Occupy Everywhere - Sept 17th - Day of Rage Against Wall Street and what it stands for!

[Peter Lemkin]

NERMEEN SHAIKH: We turn now to an issue that's gained increasing prominence in the last year: increasing inequality in the United States and the divide between the richest 1 percent and the rest of the country. Bloomberg News reported Tuesday that pay for the top CEOs on Wall Street increased by over 20 percent last year. The article is based on analysis of data reported to the Securities and Exchange Commission and finds that the substantial rise comes after a 26 percent jump in CEO salaries in 2010.

Meanwhile, census data shows nearly one in two Americans, or 150 million people, have fallen into poverty or could be classified as low-income. Thirty-eight percent of African-American children and 35 percent of Latino children live in poverty.

AMY GOODMAN: Well, our next guest has helped to popularize the expression "the 1 percent" and brought to light the causes behind increasing inequality in the United States. Joseph Stiglitz is a Nobel Prize-winning economist. During the Clinton administration from '93 to '97, he served on the Council of Economic Advisers. His May 2011 Vanity Fair article, "Of the 1%, by the 1%, for the 1%," serves as the basis of his new book, _The Price of Inequality: How Today's Divided Society Endangers Our Future_. Joseph Stiglitz teaches at Columbia University.

We welcome you back to Democracy Now!

JOSEPH STIGLITZ: Nice to be here.

AMY GOODMAN: I mean, this figure you have on page eight of your book, when you say, "Consider the Walton family: the six heirs to the Wal-Mart empire command wealth of $69.7 billion, which is equivalent to the wealth of the entire bottom 30 percent of U.S. society."

JOSEPH STIGLITZ: It's a comment both on how well off the top are and how poor the bottom are. And it's really emblematic of the divide that has gotten much worse in our society. One of the points I try to make in the book is, none of this is inevitable. It's not just market forces. United States is the country in the world with the highest level of inequality, and it's getting worse.

AMY GOODMAN: The highest level?

JOSEPH STIGLITZ: Of the advanced industrial countries.

AMY GOODMAN: The highest level.

JOSEPH STIGLITZ: Highest level of the advanced industrial countries. And to me, what's even more disturbing is, we've become the country with the least equality of opportunity of all the advanced industrial countries for which there's data. You know, we think of ourselves as a land of opportunity, American Dream. And there are all examples that we know of where people have made ityou know, immigrants, other people who have made it to the top. But what matters really are the numbers, the chances. You know, what are your life chances if you had the misfortune of being born to a poor family or somebody whose parents are not well educated? What are your chances of going from the bottom to the middle or the bottom to the top? And they are lower in the United States than in other advanced industrial countries.

NERMEEN SHAIKH: I mean, it's a striking fact, because you talk about it a few times in your book, that now in old Europe there is more class mobility than there is in the U.S. And, of course, we always here think of Europe as being very class rigid.

JOSEPH STIGLITZ: That's right. And this is a change, in many respects. And one of the other points I try to emphasize in the book is it has consequences. It has consequences for our sense of identity, of what we are, but it also has even more, you know, you might say, narrow economic consequences, because what it means is that if you have theyou know, make the mistake of choosing the wrong parents, the likelihood is that you're not going to live up to your potential. And we are, in that sense, wasting our most important assets: our human resources.

NERMEEN SHAIKH: You also say that, ultimately, the rich will also pay an extraordinary price for this inequality. How?

JOSEPH STIGLITZ: Well, we're all in the same boat together. You know, there are a lot of people who are very bright, who work very hard in developing countries, emerging markets, who have very low incomes. The point is that all of us benefit from our education system, our legal system, the way our whole society functions. In those parts of the world where there's a large divide, mainly in, you know, emerging markets, developing countries, where there's a large divide, societies fall apart. There's political, social, economic turmoil. And in that context, not even the 1 percent can do that well.

AMY GOODMAN: I wantedI wanted to ask you about the people we value and the people we don't. You have an amazing set of examples. You say, "Few are inventor" you say, "By looking at those at the top of the wealth distribution, we can get a feel [for] the nature of this aspect of America's inequality. Few are investors who have reshaped technology, or scientists who have reshaped our understandings of the laws of nature. Think of Alan Turing, whose genius provided the mathematics underlying the modern computer. Or of Einstein. Or of the discoverers of the laser (in which Charles Townes played a central role) or John Bardeen, Walter Brattain, and William Shockley, the inventors of transistors. Or of Watson and Crick, who unraveled the mysteries of DNA, upon which rests so much of modern [medicine]. None of them, who made such large contributions to our well-being, are among those most rewarded by our economic system." We have very different names that are tied to these so-called inventions, like of the internet.

