Roosevelt Institute’s New Report: Inequality is a Result of Policy

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By Johnathan Mills

On Wednesday, Joseph Stiglitz, Nobel laureate and chief economist at the Roosevelt Institute, released a new report entitled “Rewriting the Rules of the American Economy.  The report, described as an “agenda for growth and shared prosperity,” is part of the Roosevelt Institute’s  work on inequality. Stiglitz expands on many of the arguments made in his book The Price of Inequality, which The New York Times called “the single most comprehensive counter­argument to both Democratic neoliberalism and Republican laissez-faire theories.”

Chief among the report’s arguments is the assertion that the vast disparities in wealth we see today are a result of the laws, regulations, and institutions implemented over the past 35 years. As Stiglitz writes, “Inequality is a choice.” While others have explained the growing wealth gap in the United States by pointing to the effects of globalization and increasing sophisticated technology, Stiglitz argues that these forces are not sufficient to cause the rapid rise in inequality that has occurred since 1980. He points to a number of policy choices that have exacerbated inequality, including: 

  • Financial deregulation
  • Changes in corporate governance (which have led to increases in executive compensation)
  • Cutting top marginal tax rates
  • Federal Reserve favoring low interest rates, low inflation, and higher unemployment
  • Decline in union influence
  • Failure to update rules and institutions to accommodate women in the workforce, including lack of affordable childcare and insufficient measures against workplace discrimination
  • Mass incarceration, which creates ‘second-class citizens’ unable to find work

Together, these policy and institutional shifts have widened the gap between the rich and poor. What’s most notable about Stiglitz’s framing of inequality is that it reverses the conventional narrative—that inequality is both a natural and inevitable result that governments take measures to mitigate—and instead draws attention to the institutional, legal, and regulatory frameworks that have allowed inequality to get out of hand. While Stiglitz paints a dire picture of the state of wealth inequality in the United States today, his conclusions contain a silver lining: if policy has been driving inequality, then changing those policies can reverse the trend. With inequality linked to a variety of social and environmental ills, changing the policies described above may pay dividends throughout our society.

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