Checking In With Joseph Stiglitz on the State of Inequality
Ahmed: As I walked past my bookcase this morning, I saw Globalization and its Discontents—the book that got me into all of this. It's always great to interview someone who's taught us all so much.
Stiglitz: Thank you and nice to be here.
Daar: Joe, I'm equally excited to have this conversation and really grateful that you're making the time. I wanna get right into it and ask about inequality, because that's the topic of the day. Oxfam’s just put out our Davos report, and again, we see these shocking figures on wealth accumulation. There's been soaring increases in food and energy prices. And I wonder from your perspective, how serious is the state of economic inequality?
Stiglitz: Well, first, let me say, I always look forward to your annual report—you put things so viscerally. In one of the earlier reports, you said you could put half the wealth of the world in a bus, and then a couple years later you said, you don't need a bus—you could have a minivan. Inequality had increased that much.
Well, what's happened since COVID-19 has been extraordinary; it both exposed global inequalities, and exacerbated them. Your inequality report focuses on the top. And, in a period where so many people found life so difficult, with losing their jobs, now dealing with food prices and oil prices going up, it is shocking how many people and rich corporations made off like bandits.
The increase in wealth is just phenomenal. From your report: the richest 1% grabbed nearly two thirds of all new wealth created since 2020 (worth $42 trillion), almost twice as much money as the bottom 99% of the world's population. That is just an astounding number.
Every time I read one of these reports, I think well, clearly, things have to get better—but the pandemic, and the post pandemic world, has just made things worse. The example that I find most outrageous was, while so many around the world were facing high oil prices, the oil companies and gas companies were raking in tens of billions of dollars, that they were paying in share buybacks and one-time dividends and so forth.
Then proposals were made to maybe share the wealth—with a tax on these windfall gains—they hadn't done anything to deserve it; Putin did. The source of that particular profit was Putin's war in Ukraine. I would call that war profiteering… But when it was proposed that there'd be a windfall profits tax—just on the extra tax—they (the companies) said, No way. And fought against it. Some European countries have done it, but the US hasn't done it.
Ahmed: You’re so right, Joe... There’s some talk here in the US now, some people thinking maybe things are getting a little bit better. How do you respond to that?
Stiglitz: It's a mixed bag, to be frank. There was a moment in 2021, right after Biden took office and the American Recovery Act was passed. It succeeded in reducing childhood poverty in one year by 40 to 50%. That's phenomenal.
It showed us something that I've been saying for a long time: Inequality is a choice. We could have reduced childhood poverty by 40 to 50% anytime we wanted to. We had the money to do it if we'd wanted to, but it took a person like President Biden, and a moment like the pandemic, to get our act together.
But then the Republicans, even some of the Democrats, said, great, let's have more inequality. I couldn't believe it.
We’re putting in jeopardy our future, because, you know, children who grow up in poverty are not going to be as productive. Discontent is going to have adverse effects on our politics and our society and our economy. It is foolish, I believe, to have so many of our children grow up in poverty.
One more example, I've been finding it amazing that the Fed has been saying, “We want to increase the unemployment rate.” Then they go on to say, it's going to take a lot of pain. Of course, they’re not going to be feeling the pain… While it seems like a small thing—increasing the unemployment rate, say from 3.7% to 5.1%—those seem like just numbers, but they're real people.
When you do that, the unemployment rate on say, marginalized groups, on young African Americans, is not going to be 5.1%, it’s going to be around 20%. What does that do to our society?
Ahmed: Joe, you mentioned choices here, and one of the choices that we can make to combat extreme inequality is taxing the ultra-wealthy. And I want to go there because it feels to me that the world's moved on from asking “Maybe we should tax the rich” to an increasing debate on how much we should tax the rich.
The US has such an interesting history here. The most progressive tax system in the world in the past—FDR to the early eighties—top earners saw an average at the top margin income tax rate above 80%.
What do you think's the right rate to tax the ultra-wealthy? Specifically billionaires in today's era?
Stiglitz: I think we have to realize that most of the billionaires have gotten much of their wealth out of luck. They did something positive, they created something, but there were other people doing similar things. Take Facebook, there was MySpace. One of them was going to win; it was a lottery. And you can say, they came up with a better idea, of clicking Like—that was a big innovation, but is it worth $50 billion or a hundred or $150 billion?
