The United States of America is one the nations that has experienced economic inequality in the recent past. Economic inequality involves technological and social changes, which produce a two-level society. The inequality in America meant that there were distinct differences between social classes. The market is no longer free because most of the people especially those in the lower social classes cannot afford most of the commodities in the market. As such, the market is left for those in the middle and upper classes. The problem of inequality has had significant impacts on the economy of the United States of America as well as other global economies. This is what provoked authors and economic analysts like Joseph Stiglitz and others to dig deep into the matter. As a result, Joseph Stiglitz has written a book titled ‘The Price of Inequality’, which is an analysis of the inequality situation in America. In the book, Joseph Stiglitz writes about the possible causes, impacts, and solutions of inequality in America.
In his book, Joseph Stiglitz argues that the price of inequality in America was not by chance. He indicates that it was created by interplay of various factors. However, according to Joseph Stiglitz, the political factor is the most prevalent factor in the problem of inequality. He affirms that inequality is as a result of a political system which is money driven, thus grant more power to the most influential people in the society. Those with power in the society are given the privilege of enjoying favorable treatments on tax and the government protects their market share as well as other forms of benefits. These benefits are what economists refer to as “rent seeking.” The conservatives of a nation normally advocate for pure free markets in which every person in the nation can afford a standard lifestyle. However, this is not the case in most economies because of the conversion of economic power into political power. Those in politics tend to be the wealthy people in the society. They are the same people who run the government once elected as leaders. Therefore, when elected into the government they make policies that would favor them. For instance, in most of the countries including the United States of America, political leaders enjoy tax-free salaries. On the other hand, the burden of taxation is bestowed on the less fortunate people in the society. This is what Joseph Stiglitz notes in his book as monopolistic power.
The monopolistic powers, which Joseph Stiglitz claims the political leaders have, also include the evasion of estate tax and having unrestricted campaign contributions. In the latter, the political leaders organize fundraisings and get donations from friends and well-wishers during their campaigns, but all the accumulated funds are neither taxed nor commissioned. This happens at the expense of the other members of the society especially those in the lower social classes. This is because the huge sums of money collected have economic impacts such as high inflation rates thus causing inequality. Therefore, by concentrating wealth on a specific group of people, the American government is hurting the economy since only the wealthy get the opportunity to control economic decisions given their political powers. The political leaders make policies that favor them only hence creating monopoly in the economy distribution.
In addition to this, the policies also restrict market competition, something that is unhealthy for any growing economy. In his book, Joseph Stiglitz argues that a healthy economy is one with a free and competitive market. However, this is not the case in the American economy where power is concentrated in private hands only. The powerful in America use their power to gain revenue at the expense of the less fortunate people in the society who coincidentally happen to form the largest part of the population. As such, the powerful destroy the functioning of markets thus affecting the whole economy. It is because of this that Joseph Stiglitz urges the American government to adjust its regulations for the economy to function and behave as expected.
Further in the book, Joseph Stiglitz mentions that the economy is not only threatened by democratic politics but also by other factors such as capitalism, low productivity, fueled crisis, and growth retardation just to mention a few. The aforementioned factors thus lead to inequality in housing, schools, and presence of other social amenities. As mentioned earlier in the paper, those affected most by inequality are those in the lower social classes. The reason behind this is not only the high market prices being experienced but also the fact that their leaders have selfishly shared the national cake among themselves. Upon getting the largest share of the national cake, the political leaders fail to re-distribute it to the other members of the society through other ways such as development of infrastructure. Since the rich people only need a few of the public services, those suffering as a result of their selfishness are those in the middle and lower social cases who need them to survive. For instance, the rich political leaders have the money to take their children to better schools in other developed nations while those of the poor people remain without proper education in their own nation. The same applies to other important social amenities like health facilities and roads among others.
Joseph Stiglitz argues that income distribution is a political process as well as economic one because the political leaders are worried of the government redistributing their income. They therefore interfere by using their political influence to evade tax and curtail the spending of the government. This has in turn led to sabotage of the American values and identity given the emergence of inequality. If not properly checked, inequality in the American economy will be manifested in all public decisions including budgetary allocations and the conduct of monetary policy. This is what has made America become one of the nations with no justice for everyone. Instead, it only favors the rich who are able to afford it. Lack of proper attention to this matter of inequality is bound to have negative impacts to the economy of the United States of America. This can be evidenced in the recent foreclosure crisis that occurred in America leading to failure in most of the big banks. The banks were thought to be too big given the less customer turn-up forcing them to close down. This is one of the consequences of inequality in America. Nevertheless, as Joseph Stiglitz warns in his book, ‘time is running out’ and the American government needs to intervene before the problem overwhelms and kills the whole economy.