Hillbilly Elegy (part 3)

September 7, 2016

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Subcultures as adaptations

J. D. Vance has vividly described the “hillbilly” culture into which he was born, but which he outgrew. He has also offered a critique of that culture, showing how its attitudes and behavioral norms can become obstacles to personal health, happiness and achievement.

As with much of the writing in the “culture of poverty” tradition, the critique can exaggerate how much the poor are responsible for their own way of life and all its problems. I fear that Vance is falling into this trap when he says that “these problems were not created by governments or corporations or anyone else. We created them, and only we can fix them.” But the cultures of “hillbillies” or inner-city blacks or Latino farmworkers are not self-contained worlds independent of the larger social environment. They are American subcultures that have always been shaped by the institutions of the dominant culture.

One does not have to be a strict social determinist to argue that subcultures adapt to the institutional realities of the surrounding society. People do create their own culture, often in surprisingly innovative ways. But they cannot do it in a social vacuum. People interact all the time with institutions like work organizations, schools, churches and governments, which provide both challenges and opportunities.  The lack of agency Vance complains about–the feeling that one lacks control over one’s life–arises especially because the poor and uneducated are in such a weak position in relation to such institutions. The poor don’t just need new attitudes and behaviors; they need empowerment.

At one point in his childhood, Vance was called upon to testify in court against his own mother, who had physically attacked him. That was when he noticed that “the social workers and the judge and the lawyer all had TV accents. None of us did. The people who ran the courthouse were different from us. The people subjected to it were not.” On that occasion, Vance lied in order to protect his mother and keep those strange-talking outsiders from hurting his family. Vance describes his people as preferring their own form of justice. “My people were extreme, but extreme in the service of something— defending a sister’s honor or ensuring that a criminal paid for his crimes. The Blanton men, like the tomboy Blanton sister whom I called Mamaw, were enforcers of hillbilly justice, and to me, that was the very best kind.” He does not analyze this further, but an informal, homemade system of justice is a predictable adaptation for people who see the official justice system as not serving their class of people very well.

When Vance is exploring the psychology of work, he says, “When groups perceive that it’s in their interest to work hard and achieve things, members of that group outperform other similarly situated individuals. It’s obvious why: If you believe that hard work pays off, then you work hard; if you think it’s hard to get ahead even when you try, then why try at all?” I would add the sociological point that such beliefs are shaped over time by social experience. When opportunities are opening up, as they were in the heyday of manufacturing expansion, people become more optimistic. But when opportunities are shrinking, families with few generations of success to remember are easily discouraged.  Subcultures do change, but they change slowly, and mostly in response to changing conditions. Vance mentions that the emigrants from coal country who found manufacturing jobs “had largely caught up to the native population in terms of income and poverty level” within two generations. But the postwar economic progress was not sustained long enough to eradicate the culture of poverty. Generations of restricted opportunity had created it, and generations of expanded opportunity were required to repair it.

Women’s agency

Another example of how American social institutions help account for subcultural adaptations involves women and sexuality. One of the best examples of the lack of agency Vance deplores is unplanned teenage pregnancies. They figure prominently in his story, since his mother became pregnant at 18 and his grandmother at 14. If sociologists have learned anything about gender in the past half-century of intensive study, it is that the institutions of patriarchal society are largely responsible for limiting women’s agency in general, and women’s control over their own bodies specifically. A lot of early pregnancies and shaky marriages are what you get when the dominant culture glamorizes sexuality and portrays women primarily as sex objects; when schools fail to provide sex education or limit it to preaching abstinence; when churches teach that sex is too shameful to discuss and contraception is sinful; when the local economy provides few career opportunities for women, so they see no life for themselves except as mothers; when good jobs for men are also in short supply, so they express their masculinity by obtaining and controlling women, sometimes by force, but not so much by supporting their families. This is also a vicious circle, since early motherhood can offer an escape from the troubled homes created by the previous generation of young mothers.

Blaming families for their own problems is easy. No one denies that what girls and boys learn at home can shape their gender roles for a lifetime and affect whether they express their own sexuality responsibly. Parents are primary carriers of culture, to be sure, but they cannot be expected to transform their received culture singlehandedly. Expecting families to change the culture without supportive changes in other social institutions is not realistic.

