Minding the Gap of "The Great Divide"

In the wake of Occupy Wall Street and the anti-austerity protests in Spain, Greece, and elsewhere around the world, economic inequality has emerged as one of the more hotly debated issues in the public sphere. One of the more prominent voices in the discussion is economist Joseph Stiglitz, whose May 2011 Vanity Fair article "Of the 1%, by the 1%, for the 1%" provided the rallying cry of what became a global social movement. That essay and others that have appeared in Vanity Fair, The New York Times, and other publications over the last few years are collected in Stiglitz's latest contribution to the debate, The Great Divide: Unequal Societies and What We Can Do About Them. The book follows up on his previous bestseller The Price of Inequality: How Today's Divided Society Endangers Our Future in which Stiglitz examines the forces, market and political, that have contributed to America becoming the most unequal of the world's advanced countries.

Like that earlier book, The Great Divide argues that inequality is not the natural result of market efficiency but instead is due to "rent seeking" on the part of economic elites who have gained control of income-producing resources that have enabled them to become richer and richerer not by creating any new wealth but by greatly increasing their share of the wealth that already exists. An example Stiglitz cites several times in the book is Big Pharma, which makes minor adjustments in prescription drug formulas in order to keep them from becoming generic, thereby keeping prices high. Another example are the entertainment industry conglomerates, which for the most part have succeeded in extending copyright monopolies far beyond a work's original creation in order to reap economic rewards without  contributing much new to the marketplace of cultural production. At the same time, marginal tax rates on top incomes have dramatically decreased, from 50 percent in 1980 to 39.6 percent today with rates on capital gains and dividends, the sources where the wealthy derive most of their income, slashed even further to 15 percent. This has allowed the top 1 percent of earners to rake in some 95 percent of the nation's pretax income growth since the Great Recession of 2008 whereas the incomes of the vast majority of Americans have barely budged. This not only stifles growth and opportunity for the broad swath of people and by extension society overall, but has serious political implications for the democratic system as well, especially evident in the wake of the US Supreme Court decision in Citizens United.

A 2001 winner of the Nobel Prize for Economics, Stiglitz is recognized for his contributions to what is known as information economics, in particular the idea that markets are as a rule inefficient—contrary to the claims of neoclassicists—based on unequal access to information between buyer and seller. (The circulation of "lemons" in the used-car market is a prime example of "information asymmetry" whereby the seller knows more about the commodity being sold than the buyer and therefore has a comparative advantage in negotiating the price.) He is also a recipient of the John Bates Clark medal, which some consider more prestigious than the Nobel. He is a former Chief Economist of the World Bank and ex-Chair of the President's Council of Economic Advisors. Current Chair of the Board of Governors of the Federal Reserve System Janet Yellen is one of his doctoral students. Hardly a rogue economist, he is also a staunch critic of free-market fundamentalism (the notion that any interference with market processes diminishes their effectiveness), especially as it pertains to policies of neoliberalism, both domestic and international.

Stiglitz at Forum Invest FINANCE 2009 (CC-BY-AA 3.0)

As a compendium of articles written over a period of several years, there is a lot of repetition in the individual entries, oftentimes down to the same phrases. That is a bit distracting but it doesn't necessarily diminsh from the larger point being made. And to be sure, it cannot be repeated enough that our current travails are due to the malfeasance of certain vested interests (read: the uber-rich and their lackeys) who have handsomely rewarded themselves at the expense of everyone else and have for the most part escaped bearing any responsibility for what they have wrought. As the aforementioned Vanity Fair essay maintains, the 1 percent have rigged the system for their own benefit and to hell with the rest of us, in no small measure by buying up whatever political influence they have needed along the way. The examples include bailing out the money-center banks and their CEOs who engaged in predatory lending while allowing their unsuspecting borrowers to flounder in underwater mortgages and lose their homes to foreclosure, and making whole hedge fund investors—who given their supposed financial acumen and sophisticated economic forecasting tools surely knew the risks they were taking—while allowing pensioners to lose their life savings in imploding 401k valuations.

Stiglitz is essentially a Keynesian, and as such, sees a role for public-sector intervention into the economy during times of weak demand, such as the one many persuasively argue we are currently in. Stiglitz does not call for the end of capitalism as we know it, as Naomi Klein pretty much does in This Changes Everything. Rather, he calls for a mixture wonkish tweaks—increased taxes on corporations and the wealthy, tighter regulation of financial services, greater public investment in infrastructure, education, and technology, plus campaign finance reform—to mediate the deleterious effects of what he terms "ersatz capitalism" (which is a funny concept in that elsewhere in the book Stiglitz claims that there are no inherent laws of capitalism, so then how does one decide what constitutes the "inauthentic" kind?).

