve to beg the larger issue of addressing the underlying causes of the U.S.'s...