The politics of pessimism

Vance concludes his book by saying, “I don’t know what the answer is, precisely, but I know it starts when we stop blaming Obama or Bush or faceless companies and ask ourselves what we can do to make things better.” I imagine that few people will disagree with his call for more personal responsibility. I do note, however, that this is essentially the Ronald Reagan philosophy of government, “Ask not what your country can do for you; ask what you can do for yourselves.” Vance does not see much for government to do about the plight of the struggling working class, since “the fault lies almost entirely with factors outside the government’s control.”

In truth, neither of the major political parties has been offering much hope to the white working class lately. Hillary Clinton does not seem to be connecting with them very well at all. Donald Trump is speaking to them directly, but appealing to their prejudices and false hopes. He encourages them to blame their problems on foreigners and immigrants, reject climate change as a hoax, and hope for a return of coal mining jobs.

But I think something is lost if citizens of a democracy become too pessimistic about their own government. Vance doesn’t want people to blame government for their problems, but he doesn’t want them to look to government for solutions either. In that respect, he can be accused of reinforcing the alienation from mainstream institutions that is a familiar trait of “hillbilly” culture. By focusing on agency as a psychological characteristic, he overlooks the value of the social agency that arises when citizens cooperate together in a common political cause.

One thing that government is going to have to do is increase support for higher education, so that students can go to college without accumulating massive debt. States have been cutting spending on education at the same time that the educational requirements of good jobs have been rising. (Vance should appreciate that need, since his own success story depended on a state-supported university and generous financial aid from a private law school.) Another thing for government to do is to promote industries that have realistic hopes of creating good jobs. The solar industry already employs a lot more people than the coal industry. Ironically, Hillary Clinton is the one calling for these things (when she can be heard over the clamor for her emails), but she is getting her least support from working-class whites who might benefit from them.

Assuming the Trump candidacy fails, as I hope it does, I would like to see the white working class join other disadvantaged groups in a progressive coalition for realistic socioeconomic change. If that seems improbable, we should remember that that’s what they did during the Roosevelt era.



Hillbilly Elegy (part 2)

September 6, 2016

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J. D. Vance describes himself as a “cultural emigrant” from the “hillbilly” culture of his youth to the upper-middle-class world of educated professionals. That puts him in a somewhat detached position, from which he can see his former world as not just a collection of individual characters, but as a common culture with typical beliefs, values and patterns of behavior.

One major theme of the book is that “social class in America isn’t just about money.” It’s also about lifestyle, and upward mobility is unlikely without changes in lifestyle. The attitudes and behaviors people acquire in their early socialization can get in their own way.

William H. Whyte classically defined the “Protestant ethic” as an ethic of hard work, thrift and self-reliance. Vance sees too much of the opposite: laziness, overspending and blaming others for one’s problems. To be fair, he doesn’t actually use the world “lazy,” but he does say, “We choose not to work when we should be looking for jobs. Sometimes we’ll get a job, but it won’t last. We’ll get fired for tardiness, or for stealing merchandise and selling it on eBay, or for having a customer complain about the smell of alcohol on our breath, or for taking five thirty-minute restroom breaks per shift.” Without denying the reality of these problems, I will note that Whyte, writing in the 1950s, was questioning how much of a work ethic American society really wanted anymore. Prosperous, corporate American seemed to be placing increasing value on leisure, spending, and reliance on big organizations. Sometimes I wonder how long many higher-class people would last in some of the grueling jobs that poor people have to do. But I digress.

Vance’s number one complaint is that too many “hillbillies” lack a strong sense of personal agency, a belief that their choices matter and that they can take control of their own lives. That puts them in a strange relationship with their own government. On the one hand, “a large minority are content to live off the dole.” On the other hand, many like to blame the government for their problems. And those who are trying to uphold the traditional work ethic, at least in theory, may blame government for spending too much on public assistance.  Vance suggests that this is a bigger reason why so many low-income whites have abandoned the Democratic Party than the Party’s support for the Civil Rights Movement. I’m not so sure that those two issues can be separated, since white resentment of government spending is probably strengthened by the perception that people of color are getting more help than white people are. In any case, Appalachian whites have shifted their allegiance to the party of limited government even as their economic vulnerability and potential dependency have been increasing.

