Joseph Stiglitz, Nobel laureate, overstates the role of big business in the gap between rich and poorby Richard Lambert / July 18, 2012 / Leave a comment
Published in August 2012 issue of Prospect Magazine
Back in 1975, income inequality in Britain on the standard economic measure stood well below the rich country average. Then something changed. During the following decades, the gap between rich and poor in Britain grew more rapidly than in any other advanced economy to a point that is now well above average and second only to the United States among the big developed countries.
Three questions follow. Why has this happened? Does it matter? And if it does, what’s to be done?
Joseph Stiglitz, a Nobel prize winner in economics, would have no hesitation in answering question one. His new book, The Price of Inequality, is mainly about the US, but his arguments apply with equal force to the UK. His main message is that inequality is at least as much the result of political forces as it is of economics. Governments set and enforce regulations that shape the market place; they distribute resources; they use taxes and social spending to influence the way in which money flows around the economy; and they alter the dynamics of wealth, for example by taxing inheritances or providing free public education.