But the real point is would they have done it anyway—if instead of having a hundred billion dollars, they only took home $5 billion. My view is what drives a lot of this is the drive to create, to be successful. And if you took away a large fraction of the wealth they get beyond five or $10 billion, they still would've done it….
Also, most of the wealthiest have gotten at least a fraction of their wealth out of exploitation. Sometimes it's just exploitation of market power.
Some of the billionaires … are explicitly exploitive, lying, cheating… So the kinds of proposals that have been put forward in the United States by say, Elizabeth Warren, a wealth tax of 1% or 3% over 50 billion, or over 5 billion dollars, seem to be very reasonable and would really go a long way to raising revenues that could alleviate some of our country's problems.
Let me make it clear. It's not that we're trying to be against success. It's really a question of sharing the wealth in ways to make our society function better.
Daar: I do want to push you on that, just thinking about the, the top earners specifically on a top marginal rate. I mean, we have seen it over 90% in the past. Is that realistic today? You know, getting up to, to those kinds of percents?
Stiglitz: There have been calculations done by some of the top public finance economists where they carefully look at the trade-offs. People at the top might work a little bit less if you tax them more. But on the other hand, our society gains in having a more egalitarian, cohesive society. And, I think the general consensus is on labor income, that a tax rate of 70% would clearly make sense.
Maybe a little higher. I don't want to fine tune it too much.
But what we're talking here is also more about wealth taxes. And the irony is that, while in my view, we should be taxing wealth at a higher rate, because much of the wealth is inherited wealth. One of my friends describes as winning the sperm lottery—they chose the right parents…
In fact, we tax at a lower rate; we tax dividends at 20% at the top. We tax capital gains at a lower rate. And in the United States, if you pass on assets to your children, you can escape capital gains tax. Totally.
Daar: When we think about billionaires, we think about a lot of concentration of wealth. We think about the Elon Musk’s of the world and the Bill Gates of the world. And, and at the same time, there's a huge concentration of wealth also in low and middle income countries, right?
It's not just these white men in the Global North, there’s a huge concentration of wealth in other countries as well.
And so I do wanna ask, is that also feasible? We're seeing these mountains of debt payments accumulating in low and middle income countries, and the proposed solution we often hear from the North is this drive towards austerity. When you have these choked budgets, governments are just moving towards austerity—obviously pushed for by the elite, and also by the IMF as this huge dominant external force.
But how much is there as an alternative to austerity? How much scope is there to tax the rich and tax wealth in those kinds of countries?
Stiglitz: Oh, I think there's enormous scope. One of the things that the international community has to do, of course, is close the tax havens. A lot of the wealth escapes…. There's been enormous growth of billionaires in China and in India. And those countries, if they wanted to, could clearly make those who do business in their country pay, like we do in the United States. We say that your income is taxed no matter where you make that income. So we discourage tax havens. We don't do it perfectly, and we ought to do it more, but having global reach is really important, and other countries haven't done that.
It's a hidden form of corruption; a lot of the wealth is created in these countries by political connections—that drive a lot of the wealth accumulation in developing countries and emerging markets.
Daar: And, thinking about tax havens, and how these decisions get made in international spaces, I actually wanna move the conversation towards there and towards multilateralism.
You were such a tremendous force in the discussion on vaccines during the Covid 19 pandemic… In so many of these multilateral discussions, we've seen poor countries almost literally locked out of the room on decisions, and then at the end of the day, getting a very, very raw deal.
It blows my mind that we still have such a neo-colonial dynamic almost. How do we shift that dynamic?
Stiglitz: That’s a really good question; you're absolutely right. There's been a greater effort to have what they call inclusive frameworks on the tax. They're in the room—but not being listened to. The conversations are structured in ways that the voices of the poor countries are effectively not heard. And you see that in the outcome of the OECD initiative on tax reform.
They wouldn't even disclose how much extra money the developing countries were going to get. And we know why—because those who did preliminary calculations said they're getting a pittance. So the question you ask is the right one: how do we change that?