Vance describes his people as uniquely pessimistic and cynical, much more so than Latinos or blacks. They are patriotic in a vague sort of way, but do not currently have any heroes as they once had Franklin Roosevelt. Largely detached from the wider society, they can be intensely loyal to kin and react violently to perceived threats from outsiders. They pride themselves on their toughness, which they rely on to compensate for other weaknesses. As a child, Vance had a lot of opportunities to learn about drinking, yelling and fighting, but not much else about being a man.

Reacting strongly against the idea of blaming others for one’s problems, Vance concludes that “these problems were not created by governments or corporations or anyone else. We created them, and only we can fix them.”

I have a concern about this perspective that I will elaborate in my next post. I think that Vance’s discussion of “hillbilly” culture is strong on personal observation but weak on analysis. He is, after all, a young lawyer, not a sociologist, anthropologist or economist. He makes the world he describes sound too much like a standalone culture, as if we had just discovered it in some remote jungle. It is, rather, an American subculture shaped and reshaped by the institutions of American society. Those institutions include churches and schools, and yes, government and corporations. American institutions, from coal companies to Bible Belt churches, have been a demonstrable part of the problem, and institutional change as well as personal change will have to be part of the solution.


Hillbilly Elegy

September 5, 2016

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J. D. Vance. Hillbilly Elegy: A Memoir of a Family and Culture in Crisis. HarperCollins Kindle Edition, 2016.

First, I want to express my discomfort with the word “hillbilly,” a word I have rarely spoken. For many, it is a derogatory term. Vance uses it because that’s the way his family described themselves, but I will use the quotation marks to indicate that it is his term, not mine.

J. D. Vance is a young man who overcame a troubled family history to graduate from Ohio State and Yale Law School. He says that he still identifies with the people he grew up with, “the millions of working-class white Americans of Scots-Irish descent who have no college degree. To these folks, poverty is the family tradition–their ancestors were day laborers in the Southern slave economy, sharecroppers after that, coal miners after that, and machinists and millworkers during more recent times.” The story of such people is a story of generations of economic hardship, considerable upward mobility during the booming manufacturing economy after World War II, but a return of hard times for those displaced by the recent loss of manufacturing jobs.

This is not, however, primarily a book about economics. It is a book about the “hillbilly” culture that often gets in the way of personal achievement. Vance sees it as “a culture that increasingly encourages social decay instead of counteracting it.” Vance found that he had to overcome many of the self-defeating attitudes and behavior patterns he encountered among his own friends and relations. Fortunately he got some more positive messages too, messages about working hard and doing well in school, especially from his grandparents. They had gotten out and moved up themselves during the postwar boom, although they continued to lead troubled lives in many ways.

Vance says that he always thought of Jackson, Kentucky, where his great-grandmother lived, as his home, although he was born and raised in Middletown, Ohio. His grandparents, always referred to as Mamaw and Papaw, moved to Ohio “at the tender ages of fourteen and seventeen,” forming a hasty union as a result of teenage pregnancy. They joined a massive migration out of Appalachia to the industrializing cities, a migration Vance describes as spreading the “hillbilly” culture as well as the people. Papaw got a job at a steel company and provided a good income. The first baby lived only a few days, but the couple had three more, the second of whom was J. D.’s mother Bev. The marriage became increasingly troubled, however. Vance describes his grandfather as a violent drunk, and his grandmother as a socially isolated violent non-drunk.

Vance describes his mother Bev as a good student, but she chose marriage over college when she became pregnant at eighteen. She went on to have five failed marriages and a serious drug problem. Vance says that what he hated most about his childhood was “the revolving door of father figures.” He was born in 1984, a product of his mother’s second marriage, which lasted only a couple of years. He was later adopted by his mother’s third husband. After that marriage ended too, his mother became more erratic in her behavior, more drug-dependent, and sometimes abusive. J. D. began to live much of the time with his grandparents, who still lived close by, although they too were separated. “Mamaw told me that if Mom had a problem with the arrangement, she could talk to the barrel of Mamaw’s gun.”

Vance also relied heavily on his older half-sister Lindsey, whom he describes as the person he has been proudest to know. As their mother’s parenting deteriorated, Lindsey assumed a more adult-like role, and went on to have a successful marriage. After she moved out, J. D. lived for a time with his biological father, who had remarried. Then he came back to live with his mother and her latest husband. When that marriage ended, he spent the last two years of high school living with Mamaw exclusively. That’s what he says turned his life around. During that time he showed dramatic improvement at school, both academically and behaviorally, for which he gives Mamaw much of the credit.

