Video: Dr. Joseph E. Stiglitz Interviewed by Cenk Uygur, June 15, 2012, with Full Transcript

Cenk Uygur: Hi, we’re back on the Young Turks and we are going to talk about income inequality here. It is interesting that there is a huge misconception that people have about inequality. In fact, they did a poll on this, and they asked, what do you think should be the right amount of percentage of wealth for the country to have for the top 20%? And the American people said that 30% of wealth should be in the top 20%.

Now that makes sense, right, and it’s logical: they are in the top 20% so they should get more than 20%, right? And I actually think that number should be higher.  I guess the country is more liberal than I am, significantly more liberal than I am.

But when you ask them, hey, what do you think is the percentage of wealth for the top 20%, then they answer 60%. But when you find out the reality, [the real percentage of our country’s wealth that the top 20% of our population have], it is actually 85%!  It’s a much more unequal society than they realized, let alone what they think it should be.

A guy who has written a little bit about this and might know a thing or two about inequality is Dr. Joseph Stiglitz. He is a Nobel Prize winner, in fact, he has won really one and a half: one he shares with Al Gore in some ways as part of a team, and also of course a Nobel Prize in economics. The book is “The Price of Inequality and How Today’s Divided Society Endangers Our Future”, and he teaches at Columbia University. Now great to have you here.

So now we are told by the Republicans and conservatives, no, inequality is awesome because if you give all the money to the rich, eventually, you know, they are so productive that they actually raise everybody’s standard of living. True or untrue?

Joseph Stiglitz: Untrue. This is the old-fashioned old idea of trickle down economics. Throw enough money at the top, everybody benefits. I wish it were true because we’ve thrown so much money at the top, yet if it were true, we’d all be great.

In fact, in recent years the middle has been doing very badly. The middle median income today is the same as it was a decade and a half ago in terms of wealth. New numbers just coming out this week from the Federal Reserve show that the wealth of the middle America is the same as it was the in beginning of the ‘90s.

Cenk Uygur: So no increase there. In fact I’ve seen the charts between 2001 and 2010, it went way down for middle-class earners. The only category it went up for unsurprising was the top 10%.

Joseph Stiglitz: And the top 1% did fantastically. They’re getting now 20% of all the income. In 2010, the year of recovery, they got 93% of the gains.

Cenk Uygur: So it appears that it’s a trick really to take money from the middle class and to give it to the very rich, and that the rest of it is just a bunch of excuses. We are going to talk more about inequality in a second but let’s talk about the politics of it for a second here before we move on.

Do you think that all of the people at those so-called think tanks who are funded by the Koch Brothers, etc., right, all the Republican politicians, some of the Democratic politicians, may actually have bought into this myth, or do you think, ah, this will be a nice cover for all of us to get paid.

Joseph Stiglitz: I think it is a sales job they’re doing. An example [was] with Paul Ryan:  when the data came out about how it would influence society, he said, we don’t care about equality of outcome. What we care about is equal opportunity.

The sad fact is that the United States is not only the country with the most inequality in outcomes, it is the country with the least equality of opportunity.  [Today in America, a] kid’s life prospect is more dependent on the education and income of his parent than in any advanced industrial country for which we have data on.

Cenk Uygur: Now that fact is never publicized in this country. And that’s why I often times get really frustrated with Democrats. I don’t think that they are progressives in reality. Because if you were a true progressive, wouldn’t you shut out from the roof tops, we killed equality of opportunity? We are supposed to be the land of opportunity. We are ranked the worst in that now among these developed countries.

So you say that there are other harms to inequality: increasing instability, reducing productivity, and undermining democracy. Why is that the case?

Joseph Stiglitz: Taking instability, it is not an accident that in the run-up to this recession, inequality reached such a high level. And in the run-up to the Great Depression, inequality reached a peak. The principle is very simple. Those at the top don’t consume all of their income. Those at the bottom do; they have no choice. So when we take money from the bottom to the top, total demand goes down.

There’s a tendency of the Fed when they see demand down to try to goose the economy. And that’s what they did in the years before the crisis. They goosed the economy through a bubble. But a bubble is not going to be sustainable; every bubble eventually breaks. And so that’s how inequality generates the kind of instability that we are going through.

One of the reasons we’re having such a weak recovery is demand is so weak. And one of the reasons demand is so weak is we have so much inequality.

Cenk Uygur: It seems like there’s a battle between enlightened self-interest [and short-term greedy] among the rich, because some rich, some millionaires, are coming out and saying, wait a minute, if there is no one buying our products, we are all going to go broke, right? And the guys who are short-term greedy, saying, no, I want all the taxes, I want all the money, etc. And if we go in this direction, one, I feel like they are going to crash the economy again and this time even worse. Am I being too pessimistic about that, or do you think that is the direction we are headed?

Joseph Stiglitz: I think that there is a significant risk, and let me put it in the following way. One of the lessons that most economists took out of the crisis was that we needed, for instance, to get our banks back to the boring business of lending and away from gambling and risk-taking. We didn’t do that. We said we have to make our banks more transparent. We didn’t do that.

In fact, in some ways the financial sector is worse because we made our big banks even bigger: too big to fail; too big to be held accountable. And the result of that is there is an incentive for them to engage in more risk-taking.

Cenk Uygur: Is it definitely going to blow up again?

Joseph Stiglitz: I don’t want to go that far but I think the risk is very high.

Cenk Uygur: Yeah I would. I think it’s inevitable. It’s just a matter of logic. If you keep taking this level of risk you will at some point crash.

Joseph Stiglitz: A chief example is what happened to JP Morgan. One company betting so much, losing overnight $2, $3, $4 billion, but we don’t know how much because it [the behavior of the banks] is so lacking in transparency.

Cenk Uygur: Exactly right. Now don’t just take my word for it. Nobel Prize winner in economics here, Professor Stiglitz, thank you so very much for joining us. We really appreciated it.

Transcribed by The Barefoot Accountant
Accountants CPA Hartford, Connecticut, LLC
Certified Public Accountant
Certified QuickBooks ProAdvisor

Cenk Uygur failed to follow up with the most critical question for the interview of Professor Joseph Stiglitz: so what do we have to do to reverse this inequality in income and wealth?

Speaking for Professor Stiglitz, the answer is obvious: reverse the process that has been occurring over the past thirty (30) years. Raise the highest marginal tax rates significantly on the wealthy, change the tax laws to end subsidies and tax loopholes for the wealthy, eliminate the capital gains tax rate for investment income, including that on the “carried interest” of investment CEOs and hedge fund managers, return the estate tax to previous levels and exemptions.

In addition, slash our imperialistic military budget, and instead of building infrastructure on foreign soils, invest in our infrastructure at home, creating jobs here in America.

Finally, reinstate and enforce both the Glass-Steagall Act as well as the Sherman Anti-Trust Act, separating commercial from investment banking and breaking up the big banks.

This was the failure of President Obama, who ran in 2008 on a platform of “change”, “hope and change”, “change you can believe in”, “change the way Washington works”. President Obama surrounded himself with Wall Streeters instead of Progressive economists like Professor Joseph Stiglitz, Paul Krugman, and Robert Reich.

William Brighenti, Certified Public Accountant, Certified QuickBooks ProAdvisor
Accountants CPA Hartford, Connecticut, LLC