JOSEPH STIGLITZ: That's right. And the point is that the theory that was developed in the 19th century to justify the inequality that was emerging with capitalism was marginal productivity theory. It was the notion that those who contributed the most to society will get bigger rewards. It was a sense, you might say, of moral justification, but also an argument for economic efficiency. And what we now realize is the individuals who have made the most important contributions are not those that are at the top. The peoplemany of the people who are at the top, for instance, are those financiers who brought the world to the brink of ruin. And the moment of Great Recession, I think, was a really telling moment in our rethinking of what was going on. You know, we all sort of understood that there was something wrong. But in that crisis where you saw so many bankers who had brought the world to the brink of ruin, who actually brought their companies to the brink of ruin, walk off with pay in the millions of dollars, it was very clear there was a disconnect between private rewards and social returns, really undermining the theory that was the basis of the justification of inequality in our society.

NERMEEN SHAIKH: So when did financiers, though, come to have this kind of power?

JOSEPH STIGLITZ: Well, it's been an evolution. But I think, in my mind, a really telling change was the repeal of Glass-Steagall, where we told the banks, you know, "Don't focus on what you're supposed to be doing, which is providing credit to new businesses to expand businesses." We brought together the commercial banks, which were the basis of the kind of prudent lending, and investment banks, who took rich people's money and gambled. And we put it together. We created these financial institutions that were too big to fail. And the result of that was they grew larger and larger, and the risk taking, gambling, speculation dominated, rather than the lending, which is the basis of a growing, productive economy.

But in a way, the evolution of our economy, more generally, began about 1980. That'sif I would say, where's there a dividing pointwhere the CEOs began to realize that they could take a larger and larger share of the corporate income. They understood that we have deficient corporate governance laws. And so, we didn't require a say in pay. We didn't requireyou know, shareholders are supposed to own the firms, but the shareholders had no say in the pay of the companiesof the managers of the companies that they were supposed to own. A very strange situation. I mean, if you have somebody working for you, you would say you ought to have some say in their pay. And the result of that is they took a larger and larger share. And if you look at those at the topas I say, they're not the Watson and Cricks, the people who made these big changesthey're corporate CEOs.

AMY GOODMAN: Who is Berners-Lee?

JOSEPH STIGLITZ: Well, these are people who, you know, made the internet, the people who

AMY GOODMAN: But we think Mark Zuckerberg. We think Gates. We think Jobs.

JOSEPH STIGLITZ: You know, all of these played an important role. You know, we shouldn't underestimate the importance of that. But all these rest on a foundation, and that foundation was largely publicly provided, publicly funded. You couldn't have a program if you didn't have a computer. And you don't have a computer unless you do the mathematical research that isprovided the foundation. That was theTuring.

AMY GOODMAN: Alan Turing.

JOSEPH STIGLITZ: That was Alan Turing. You don't have internet programs unless you have the internet. And that was something that the U.S. government helped to develop, and these other people that helped develop the World Wide Web. So, you know, the irony is that the people who provided the foundation on which our entire modern economy is based are not the people who have done well.

NERMEEN SHAIKH: I want to ask you about the presidential race and about Republican candidate Mitt Romney's record. Newark Mayor Cory Booker, a supporter of President Obama, generated controversy last month when he defended Romney's former company, Bain Capital. Booker spoke on Meet the Press.

MAYOR CORY BOOKER: I have to just say, from a very personal level, I'm not about to sit here and indict private equity. It'sto me, it's just thiswe're getting to a ridiculous point in America, and especially that I know. I live in a state where pension funds, unions and other people are investing in companies like Bain Capital. If you look at the totality of Bain Capital's record, it ain'tthey've done a lot to support businesses, to grow businesses. And this, to meI'm very uncomfortable.

NERMEEN SHAIKH: Joseph Stiglitz, your comments on the role of private equity, and on Bain Capital, in particular?