After finishing high school, Vance entered the Marine Corps, which “taught me how to live like an adult.” The Marines assumed that everyone needed to learn basic things like personal hygiene and how to balance a checkbook. By the time he left, he had risen to the position of media relations officer for a large military base. After the Marines, he attended Ohio State and Yale Law School. Because he was poor, Yale gave him a substantial financial aid package. He was the first person in his nuclear family to go to college and the first in his extended family to go to professional school.

At Yale, Vance had the good fortune to meet, and later marry, a law student from a much more stable background. Here he uses a standard list of “adverse childhood events” (ACEs), to make the point. They include things like parental divorce, drug abuse, domestic violence, depression and suicide. Vance had six ACEs in his background, while his partner had none. While his basic approach to relationship issues was fight or flight–attack or run away–he learned from her how to stay and talk problems through. Here is Vance’s rather caustic summary of what he had learned about conflict resolution in his childhood:

Never speak at a reasonable volume when screaming will do; if the fight gets a little too intense, it’s okay to slap and punch, so long as the man doesn’t hit first; always express your feelings in a way that’s insulting and hurtful to your partner; if all else fails, take the kids and the dog to a local motel, and don’t tell your spouse where to find you— if he or she knows where the children are, he or she won’t worry as much, and your departure won’t be as effective.

As such comments make clear, the book is not just an autobiography, but a critique of “hillbilly” culture. My next post will go more deeply into that critique.


Postcapitalism (part 2)

May 4, 2016

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Paul Mason’s perspective on the current plight of capitalism develops from his understanding of the crises that have occurred periodically in the history of capitalism. The current crisis resembles past crises in many respects, but differs from them in ways that are crucial to his central argument. The current crisis has taken shape more slowly and been resisted more successfully for a time, but will ultimately result in a more profound transformation.

Long cycles of capitalism

The historical part of the book focuses on the “long cycles” of capitalism first described by Nikolai Kondratieff. He discovered a roughly fifty-year cycle of economic activity, divided about evenly between an upswing and a downswing. He described the upswing as a period of technological innovation and high investment, followed by a period of slower growth or contraction, usually ending with a depression. Mason uses these dates for the first four long cycles:

  1. 1790 to 1848
  2. 1848 to mid-1890s
  3. 1890s to 1945
  4. Late 1940s to 2008

Each cycle has its key industries where innovation and growth are centered, such as the steam-powered factory in cycle 1, railroads and machine-made machinery in cycle 2, mass production and electrical engineering in cycle 3, and mass consumer goods like automobiles in cycle 4.

In the late 1990s, a fifth cycle began, “driven by network technology, mobile communications, a truly global marketplace and information goods.” But instead of transforming production, it has stalled out, while the previous cycle has hung on longer than normally expected. Mason’s theory of cycles tries to explain why.

A theory of cycles

In very brief form, Mason’s theory says this: During the upswing of a long cycle, capital that has built up in the financial system flows into new technologies and markets, “fueling a golden age of above-average growth with few recessions.” Because the economic pie is expanding so rapidly, achieving social peace by giving everyone a piece of it is easier. Workers who are displaced by labor-saving improvements can usually find employment in expanding industries.

At some point, the upswing peaks out. “When the golden age stalls, it is often because euphoria has produced sectoral over-investment, or inflation, or a hubristic war led by the dominant powers.” There are limits to how much capital can be invested productively in the same technologies and industries. As for “hubristic wars” I assume he means that nations foolishly squander their wealth trying to grab too large a share of the world’s markets and raw materials. I will add that although military spending can stimulate the economy in times of recession, wars have had devastating effects on many healthy economies, with the impact of World War I on Europe the prime example. “War is good for the economy” is not a very safe bet.

When  dominant industries stop expanding and profits stop rising, employers become more resistant to wage demands, and they may also try to reorganize production to replace skilled workers with lower-skilled workers and machines. Worker resistance increases as displaced workers have fewer alternatives. If profits continue to fall, “capital retreats from the productive sector and into the finance system, so that crises assume a more overtly financial form.” I take that to mean that capital that is not invested productively can only finance debt and inflate the value of stocks and other assets beyond their earnings value. Financial panics and depressions occur when the debtors default and the asset bubbles burst.

