Joseph Stiglitz reviews Benjamin Friedman’s new book, The Moral Consequences of Economic Growth, in the November/December issue of Foreign Affairs.
In short, the debate should not be centered on whether one is in favor of growth or against it. The question should be, are there policies that can promote what might be called moral growth — growth that is sustainable, that increases living standards not just today but for future generations as well, and that leads to a more tolerant, open society? Also, what can be done to ensure that the benefits of growth are shared equitably, creating a society with more social justice and solidarity rather than one with deep rifts and cleavages of the kind that became so apparent in New Orleans in the aftermath of Hurricane Katrina?
(snip)
Consider the following thought experiment: If you could choose which country to live in but would be assigned an income randomly from within that country’s income distribution, would you choose the country with the highest GDP per capita? No. More relevant to that decision is median income (the income level that 50 percent of the population is below and 50 percent is above). As the income distribution becomes increasingly skewed, with an increasing share of the wealth and income in the hands of those at the top, the median falls further and further below the mean. That is why, even as per capita GDP has been increasing in the United States, U.S. median household income has actually been falling.
Of course, Stiglitz will have a new book of his own, Fair Trade for All, out in just a few months.
LINK to review at foreignaffairs.org. (via Marginal Revolution)
UPDATE: Also in this edition of Foreign Affairs is this review of Harm de Blij’s Why Geography Matters.
Given the hypothetical scenerio I personally wouldn’t care about the distribution of per capita GDP. What I would prefer is to live in the country that had the highest correlation of income growth to investment – that is investment in education or starting a business. Income should not be equally distributed in a society. It should be distributed according the amount of value an individual creates for society as a whole, in other words pay for performance.
Income distribution is a meaningless indicator when taken out of context. What matters is the potential for a person existing in one income group to move to another income group given they are willing to put forth the effort.
I would suspect that the growing distribution gap in the US is mostly the result of a growth in the gap between college education and non-college educated.
“What matters is the potential for a person existing in one income group to move to another income group given they are willing to put forth the effort.”
Part of what Friedman is doing in his new book is calling attention to the issue forgotten by statements like the above – ethics. Such a concept is not singular, but social; personal morality assumes a pluarlity of persons among which to act – if your actions have no consequences toward others, then what standard is there? It would seem that saying what ultimately matters is an individual’s abilty to rise an income level is shallow at best. If all it takes is determination and hard work, why isn’t everyone improving their standard of living constantly? If it only takes putting one’s mind to it, why are so many still unemployed/underpaid/struggling to pay bills and put food on the table? It must be because impoverished people are lazy/make poor decisions/involved in drugs. Yes, that’s it – it clearly couldn’t be because racism, sexism, and other forms of discrimination are still rampant. It couldn’t be because US government is rapidly becoming a “corpocracy” by, for, and to the corporation at the expense of real flesh and blood men, women, and children.
“I would suspect that the growing distribution gap in the US is mostly the result of a growth in the gap between college education and non-college educated.”
Such a statement could only be made by an uneducated person. The numbers show that more people attend college now than ever before in the United States. The gap that exists is not between educated and uneducated, but between the educated from higher income families and the educated from lower income families. So, basically, the education disparity is also a result of the economic disparity that exists in America: rich kids get all the education they want, while lower income children must wrestle with economic, social, and cultural powers that combine to make it much harder for them to go to school, considering most must work to support themselves or their families at an early age. Friedman’s clarion call for a look at the morality of economic growth, on a general level, is important in as much as it draws ethics back into economics. After all, does the economy exist for itself or for people?
a link to a discussion with Benjamin Friedman at bloomberg podcasts;
http://truckandbarter.com/mt/archives/2005/11/carnival_of_the_1.html
-paul