By Vijitha Yapa
Reading this book by economist and Nobel Laureate Joseph Stiglitz while watching scenes in the US House of Representatives where US President Donald Trump became the third executive in history to be impeached stateside, one wonders where America is heading. The Democrats carried the impeachment motion and the verdict is now in the hands of Republicans who have a majority in the Senate.
Whatever one’s views on Trump may be, the debates weren’t marred by chilli powder, chairs or bottles being thrown. The US represents a house divided; but in the long run, the proceedings showcase what’s good about America.
US corporations dominate entire sectors, leading to the riches that capitalists have reaped. And not since before the Great Depression have the country’s richest citizens captured such a large proportion of the nation’s income.
The concept of the rich becoming richer is interesting to President Gotabaya Rajapaksa too. He is appointing capitalists to head crucial state institutions to turn them around.
Can the success that Sri Lanka’s rich have achieved in their businesses be called upon to turn around loss making institutions and enrich the poor? One wonders what Stiglitz with his pro-socialist views would think of this experiment?
The author discusses US economic minuses – the failure to successfully handle the transition from manufacturing to services; an inability to tame the financial sector, and properly manage globalisation and its consequences; and not responding to growing inequality in the country.
Stiglitz believes America “seems to be evolving into an economy and democracy of the one percent, for the one percent and by the one percent.” He thinks economics and politics should be separate – especially in the context of money driven politics – and lashes out at excessive financialisation, mismanaged globalisation and increasing marketing power.
The author observes these are interrelated, explaining why growth has been so anaemic and its fruits unequally shared. He painstakingly draws attention to the wealth of nations, and distinguishes between wealth creation and extraction.
Stiglitz writes about reforms leading to a faster growing economy with greater shared prosperity. President Ronald Reagan’s tax cuts in 1981 led to an era of massive fiscal deficits, slower growth and greater inequality, which President George Bush termed ‘voodoo economics.’
Tax cuts by the new regime in Sri Lanka have left the main opposition party speechless. For years, taxation seemed to be the panacea for the nation’s economic woes. This stranglehold on the people meant that they lashed out with both fists.
No one has analysed and shown us what will happen in the future when euphoria inevitably leads to reality. Where will the money come from to pay off the huge loans we have inherited? Fitch estimates that US$ 19 billion is due to be repaid between 2020 and 2023.
Stiglitz believes that while economics has floundered in the US, the political divide has widened. Those with money and power have used their political clout, to write the rules of both economic and political games.
Apparently, the three richest Americans – Jeff Bezos, Bill Gates and Warren Buffet – are worth more than the bottom half of the population combined. It’s shocking to discover that 40 percent of Americans can’t cover a US$ 400 calamity such as their child falling sick or the car breaking down.
This Nobel Laureate feels that steps need to be taken to save capitalism from itself. He talks about ‘Trumpian economics,’ which turns its back on international law and trumps globalisation with a club. For instance, the battle with China on the economic front propagates the myth that the world should be buying more from the US and less from others.
When this doesn’t happen, the assumption is that rivals must be cheating. Therefore, the rules of international trade have to be changed to stop the ‘cheating.’
Stieglitz notes that 60 years ago, China was a very poor country with a per capita income of 150 dollars, which the World Bank labelled ‘extreme poverty.’ But in the last 40 years, incomes in China have increased more than tenfold and over 740 million people have moved out of poverty.
The author warns that this generation of unscrupulous leaders at the helm challenging the ideals of truth in the world places nations at risk of a much greater disintegration. This is a book worth studying in detail as it contains home truths and practical analyses of where the US is heading – and how it’s affecting Americans as well as the rest of the world.