Mason thinks that traditional descriptions of long cycles focus too exclusively on waves of technological innovation (not to say those are not important), and not enough on falling profits, class conflict, and the intervention of the state. In the first three historic cycles, businesses tried but ultimately failed to maintain profits by squeezing the workers. When economic conditions and social unrest got out of hand, the state acted to facilitate the transition to the next cycle.

In each long cycle, the attack on wages and working conditions at the start of the downswing is one of the clearest features of the pattern. It sparks the class warfare of the 1830s, the unionization drives of the 1880s and 90s, the social strife of the 1920s. The outcome is critical: if the working class resists the attack, the system is forced into a more fundamental mutation, allowing a new paradigm to emerge….The history of long cycles shows that only when capital fails to drive down wages and when new business models are swamped by poor conditions is the state forced to act: to formalize new systems, reward new technologies, provide capital and protection for innovators.

The issue of falling profits deserves additional attention, but I’ll save that for when I discuss Mason’s theory of value in the next post.

The prolonged fourth cycle

Something different happened during the downswing of the fourth cycle, beginning in the 1970s. As in previous cycles, the growth in productivity slowed. The initial responses were inflationary rather than deflationary. Businesses kept giving in to the wage demands of highly organized workers, and government social spending also increased, although both wages and benefits were eroded by rising consumer prices. As wages went up faster than productivity, profits were squeezed. Business then launched a very successful attack on workers and government, blaming both of them for inflation. Globalization enabled corporations to eliminate high-wage, unionized manufacturing jobs in the developed countries, while finding new sources of revenue in the developing countries.

All this meant that profits could be maintained without transitioning beyond fourth-cycle capitalism. There was a twenty-five-year surge of productivity in the developing world, between 1981 and 2006. But in the developed countries, productivity growth continued to fall, and yet profits remained high because of stagnating wages. Inequality rose to Gilded Age levels, but until recently popular resistance has not been strong enough to force serious systemic change.

So we have been living in a strange time, suspended between an old system that no longer works for enough people and a new one that can’t quite get going. “Alongside higher profits, the overall rate of investment after the 1970s is low.” There is something odd about an economy in which capitalists make so much money while investing so little in the economic progress of their own countries. But another major transition cannot be put off forever.

A fifth cycle?

Twenty-five years ago, I taught a course on Social Change using Daniel Chirot’s Social Change in the Modern Era as a text. Chirot used long-cycle theory as a framework, and he said this about the fifth cycle he saw emerging at the time:

We can expect that the present fifth industrial cycle will gain ground, transform economies and societies, make life ever more materially comfortable, and then come to some sort of end in a half-century or so. Then, a new crisis will come, and a sixth as yet quite unknowable, industrial cycle will begin.

I gave a lecture which began, according to my notes, “Chirot may be right, but I want to raise the possibility that we are coming to the end of an era, not just a transition between cycles.” I based that suggestion on several far-sighted books of the 1980s, such as Christopher Chase-Dunn’s Global Formation: Structures of the World Economy, and James Robertson’s Future Work: Jobs, Self-Employment and Leisure after the Industrial Age.

Mason’s position is basically the same. The new cycle that has begun without yet coming to fruition represents a more fundamental threat to capitalism. That would explain why resistance is so strong, and why capitalists would prefer to export existing forms of production to other countries rather than improve upon them at home.



The Price of Inequality (part 2)

December 12, 2012

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The previous post summarized Joseph Stiglitz’s discussion of the market inefficiencies that allow more inequality than is necessary to reward productive activity. In any free market, some will be more successful than others; the problem is that the winners can win in ways that erect barriers to the success of others, or impose costs on the rest of society, or take advantage of privileged access to information. The excessive inequality that results then undermines social mobility, aggregate demand, investment in public goods, and economic growth in general. Contrary to the view that less government is always better economics, Stiglitz sees an essential role for government in keeping markets fair and efficient, countering tendencies toward excessive inequality, and encouraging economic growth for the benefit of all.

