Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
AI Tech Stocks Portfolio Current State - 28th Oct 21
Proshares Bitcoin BITO ETF Marks a Huge Milestone for Crypto Currencies - 28th Oct 21
Bitnomics Review – Is it an easy solution to buy and sell crypto? - 28th Oct 21
Skate Boarding Fun at Millhouses Park Summer 2021 - 28th Oct 21
Chinese Tech Stocks CCP Paranoia and Best AI Tech Stocks ETF - 26th Oct 21
Food Prices & Farm Inputs Getting Hard to Stomach - 26th Oct 21
Has Zillow’s Collapse Signaled A Warning For The Capital Markets? - 26th Oct 21
Dave Antrobus Welcomes Caribou to Award-Winning Group Inc & Co - 26th Oct 21
Stock Market New Intermediate uptrend - 26th Oct 21
Investing in Crypto Currencies With Both Eyes WIDE OPEN! - 25th Oct 21
Is Bitcoin a Better Inflation Hedge Than Gold? - 25th Oct 21
S&P 500 Stirs the Gold Pot - 25th Oct 21
Stock Market Against Bond Market Odds - 25th Oct 21
Inflation Consequences for the Stock Market, FED Balance Sheet - 24th Oct 21
To Be or Not to Be: How the Evergrande Crisis Can Affect Gold Price - 24th Oct 21
During a Market Mania, "no prudent professional is perceived to add value" - 24th Oct 21
Stock Market S&P500 Rallies Above $4400 – May Attempt To Advance To $4750~$4800 - 24th Oct 21
Inflation and the Crazy Crypto Markets - 23rd Oct 21
Easy PC Upgrades with Motherboard Combos - Overclockers UK Unboxing - MB, Memory and Ryzen 5600x CPU - 23rd Oct 21
Gold Mining Stocks Q3 2021 - 23rd Oct 21
Gold calmly continues cobbling its Handle, Miners lay in wait - 23rd Oct 21
US Economy Has Been in an Economic Depression Since 2008 - 22nd Oct 21
Extreme Ratios Point to Gold and Silver Price Readjustments - 22nd Oct 21
Bitcoin $100K or Ethereum $10K—which happens first? - 22nd Oct 21
This Isn’t Sci-Fi: How AI Is About To Disrupt This $11 Trillion Industry - 22nd Oct 21
Ravencoin RVN About to EXPLODE to NEW HIGHS! Last Chance to Buy Before it goes to the MOON! - 21st Oct 21
Stock Market Animal Spirits Returning - 21st Oct 21
Inflation Advances, and So Does Gold — Except That It Doesn’t - 21st Oct 21
Why A.I. Is About To Trigger The Next Great Medical Breakthrough - 21st Oct 21
Gold Price Slowly Going Nowhere - 20th Oct 21
Shocking Numbers Show Government Crowding Out Real Economy - 20th Oct 21
Crude Oil Is in the Fast Lane, But Where Is It Going? - 20th Oct 21
3 Tech Stocks That Could Change The World - 20th Oct 21
Best AI Tech Stocks ETF and Investment Trusts - 19th Oct 21
Gold Mining Stocks: Will Investors Dump the Laggards? - 19th Oct 21
The Most Exciting Medical Breakthrough Of The Decade? - 19th Oct 21
Prices Rising as New Dangers Point to Hard Assets - 19th Oct 21
It’s not just Copper; GYX indicated cyclical the whole time - 19th Oct 21
Chinese Tech Stocks CCP Paranoia, VIES - Variable Interest Entities - 19th Oct 21
Inflation Peaked Again, Right? - 19th Oct 21
Gold Stocks Bouncing Hard - 19th Oct 21
Stock Market New Intermediate Bottom Forming? - 19th Oct 21
Beware, Gold Bulls — That’s the Beginning of the End - 18th Oct 21
Gold Price Flag Suggests A Big Rally May Start Soon - 18th Oct 21
Inflation Or Deflation – End Result Is Still Depression - 18th Oct 21
A.I. Breakthrough Could Disrupt the $11 Trillion Medical Sector - 18th Oct 21
US Economy and Stock Market Addicted to Deficit Spending - 17th Oct 21
The Gold Price And Inflation - 17th Oct 21
Went Long the Crude Oil? Beware of the Headwinds Ahead… - 17th Oct 21
Watch These Next-gen Cloud Computing Stocks - 17th Oct 21
Overclockers UK Custom Built PC 1 YEAR Use Review Verdict - Does it Still Work? - 16th Oct 21
Altonville Mine Tours Maze at Alton Towers Scarefest 2021 - 16th Oct 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Stiglitz and Conrad Battle Over U.S. Income Inequality Stagflation or Prosperity

Politics / Social Issues Jun 05, 2012 - 09:21 AM GMT

By: Bloomberg

Politics

Best Financial Markets Analysis ArticleToday on Bloomberg TV: Top private equity investor (and former Bain Capital managing director) Edward Conard debates Nobel Prize-winning economist Joseph Stiglitz about income inequality and whether Americans are better or worse off due to innovation in the economy.

Have we just experienced a half-century of stagflation, or have financial risk-takers kept us ahead of Europe and Japan? What does the data show about how much income inequality has helped - or hurt - the average American?


