Be clear that if you’ve read Stiglitz’s other books, the Great Divide is not much different to what he’s already written. If you’ve read his articles in New York Times and other popular publications, then it’s more than likely that you’ve come across at least one of these articles.
The Great Divide is the same old fundamental ideas, compiled, repackaged and redistributed. This is probably the reason I found the book in Book Excess for about $5. I don’t feel cheated, but I feel that the book doesn’t contribute any new knowledge, and at best, is a cash cow. Some of these articles feel outdated (some were published before the 2007 crisis), and his ideas are quite repetitive in plenty of these articles.
Nonetheless, for a casual reader and for someone who has an interest in economics, this book holds some value.
Key takeaways:
America’s Inequality
We all know it, Stiglitz vocalises it in his writings. America is a den of thieves where politics benefit the 1% (especially the 0.1%) at the expense of the bottom 99%. This inequality has reached a point where it is also detrimental for the 1% if nothing is to be done for the 99%. The continued success of the 1% relies on the betterment of the 99%.
Trickle down economy is a myth and the sooner we stop teaching this, the better
The reason the 1% is doing so well while the 99% languish in their own cesspool is because the money gets stuck at the top. The wealthy has more to save, and therefore spends less in proportion of their income than the less wealthy. Economists argued (badly) that the rich will stimulate growth from the top, but wealth begets wealth for the wealthy, and the poor is holding their bowls with both hands a la Oliver Twist, waiting for the porridge. They’ll still end up hungry.
This Inequality has been caused by a lack of regulations starting from good old Reaganism
There are various points of history which happened back in the 80s and 90s that still reverberates and sets the scene for today. During the Reagan era, deregulation became the norm, favouring the rich and ultra rich. Tax cuts for this bracket is commonplace and gave free rein to those in control in financial institutions to do what they like. This ethos became more and more entrenched, leading up to the global financial crisis.
The poor is fucked, more so than before
Bad politics create bad policies, at least for the poor. The American Dream is dead for many years, and everybody is still aloof. The success of an average American depends more than ever in the level of education and income of the parents, more so than any other country. That doesn’t help when the top 1% holds about 30% of the wealth. Education, the traditional get out of jail free card is still a draw, minus the “get out of” part. Students have the choice of taking on these massive loans that will take them decades to repay, or to just settle for something less as there’s no point applying for a decent job without an expensive degree.
In the Great Recession, the banks must be saved, but not the way that it was done
Everybody was in panic mode when GFC hit. In almost a knee-jerk reaction, the US government bailed out banks to stimulate lending again and to save them from going under. Instead, the bailout should be focused on the homebuyers going underwater as opposed to a quasi-blank-cheque to the banks to abuse. As a result, bankers who architected the collapse became the beneficiaries of these bailouts by syphoning them into bonuses to line their own pockets. During this time, monetary policy trumps over fiscal policy, with little benefit for the punters.
Somebody somewhere must do something about how intellectual property is managed
Powerful companies will hold on their patents for as long as they can to keep the competition out. They will evolve the patents slightly for essentially the same product to keep this intellectual property, in a process called evergreening. This is prevalent in pharma which has negative impact on those who need the drugs but have no way to afford them. Stiglitz suggested some ideas in this book (such as a reward system as opposed to a patent) but doesn’t go into the details.
America could learn from how other countries are managed
There are other countries such as Mauritius, Singapore, Japan and China that have struggled in the past but have fared better than how America has evolved. Australia has a great system but have somehow convince themselves that the American way is the way to go. America should shed its cloak of arrogance and look at these countries as case studies.
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Before I read The Great Divide, I finished F Scott Fitzgerald’s the Beautiful and the Damned where an aristocratic couple live in leisure from the allowance from a rich grandfather, expecting inheritance money to sustain them when the said grandfather is gone. The life was a life fuelled with parties and excess, selling their bonds to fuel this unsustainable way of life. Their friends overtime, see them as a joke and start to avoid them.
The America I see now is no better than the Patches, the couple in Scott’s novel, relying on debt to fuel an unsustainable way of living and along the way, losing the respect and credibility of their peers. America, in effect, has become a raging alcoholic who pick fights they cannot win. For everybody’s sake, I hope that they can get their shit together.