In general, the policies that Stiglitz recommends flow naturally from his understanding of market inefficiencies and limitations. Where markets allow companies to capture private benefits while evading responsibility for social costs (such as environmental damage), government can restore the balance with taxes and regulation, and make sure that producers pay a fair price for access to public resources (such as oil on federal lands). Where markets tend to give unearned benefits to those with inside information (such as bankers who know that some of the securities they market have been designed to fail), government can insist on regulated exchanges with greater transparency. Where markets underinvest in public goods, government can specialize in the creation of public goods. Where markets leave a large segment of society too poor to afford the products that they offer, government can use progressive taxation and spending to stimulate aggregate demand. Where markets erect barriers to upward mobility, government can provide better access to education and health care, as well as “active labor market policies” to help workers transition to occupations in which their labor is needed. It can also impose estate taxes to keep the children of the rich from enjoying large unearned advantages over other children.

All of these things are easier said than done, for the simple reason that the same inequalities that distort the economy also distort the political process, undermining government’s ability to address the inequalities. Stiglitz calls this an “adverse dynamic” or “vicious circle,” a self-amplifying feedback loop perpetuating and strengthening social inequality.

As the wealthy get wealthier, they have more to lose from attempts to restrict rent seeking and redistribute income in order to create a fairer economy, and they have more resources with which to resist such attempts. It might seem
strange that as inequality has increased we have been doing less to diminish its impact, but it’s what one might have expected. It’s certainly what one sees around the world: the more egalitarian societies work harder to preserve their social cohesion; in the more unequal societies, government policies and other institutions tend to foster the persistence of inequality. This pattern has been well documented.

Economic elites use a variety of tactics to tilt the political playing field in their favor. They employ lobbyists to make their case, and gain access to politicians with large campaign contributions (minimally regulated thanks to recent Supreme Court decisions). They “use their political influence to get people appointed to the regulatory agencies who are sympathetic to their perspectives,” so-called “regulatory capture.” In the global economy, capital can flow toward countries with the most permissive tax and regulatory policies, and international bankers have enormous power over countries that rely on foreign capital. “If the country doesn’t do what the financial markets like, they threaten to downgrade the ratings, to pull out their money, to raise interest rates; the threats are usually effective.”

In a nominally democratic country like the United States, ordinary people can theoretically outvote the wealthy. Much of Stiglitz’s political discussion concerns the question of why they don’t do so more often, that is, why people frequently vote against their own economic self-interest. Here he draws heavily on behavioral economics, which tries to understand “how people actually behave–rather than how they would behave if, for instance, they had access to perfect information and made efficient use of it in their attempts to reach their goals, which they themselves understood well.” Economic elites benefit from the fact that “many, if not most, Americans possess a limited understanding of the nature of the inequality in our society: They believe that there is less inequality than there is, they underestimate its adverse economic effects, they underestimate the ability of government to do anything about it, and they overestimate the costs of taking action.” In addition, the wealthy use their economic power to market their ideas, cleverly framing policies that benefit the few to make them appear beneficial to all. Weapons programs that profit defense contractors are always described as good for the economy, while the same amount to protect the environment is just “wasteful government spending.”

The media play a crucial role here, either performing a public mission of informing the citizenry, or just presenting whatever programing brings in the most advertising revenue, including political advertising revenue. In the US, not surprisingly, the media underperform their public mission, leaving citizens at the mercy of the advertisers with the deepest pockets. Stiglitz sees this as another example of rent-seeking: The media get an unearned private benefit from free access to a public resource, then use it in a way that produces private profit at the expense of democratic discourse. “The public owns the airwaves that the TV stations use. Rather than giving these away to the TV stations without restriction–a blatant form of corporate welfare–we should sell access to them; and we could sell it with the condition that a certain amount of airtime be made available for campaign advertising.” If the public is too often misinformed, manipulated, and alienated from a political process that doesn’t represent them very well, that works to the advantage of the economically powerful: “If voters have to be induced to vote because they are disillusioned, it becomes expensive to turn out the vote; the more disillusioned they are, the more it costs. But the more money that is required, the more power that the moneyed interests wield.”

The result of this distorted democracy is that legislation to serve the public interest is extremely difficult to pass. The government is prohibited from bargaining with pharmaceutical companies over the price of prescription drugs, costing the taxpayers an estimated $50 billion a year. Banks have succeeded in blocking most regulations intended to protect student borrowers from fraudulent educational programs, as well as most state laws intended to curb predatory lending. Patent law protects the interests of large corporations and their lawyers, but allows them to “trespass on the intellectual property rights of smaller ones almost with impunity.” Corporate executives who perpetrate fraud are rarely penalized personally for doing so. The recent housing crisis revealed that the foreclosure laws make it easy for banks to foreclose without actually proving that homeowners owe the amounts claimed. And on and on.