Full interview and unofficial transcript below. Ask Betty Liu questions at ;@BettyInTheLoop

Professor Stiglitz on how companies, managers are re-distributing wealth from the bottom to the top:

"The old theory of economics was compensation was related to productivity and contributions either to the firm or society because those two were supposed to be aligned. We saw in the great recession that wasn't true. CEOs walked off with mega-bonuses when they had brought their own company, let alone the global economy, to the brink of ruin."

"[MF Global] is an example, you mentioned Citibank as another example where there is this incongruity between compensation and contribution. Over the last 30 years, the top 1%, the share of the national income they get, has doubled. The top 0.1%, their share of the national income has tripled. If it were the case that the increases to the income at the top trickled down to everyone, so everybody was better off, that would be one thing. But that's not where we are."

"The people in the middle, the median income, are today worse off, adjusted for inflation, than they were one decade and a half ago. So all the benefits of the growth have gone to the people at the top, with the majority of Americans worse off."

Ed Conard's response: "Well, you take a decade and a half ago and that was the peak of the Internet boom. Everyone wants to take that data so they can go from peak-to-trough."

Stiglitz: "Let me make this clear, if you go back to a full-time male worker, his income is lower than it was in the late 1960's. We're not talking about just one business cycle. We're talking about a half century of stagnation."

Conard: "If you look more carefully at the data, it'll show that median incomes have grown substantially if they don't adjust for household size, if they don't count the taxes, the nontaxable benefits, they don't adjust for demographics in the workforce where we've taken in about 20 million immigrants who earn below the median wage, we're put working mothers to work. I think if you really step back and look at it, employment in the U.S. has grown 40% since the mid 1980's. It's grown 15 to 20% in Europe and Japan. We've made homes for 20 million immigrants who've educated their children. Nobody else has done more for the working poor and the middle class."

Stiglitz: "We've had some successes, but let's be clear about the pattern of our growth in the period before 1980 and thereafter. The period before 1980, the national growth was higher than the period after. The period before 1980 we had shared growth - people at the bottom and [people at the top]."

"We hadn't had de-regulation. We hadn't weakened the unions. We hadn't had this unbridled CEO pay. We didn't have the excessive financialization. As Paul Volcker pointed out, all of this innovation was directed at circumventing the regulations to stabilize the economy, rather than creating value."

"The people at the top are not the people that invented the transistor, the computer, the laser -- they're the people who brought the financial products that brought the economy to the brink of ruin."

Conard: "Let's just parse the data. You have the 50's and 60's where the U.S. economy did grow rapidly, they were capitalizing on mass manufactured goods that weren't really available prior to that. In the 1970's and 1980's, the manufacturing slowed to a crawl. Productivity slowed down. Then, in the commercialization of the Internet, the U.S. alone has increased productivity. Europe and Japan are down."

"So if you don't see that innovation has become critically important to this economy, relative to the economy of the 1950's, you won't see that risk takers and innovators are really the source."

Stiglitz: "You have to mention the source of innovation. The Internet. The basic research for the Internet was done by government."

Conard: "That doesn't matter. It still has to be commercialized."

Stiglitz: "Somebody has to raise the taxes to finance the basic research, the education."

Conard: "So you get Solyndra and all of these great venture capital programs."

Stiglitz on income inequality: "That gives rise to the instability that led to the great recession. When you have that redistribution from the bottom of the top, that's been a mark of the U.S. economy in recent years, there is insufficient demand to keep the economy growing. The Fed compensated for that by creating a bubble. It was a temporary palliative."

Conrad: "I just think the data doesn't support that. Take real estate prices, they rose in Europe and in the U.S. the same. They were under a different monetary regime."

"The idea that the Fed engineered an asset bubble is silly. The real estate prices in Europe and the rest of the world grew as much as they did in the United States. I don't think you could make the argument that our monetary policy, and our subprime finance, changed prices in the U.S."

Stiglitz: "It's absolutely clear there was inadequate regulation, it led to a sub-prime bubble. The breaking of the bubble led to a major problem in the U.S. It was not the only thing, but it was a major problem."

"In the U.S., we not only have the highest level of inequality of all the industrial countries, we also have the least equality of opportunity."

"What that shows is, this isn't inevitable -- the inequality we have is, to a large extent, a result of rent-seeking monopolies, distortions in the economy. We used to talk about there being a trade-off between inequality and economic growth or efficiency. Now we realize we could have a more dynamic, efficient economy with more equality of opportunity and less inequality if we simply...The government has to be involved and it has to stop doing some of the things it is doing like the way it distorts the economy - giving a preference to derivatives, making student loans non-dischargeable, inadequate supervision..."

Conrad's final rebuttal: "Sure, information technology has disproportionately made the most talented people more productive in the economy. Their wages would have gone down if that's all that happened, if everything had been held constant. But there's been an enormous window of opportunity, unrealized investment opportunities, where risk-taking is needed to capitalize on those opportunities. 13 people can create Instagram and $1 billion of value in two years."

Stiglitz: "And that's why our economy is growing slower now."

Conrad: "Our economy is growing faster than Europe and Japan."

Stiglitz: "Most Americans today are worse off."

Conrad: "They're equal to, if not better, than Germany."

bloomberg.com

Copyright © 2012 Bloomberg - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in