The Nobel economist savages the neoliberal ideology that has made society intolerably unfair
An Occupy London protester outside the Bank of England. Photograph: Andy Rain/EPA
The ancient Greeks had a word for it – pleonexia – which means an overreaching desire for more than one's share. As Melissa Lane explained in last year's Eco-Republic: Ancient Thinking for a Green Age, this vice was often paired with hubris, a form of arrogance directed especially against the gods and therefore doomed to fail. The Greeks saw tyrants as fundamentally pleonetic in their motivation. As Lane writes: "Power served greed and so to tame power, one must tame greed."
In the 1970s and 80s, "the Chicago boys", from the Chicago school of economics, led by Milton Friedman, developed their anti-regulation, small state, pro-privatisation thesis – and were handed whole countries, aided by the International Monetary Fund (IMF), on which to experiment, among them Thatcher's Britain, Reagan's America, Mexico and Chile. David Harvey's A Brief History of Neoliberalism describes how the democratically elected Salvador Allende was overthrown in Chile and the Chicago boys brought in. Under their influence, nationalisation was reversed, public assets privatised, natural resources opened up to unregulated exploitation (anyone like to buy one of our forests?), the unions and social organisations were torn apart and foreign direct investment and "freer" trade were facilitated. Rather than wealth trickling down, it rapidly found its way to the pinnacle of the pyramid.
As Stiglitz explains, these policies were – and are – protected by myths, not least that the highest paid "deserve" their excess of riches.In The Price of Inequality, Joseph E Stiglitz passionately describes how unrestrained power and rampant greed are writing an epitaph for the American dream. The promise of the US as the land of opportunity has been shattered by the modern pleonetic tyrants, who make up the 1%, while sections of the 99% across the globe are beginning to vent their rage. That often inchoate anger, seen in Occupy Wall Street and Spain's los indignados, is given shape, fluency, substance and authority by Stiglitz. He does so not in the name of revolution – although he tells the 1% that their bloody time may yet come – but in order that capitalism be snatched back from free market fundamentalism and put to the service of the many, not the few.
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For roughly 30 years after the second world war, the 1% had a steady share of the US cake. In the five years to 2007, however, the top 1% seized more than 65% of the gain in US national income. In 2010, their share was 93%. This did not create greater prosperity for all (myth number one). On the contrary, much of this gain was "rent seeking", not creating new wealth but taking it from others; a modern wild west. In the last three decades, the bottom 90% in the US (figures that resonate in the UK) have seen their wages grow by 15%. The 1% have seen their wages increase by 150%. Another myth is that bloated salaries are necessary to retain high achievers. Except, as Stiglitz points out, the rewards are more often for failure. The inequality gap is becoming a chasm. Stiglitz demonstrates how, in the US, those born poor will stay poor yet nearly seven in 10 Americans still believe the ladder of opportunity exists.
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The Price of Inequality is a powerful plea for the implementation of what Alexis de Tocqueville termed "self-interest properly understood". Stiglitz writes: "Paying attention to everyone else's self-interest – in other words to the common welfare – is in fact a precondition for one's own ultimate wellbeing… it isn't just good for the soul; it's good for business." Unfortunately, that's what those with hubris and pleonexia have never understood – and we are all paying the price. .
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