JOSEPH STIGLITZ: Well, let me first say, the financial sector is very important. A financialyou know, no economy can work well without a well-functioning financial sector. The problem with the United States is that our financial sector hasn't been doing what it's supposed to be doing. It's supposed to provide finance to create jobs, not to destroy jobs. It's supposed to allocate capital, manage risk.

The concern about Bain Capital are twofold. One is that much of what they were doing was financial restructuring, which meant not creating jobs, taking money out of companies, putting them in a very fragile situation in which, a few years later, they go over the cliff, and jobs get destroyed. So, it is important to restructure firms to make them sustainable, efficient. But that wasn't what a lot of the enterprises that they were engaged in doing.

The second problem, and I think most people find very disturbing, is that we have a tax law that says that those who are engaged working for this kind of restructuringan important activity if it's done well and done in a way that creates more productivity, more jobswhy should those people pay so little taxes? And thatyou know, going back to the upper 1 percent, their average tax rate is about 15 percent. We tax speculators at a lower rate than we tax people who work for a living. It makes no sense.

AMY GOODMAN: Mayor Booker got a lot of flak for saying, sort of, "Back off Bain." But a number of Democrats have been saying that, and there's a war in the Obama administration now. Do you attack Romney on Bain, the company that he is running on, more than being governor of Massachusetts? And a lot of the Democrats are involved with Bain or have support from people at Bain or other similar companies. Your president, President Clintonyou served as the chief of economic advisershe said, "Back off Bain." And you can see this tug-of-war going on, not only about Bain, though, and now you see them not really talking about Bain and talking about what you were just mentioning, Joe Stiglitz, but also about his offshore investments, offshore bank accounts, himself and his company. Can you talk about this and the fact that Clinton is one of the champions of saying, "Don't raise this. He's a good businessman"?

JOSEPH STIGLITZ: Yeah. Well, first, we should understand, you know, that Romney is running on the platform: it's good to have a businessman running the White House; we do a better job. You know, the last MBA president we had was George Bush, and I don't think anybody would say that the economy was well run in those eight years. Deficits soared, and the economy finally went over the brink and into the Great Recession. So that qualification that he's touting, if I looked at that, you know, a Harvard MBA, I'm not sure I would say that that is a kind of certification that I would want for running the country. You have to understand public policy, not just how to make money for yourself, which they do a good job of doing, but that's not what's entailed in running the country.

I have some sympathy and say, let's not make this personal. Let's try to keep this at the basic level of principles. And, you know, the basic level of principles are relatively simple: people should be paying their share of the taxes. And paying share of taxes mean you don't pay half the rate of other people who are working for a living. It means you don't use offshore centers to escape taxes. You know, why is so much banking going on in the Cayman Islands? It's not that the weather there is really particularly suited for moving electrons and running banks. You know, it's there for one reason only: to escape regulation, to escape taxation, to undermine the basic principles of our economy. And it's wrong for somebody who is trying to run for the president, who should be symbolizing, you know, making their fair share, to be using offshore accounts to avoid taxes and to avoid regulation.

The other point is, businesses are supposed to be creating value, creating jobs in America, and new American business. Now, this is where we have a tax system that's distorted. But when you're running for the president, you should be out there and saying we don't want a distorted tax system that encourages jobs to move abroad, that encourages speculation over real wealth creation. If he had come out and said, like Warren Buffett, that it's wrong for himthat Warren Buffett to have a lower tax rate than his secretaryif he came out and said it's wrong to have a tax structure that encourages jobs to move abroad, you know, then I might have a little bit more sympathy. But so far, I haven't heard that.

AMY GOODMAN: Ed Conard, the former managing director at Bain Capital, who has contributed to Romney, advises Romney, and argues explicitly for doubling income inequality?

JOSEPH STIGLITZ: Yeah. I find that astounding. I debated him yesterday, actually. The point is, he believes in trickle-down economics, a notion you throw a lot of money at the top and everybody does a lot better because of their innovation. Given the level of inequality in the United States, I wish it were true, because if it were true, we'd all be doing very well. But the evidence is, you know, overwhelmingly against that. We've had a growth at the top, but what's been happening to the average American? He's not doing very well. Most Americans today are worse off than they were a decade-and-a-half ago. And the people at the bottom have done even worse. If you started looking at, say, male workers, a full-time male worker, people who work for a living, for a male worker today, the average, typicalhalf above, half belowhis income today is lower than it was in 1968, almost a half-century ago. So the American economy has been delivering for the people at the very top, but it's not been delivering for most Americans. And you can see it in another way in the data. In the periods like the period after World War II, we grew together, inequality was shrinking, and we grew much more rapidly than we have since 1980, where we've been growing apart. So the notion that more inequality leads to more growth, to put it quite frankly, is nonsense.