The biggest battle over public perceptions is fought over the role of government in the economy, over the Reagan question of whether government is the solution to economic difficulties or government is the problem. Since the Reagan years, conservatives have had great success convincing politicians, the media, and much of the general public that conservative fiscal and monetary policies are good for the economy, even if they favor the wealthy and aggravate inequality. In fiscal policy, the conservative approach is to tax and spend less; this is supposed to help the economy by freeing up capital for private investment. (Conservatives often support increases in military spending, however, which in combination with tax cuts produce large deficits.) Stiglitz acknowledges that constraints on taxes and spending might make sense under some conditions: “Of course, when the economy is at full employment, more government spending won’t increase GDP. It has to crowd out other spending….But these experiences are irrelevant…when unemployment is high (and it’s likely to be high for years to come) and when the Fed has committed itself to not increasing interest rates in response.” Under these conditions, government can borrow cheaply and spend with great economic effect, increasing the size of the pie for all.

The government could borrow today to invest in its future— for example, ensuring quality education for poor and middle-class Americans and developing technologies that increase the demand for America’s skilled labor force, and
simultaneously protect the environment. These high-return investments would improve the country’s balance sheet (which looks simultaneously at assets and liabilities) and yield a return more than adequate to repay the very low interest at which the country can borrow. All good businesses borrow to finance expansion. And if they have high-return investments, and face low costs of capital— as the United States does today— they borrow liberally.

Stiglitz maintains that government spending can help the economy even if it is balanced by higher taxes to avoid increasing the deficit:

There is another strategy that can stimulate the economy, even if there is an insistence that the deficit now not increase; it is based on a long-standing principle called the balanced-budget multiplier. If the government simultaneously increases taxes and increases expenditure— so that the current deficit remains unchanged— the economy is stimulated. Of course, the taxes by themselves dampen the economy, but the expenditures stimulate it. The analysis shows unambiguously that the stimulative effect is considerably greater than the contractionary effect. If the tax and expenditure increases are chosen carefully, the increase in GDP can be two to three times the increase in spending.

That means that by insisting on low taxes for the wealthy and low spending on public goods, the economically powerful and their political allies are putting private gain before the public good. They are not only promoting social inequality, but they are impeding rather than facilitating economic growth.

Stiglitz is also a long-time critic of conventional monetary policy, as practiced by the Federal Reserve, the European Central Bank and the International Monetary Fund. He believes that the so-called “independent” central banks have been captured by the financial sector, so that they serve private rather than public interests. Their main focus has been on fighting inflation, a policy that has the greatest benefit for wealthy lenders (since they have the most to lose if loans are repaid in devalued currency). Central banks tend to raise interest rates too quickly during an economic expansion, cooling the economy and maintaining unemployment at an unnecessarily high level. On the other hand, in the Great Recession governments have relied on expansionary monetary policy, pumping more capital into the system by lending banks money at near-zero rates. This is less effective than an expansionary fiscal policy, since the problem is not so much a lack of capital as a lack of spending. But it’s a sweet deal for banks, who get money so cheaply that they can make a good profit even from very low-risk investments like treasury bonds, and are not required to invest it in productive enterprises or housing loans. Cheap capital also encourages companies to finance labor-saving equipment instead of employing more workers, contributing to a jobless recovery.

Stiglitz describes a system so tilted in favor of the rich as to leave the reader pessimistic about finding any way out of the vicious circle of economic and political inequality. In the end, he suggests two general routes to reform. One is that “the 99 percent could come to realize that they have been duped by the 1 percent: that what is in the interest of the 1 percent is not in their interests.” The other is that the 1% themselves come to see beyond their own narrow and short-term self-interest. Although the wealthy have become more and more insulated from the problems experienced by ordinary people, that insulation is not absolute. If the United States were to become as unequal as a Latin American oligarchy, there would be plenty of costs to go around as a result of underutilized human talent and social unrest. Even Brazil, one of the world’s most unequal societies, has been taking steps to alleviate inequality recently. No doubt Stiglitz hopes that books like his can sound the alarm and help change opinions at all levels of American society.