A new geopolitics is emerging. During the Cold War, there was a kind of rivalry for the hearts and minds of those in the third world; then, at the end of the Cold War in the late eighties, that competition disappeared.
We're entering an era of a new Cold War, and we're seeing a failure of the West. When I look at the Russian invasion of Ukraine, I find it so outrageous. It is a disappointment to me that there hasn't been the kind of support I would've liked to have seen from developing countries and emerging markets. But I understand their anger.
They say, when we were dying with COVID-19, you wouldn't even share the intellectual property. And you still won't share that intellectual property. You're putting your profits—of Pfizer and Moderna—above our lives; and now there's this war in Europe, and we're paying the price of higher food and oil prices, and you expect us to support you in this. So I understand that anger.
Then you conduct your monetary policy in ways that result in our having to pay higher interest rates, and much of our debt is in dollars, which is increasing the value. And then you're telling us we have to have austerity because otherwise we won't be able to pay back our debts.
Maybe the answer to your question is, the new realities of the new Cold War will force the US and Europe to begin paying more attention to the developing countries than the emerging markets.
Ahmed: Profound answer, Joe and what you say really relates also to what we hear from folks we work with across the world. I want to get to a final question here…
You've led the world to address inequality. Sometimes the fight does feel quite hard. What keeps you going, Joe, to, to keep fighting for a more equal world?
Stiglitz: I just can't accept a world with the kind of social injustice that we see. I don't think I could sleep at night if I felt I weren't doing what I could to help create a better world. On the positive side, I think there has been progress. Sometimes I feel like it's two steps forward, and then one step back.
We've been criticizing the IMF and austerity, but when I wrote Globalization and Its Discontents, I think things were much worse …Now, there is more focus on inequality.
There's been a recognition that capital controls may be a better way of running capital markets in the midst of a crisis. There's a recognition that austerity hurts, and is not the way to promote even paying debts, let alone growth. There are new views on how to deal with technical issues like debt sustainability.
I don't want to say it's unmitigated victory. I said it's two steps forward, one step back. Maybe I'm too much of a student of the Enlightenment where I believe in progress and reason, progress…
I come to this from a fairly academic perspective. I very much believe in Enlightenment values, and I have to believe that if we reason together, we get out the facts; then maybe you might say it's reason plus the moral goodness—the empathy that Adam Smith talked about in the Theory of Moral Sentiments—that will lead us in the right direction.
Daar: On that note, I'm smiling, during a tough week of thinking about the state of the world. Joe, this has been such a treat. You're so inspiring, energizing, as ever. I'm truly grateful that you took the time with us today. Thank you.
Ahmed: Embracing that, embracing that moral goodness. Joe, thank you so much.
Nadia Daar is the head of the Washington DC office of Oxfam International.
Nabil Ahmed leads Oxfam's agenda on economic justice that engages policymakers, advocates, and activists to address inequality in the US and internationally. He is a strategic advocate and convener, influencing policies and discourse on wealth inequality, financing, health and worker power at the intersection of class, race and gender. He has led alliances and teams to win policy progress with governments and the private sector.
Based in Washington DC, Nabil joined Oxfam America in 2022. He is a public speaker and contributor on inequality issues, on outlets including Bloomberg, Al Jazeera and AFP.
Nabil was formerly Oxfam International’s Head of Executive Strategy and Communications, based in Nairobi, Kenya, where he led strategic influencing and public engagement efforts to tackle inequality and the climate crisis. He was the lead author of Oxfam’s flagship global inequality report in 2022, “Inequality Kills,”, and led Oxfam’s work to raise attention on inequality at the Davos World Economic Forum (WEF) since 2016. He led Oxfam’s engagement with the International Labor Organization’s Global Commission on the Future of Work and the G7 Gender Equality Advisory Council, and represented Oxfam on the WEF Advisory Board on Risks.
He co-founded the People’s Vaccine Alliance that fostered a movement of millions of people, and led efforts with world leaders and Nobel Laureates to challenge pharmaceutical monopolies over Covid-19 vaccines.
Nabil was formerly a national organizer, worked in the private sector at Unilever, and is a graduate of the University of Manchester, UK. He is a Board Member of Amnesty International UK, and co-hosts EQUALS, Oxfam’s global podcast about inequality.
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