NERMEEN SHAIKH: Joseph Stiglitz, you have spoken about the austerity measures that have been imposed across Europe or that are being considered across Europe, and you've said that they're, quote, "a suicide pact." Can you say what you mean by that?

JOSEPH STIGLITZ: Well, in Europe, these measures of austerity are going to make the countries weaker and weaker. I predicted that when Europe began that back in 2010 in Greece, when the Greek crisis first emerged. What's happened is, Greece has become successively weaker and weaker, to the point where the youth unemployment now is 50 percent, political turmoil is breaking out. I said the same thing when Spain began that process. And now in Spain the youth unemployment rate is again 50 percent, and the unemployment overall has gone well over 20 percent. And just yesterday, you know, Spain's conservative government has said, "We can't deal with it," even though they had run on a platform of, "Oh, you've messed up with the economic policy."

So, the point is that we've done this experiment in austerity over and over again. The first example, you might say, in modern history was Herbert Hoover when he responded to the stock market crash by austerity, under the influence of his Secretary of the Treasury Andrew Mellon, and we had the Great Depression. The IMF forced it in East Asia, in Korea and Thailand, in Indonesia, and we alland we saw the consequences: the economies went down. Why Europe is repeating this experiment, where we know almost for certain what the outcome isand it's turning out to be exactly as I predicted.

AMY GOODMAN: I mean, is it only Europe? Let's turn to the federal budget here. Republicans, who control the House, have been calling for cuts to food aid, healthcare, other social services, while protecting funds for the Pentagon. This is House Budget Committee Chair Paul Ryan speaking last month.

REP. PAUL RYAN: What we're saying is, let's get on growth and prevent austerity. The whole premise of our budget is to preempt austerity by getting our borrowing under control, having tax reform for economic growth, and preventing Medicare, Social Security and Medicaid from going bankrupt. That preempts austerity. The president, his budget, the fact the Senate hasn't done a budget in three years, puts us on a path toward European-like austerity. That's what we're trying to prevent from happening in the first place.

AMY GOODMAN: That's House Budget Committee Chair Paul Ryan, a Wisconsinite like Governor Scott Walker. Your response, Joe Stiglitz?

JOSEPH STIGLITZ: Well, the good thing about what he said is austerity is finally getting a bad name. Then the question is, what are the policies? And what he is proposing is weakening our basic economic fiber. If you don't invest in education, technology, infrastructure

AMY GOODMAN: Where do you get the money?

JOSEPH STIGLITZ: the economy gets weaker. Well, the good news is that right now the markets are willing to lend to the U.S. at essentially zero interest rate, long-term interest rates of one-and-a-half percent. You know, if you were a business and you could borrow at one-and-a-half percent or zero for investments with very high returns, you would be foolish not to do it. The right keeps focusing on just one side of the country's balance sheet or the government's balance sheet: what they owe. They don't look at the other side: the assets. And it's the assets that are really important if we're going to have long-term economic growth. So, it's like a company that says, "Let's cut out our R&D budget. Let's cut out all our investment." And you know where that company's going to go? It's going to go into the tubes. And that's his recommendation for America. I think that's wrong. It's not the way you're going to get growth.

NERMEEN SHAIKH: Yeah, you've also said that if Romney, if the Republicans win the elections in November, that that would significantly raise the likelihood of a recession.

JOSEPH STIGLITZ: Well, the Republicans have been consistently focused on cutbacks. You know, Americans don't realize that we already have begun austerity. There are about one million fewer public sector employees than there were before the crisis. The standard recommendation of macroeconomics, of economic, is that when the private sector gets weak, government is supposed to step in, fill the breach and stimulate the economy so that the economy is stabilized, because the private sector is very volatile. But we've been doing just the opposite. As the private sector has gotten weaker, we've cut out a million jobs. What the Republicans would do is make those cutbacks even bigger. And the resultand Wisconsin is an exampleyou know, more cutbacks, more cutbacks of public employees. And the result of that is our economy is going to go down further into the hole. In the context of Europe very likely going into turmoil, there is going to be a risk of a significant downturn. And those policies then increase the probability of our weak economy tipping over into recession.

