Economist Joseph E. Stiglitz, PhD, whose work won him the 2001 Nobel Prize, blasted the continuing U.S. obsession with trickle down economics at a lecture at Fordham on March 9.
“An economy that fails to serve a majority of its citizens is a failed economy. In that sense, ours is a failed economy,” Stiglitz said to a standing room only crowd at the Rose Hill campus.
“The median income of a full-time male worker is lower than it was 40 years ago,” he continued. “We’ve been telling people every generation gets better. It’s not true.”
His talk, “Restoring Equitable and Sustainable Economic Growth in the United States,” was part of the Department of Economic’s Nobel lecture series and was also a reunion. Fordham economics professor Dominick Salvatore, PhD, noted in his introduction it was almost 10 years to the day that the Columbia University professor last spoke at the University.
Stiglitz recounted several ways to measure how the U.S. economy is failing. The true unemployment rate, which is officially 4.9 percent, is more likely twice that—a fact that has contributed to virtually zero wage growth over the last year.
Medium household income, meanwhile, is less than 1 percent higher than it was in 1989, he said. And even though the United States has recovered from the financial crisis of 2008, 91 percent of income growth over the last few years has gone to the top 1 percent.
Not only is income inequality a moral problem, it’s also bad economics, he said.
The reason inequality is a problem is that, although those at the top spend a much higher percentage of their income than those at the bottom, there are not enough of them.
“So if you move money from the bottom of the pyramid to the top like we’ve been doing, aggregate demand goes down,” he said. “And the recession has made things even worse.”
He also made the case that markets are not a good mechanism for managing structural transformations like the one the country is in the middle of now, as it moves from a manufacturing economy to less capital-intensive industries. The last transformation happened in the wake of World War II, when the country abandoned its agrarian roots.
The transformation was helped along by government programs that encouraged more spending, such as the G.I. Bill, he said. Even though the country was much poorer than it is now, it was much more generous.
“Seventy years ago, we said we could afford four years, eight years at the most expensive schools in our country, for anybody. When President Obama proposed two years of college education for our poorest, many people said ‘We can’t afford it.’
“I think the answer is, we can’t afford not to do it now,” he said.
He laid out several proposals toward a better economy, including imposing a carbon tax to fight climate change, more investment in infrastructure, increasing some tax rates, and an end to de facto austerity.
He reiterated that income inequality and stagnant wage growth is due to politics, not sound economics. With trickle down economics policies in place since the 1980s, “we were told we were all going to be better off, and then when that didn’t happen, what were told was we just have to do more,” he said.
“We’ve now had a third of a century,” he said. “I think we can conclude that that experiment failed.”