(Photo: Vince Carducci)

The more radical of Stiglitz's progeny within the 99 percent are not likely to be optimistic about the effects of these prescriptions, seeing them at best as whistling past the graveyard. And I must confess to being among the discontented. Although I concede that Stiglitz's remedies have a better chance than Thomas Piketty's call for a global wealth tax, if only because enacting something within the confines of a nation-state seems perhaps more feasible, if extremely unlikely given the current political environment, than transcending international borders into the realm where capital rules unrestrained.

Occupy the White House

Lego® White House (ages 12+ $49.95, click here to buy).

A couple of days after the November 6 election, my New School pal Sam Binkley posted this comment on his Facebook page:

As I see it, the occupy movement deserves a lot of credit. Nobody was talking about economic inequality before fall '11, but after all the media coverage of the various occupy groups, that theme became a fixture of the liberal and democratic narrative right up to the election, and remained a staple of Obama and other campaigns. Did I hallucinate that or did it happen?

He didn't elaborate on this sentiment, which he could have easily done from his perspective as a cultural sociologist, and perhaps he did in another context and I just didn't know about it. But I believe he's right. So I'd like to take a detour from my normal blogging beat to explain.

New Social Movement theory as laid out by Jean Cohen and Andrew Arato in their authoritative text Civil Society and Political Theory (MIT: 1994) can be seen to have four distinct phases of political action, which I call the four "I's." (Cohen and Arato use slightly different language but I feel that the alliteration has value as a mnemonic device.)

The first is identity, coming out as it were to declare one's right to openly exist in the public sphere. The individuals who physically showed up in the place originally known as Liberty Plaza Park in Lower Manhattan on September 17, 2011, in the opening episode of the Occupy movement, to protest growing social and economic inequality in the United States, embraced such a political identity. That public intellectuals such as Naomi Klein and Slavoj Zizek and celebrities such as Susan Sarandon, Mark Ruffalo, and Deepak Chopra, among others, put in appearances with the Occupy crowd further raised the profile.

The identity position of Occupy soon spread to other parts of the country and then around the world, leading to the second phase, namely, inclusion. In this phase, identity (in social theory lingo, subjectivity) establishes a collective aspect. More and more individuals recognize the identity/subjectivity as applicable to themselves and embrace it. This was neatly summed up by the slogan, "We are the 99 percent," which had numerous iterations in various media, from handmade banners and buttons to formal organizational designations.

The critical mass of inclusive identity led to the third phase, influence. While the mainstream media ignored the phenomenon in the early days, the Occupy movement soon became too large to ignore. The meme of the 99 percent vs. the 1 percent changed the national conversation just as Binkley asserts. In social movement theory, the ability to redirect public discourse toward your point of view is called "reframing," and it's a primary objective of consciousness-raising efforts of many varieties.

The final phase, institutionalization, is the most difficult to achieve. Cohen and Arato refer to it as "the politics of reform" in which the state accommodates the mandate of the movement within the official political process. Civil rights legislation is one of the more readily identifiable examples. The 2012 presidential election, I would argue in concurrence with Binkely, was another. Certainly in recent memory there has been no clearer icon of the 1 percent than Mitt Romney, a self-satisfied scion of the ruling class, apparent prep school bully and vulture capitalist, who made a quarter of billion dollars pillaging takeover targets of any value and then stashing who knows how much of it in offshore accounts to avoid taxes. He basically admitted as much himself with his infamous "47 percent" comment even if he low-balled the number by a tad under half.

But before we get too celebratory about all of this, I ask you to also consider the following. In their important study, Poor People's Movements: Why They Succeed, How They Fail (Pantheon: 1977), Frances Fox Piven and Richard Cloward observe that the institutionalization of social movement activism within the state apparatus and other establishment structures tends to effectively put people back in their place. The biggest gains tend to come in periods of disruption--the industrial labor movement in the 1930s is one example they give--only to be co-opted in their assimilation into the so-called mainstream, as in the subsequent evolution of the American union movement as a partner of management in the years since.

I have been convinced pretty much from the beginning that the first election of Barack Obama served a similar function in 2008, providing a cathartic release for the widespread disenchantment being felt among so many people with the dismantling of the American Dream under the Bush Administration. (This even though I admit to welling up with emotion when on election night as I watched the scenes being broadcast from Grant Park on TV as the President-Elect pronounced that "this [was my] victory.") And I further think that the 2008 election may very well have delayed the emergence of the Occupy movement by three years.

Whether the second Obama Administration turns out to be another Thermidorian Reaction remains to be seen. Although I did hear a rumor that the other day someone on K Street saw Grover Norquist blink. One can only hope.

Image: Vince Carducci

Addendum (November 30, 2012, 3:30pm): Paul Krugman's Op Ed piece in the Friday November 30, New York Times lends further support to the thesis.