AMY GOODMAN: Joe Stiglitz, yesterday every single Republican in the Senate voted against the Paycheck Fairness Act, so it cannot move forward. Explain what this act is, the significance of this for working women.

JOSEPH STIGLITZ: Well, this is one of the issues that I take up in my book, not the particular bill, butwhat is distinctive about American inequality is that too much goes to the very topthat's the 1 percentthe middle has been hollowed out, and the bottom is notis doing very badly. The number in poverty are increasing. Well, when you look at what's happening at the middle and the bottom, one of the factors that contributes to weaknesses in the middle or the bottom is discrimination. Women get paid on average less than 80 percent of men of the same qualifications doing the same kind of work. You know, that's discrimination. And that weakens the economic fiber of our country, and it creates more inequality. And this bill was an attempt to circumscribe that kind of discrimination. You know, things are better than they were 30 years ago. We've made progress. But what is clear, that in spite of our awareness of this kind of discrimination, we haven't closed the gap. We have a lot more to do.

AMY GOODMAN: Particularly among African-American and Latino women.

JOSEPH STIGLITZ: Very much so. And, you know, one of the aspects of the crisis, we now realize that the banks targeted Afro-American and Latinos for these predatory lending, bad loans, high transaction costs. And one of the consequences of that discriminationand the banks have paid very large fines and settlements of claims against that kind of discriminationthe consequence is the wealth of those at the bottom who are Afro-American, who are Hispanics, Latinos, have been wiped out. And so, we had a bigger gap in wealth than the bigthan the gap in income. You know, I mentioned that the top 1 percent gets 20 percent of all the income. They have about 40 percent of the wealth. You look at the wealth gaps in Latinos and Afro-Americans, it's so much larger, and really unconscionable.

NERMEEN SHAIKH: And your comments on Occupy Wall Street? You write about that in your book, as well.

JOSEPH STIGLITZ: Well, Occupy Wall Street was a reflection of a lot of Americans' perspective that our economic system is unfair. You know, the protest movement that began in Tunisia was partly about lack of jobs, but it was partlyI went to Tunisiait was unfairness in our system. There was a hope, after the crisis, that government would fix things. It didn't, or it didn't do enough. And that combination of economic unfairness and a political system that doesn't seem capable of correcting these injustices, I think, is what motivated a lot of the Occupy Wall Street.

AMY GOODMAN: I want to go to a clip of Bloomberg talking about Occupy Wall Street, saying Wall Street is a critical tax base for New York City. This is during his weekly radio address last October.

MAYOR MICHAEL BLOOMBERG: The protests that are trying to destroy the jobs of working people in the city aren't productive. And some of the labor unions, the municipal unions, that are participating, their salaries come from the taxes paid by the people that they're trying to vilify.

AMY GOODMAN: What say you, Joe Stiglitz?

JOSEPH STIGLITZ: I think he's 100 percent wrong. I mean, basically, the fundamentals of a democracy are that you want people to express their views. They had hoped that the politicians would hear their voice. They had hoped that the politicians would address the inequalities in our society, the lack ofthe deficiencies in ourthe deficiencies in our financial system. And what became increasingly clear was that money was driving politics, which is an important point that I raise in the book. Money shapes markets. Markets don't exist in a vacuum. The way markets work is based on rules and regulation that come out of Congress. And when politics shapes those rules and regulations to help the 1 percent rather than to help the rest of our society, something is wrong. And whatthe protest movement was out of frustration, a sense that the democratic politics didn't reflect the view of the majority of Americansyou might say, of the 99 percent. And

AMY GOODMAN: Do you want to see it grow bigger? You were down there at Occupy.

JOSEPH STIGLITZ: I think it's very important that somehow we get a politics that reflects the interest of the majority of Americans. When we have a bankruptcy law, for instance, that says that first priority goes to derivatives, that encourages speculation in the financial markets. And when we have a bankruptcy law that says students cannot discharge their debt, no mattereven in bankruptcy, no matter how bad an education the for-profit schools give them, there's something wrong.

AMY GOODMAN: We're going to talk to you for a few minutes in post-show, put it online at democracynow.org, about what are the most important things to do right now. Nobel Prize-winning economist Joe Stiglitz, professor at Columbia University. The new book is The Price of Inequality: How Today's Divided Society Endangers Our Future.