Voice From The Back: Same old story (2003)

The Voice From The Back Column from the November 2003 issue of the Socialist Standard

Same old story

The announcement that R.J. Reynolds Tobacco Holdings, the makers of Camel cigarettes, is to cut 2,600 jobs – close to half its workforce – has come as a great shock to the town of Winston-Salem in North Carolina. Between 1,600 and 1,700 of the jobs are in the town. Bad news for the shareholders? Well, no, not really. “The company shocked Wall Street yesterday morning as it unveiled the plan to cut 40 percent of its workforce, although traders welcomed the prospect of cost-cutting and marked the shares 12 per cent higher to $38.24 by midday” (Times 18 September).

The rich get richer

One of the myths expounded by apologists for capitalism is that there are no longer classes in society and that poverty is gradually disappearing. According to the BBC News Online (25 September) the exact opposite seems to be occurring in the USA. “The gap between rich and poor in America is the widest in 70 years, according to a new study published by the Center for Budget and Policy Priorities. The research, based on newly released figures from the non-partisan Congressional Budget Office, shows that the top one percent of Americans – who earn an average of $862,000 each after tax (or $1.3 m before tax) – receive more money than the 110m Americans in the bottom 40 percent of the income distribution, whose income averages $21,350 each year. The income going to the richest one percent has gone up threefold in real terms in the past twenty years, while the income of the poorest 40 percent went up by a more modest 11 percent.”

Spare parts for sale

Everything inside capitalism takes the form of a commodity, so it should come as no surprise to learn that there is a brisk trade in desperately poor people selling their kidneys. The going price paid to young people in eastern Europe for one kidney is $2,500 to $3,000 and patients receiving the kidneys have paid between $100,000 and $200,000 for a transplant. “John Dark, a transplant surgeon at the Freeman Hospital, Newcastle, said it was difficult to draw a moral difference between the physical harm inflicted on someone paid for a kidney or paid to work in a Third World sweat shop . . . An impoverished man trying to support his family by selling his kidney is no different to putting in shifts down a diamond mine. Society has moved on from where paying for harm was unthinkable. We do it every day when we buy a pair of trainers” (Independent, 30 September).

Compassionate Tories

The Conservative Party at present are going through a crisis as they try to cobble together a series of reforms that might prove popular at the next election. They are making noises about being a caring, compassionate party, so it is interesting to see what one of the delegates to last month’s Tory conference had to say. “Mr Metcalfe, who has ambitions of becoming a Tory MP at the next election, received a rousing ovation when he insisted the way to combat crime was to make it not worth the price. He told the conference: “make prison a genuine punishment. Bring back solitary confinement, take away their TVs and snooker tables and let them earn privileges.” And there was more, “Bring back birching for young tearaways that terrorise council estates and vandalise graveyards, castrate paedophiles and bring back hanging” (Herald, 8 October). Phew, some caring – some compassion.

War aims

Mr Bush was very clear what the US war aims were in Iraq – topple the wicked dictator – build a prosperous democracy – and 100 percent foreign ownership of many of the state’s resources. Wait a minute, you don’t remember the third aim? Neither do we, but it seems that third aim is going to be realised long before the second one. “Controversial plans to privatise all of Iraq’s non-oil assets have been attacked by Nobel-prize winning economist, Joseph Stiglitz . . . The laws approved by the Coalition Provisional chief Paul Bremer, allow 100 percent foreign ownership of all state assets apart from natural resources. Trade tariffs and taxes have also been slashed, and the Central Bank of Iraq has been made operationally independent. `This is an extreme version of Republican ideology,` said Stiglitz. ‘Of course it is nothing we would do at home (US), because we’re actually quite protectionist`” (Observer, 12 October).

Fairly Equal (2016)

Book Review from the July 2016 issue of the Socialist Standard

'The Great Divide', by Joseph Stiglitz. Penguin £10.99.

Stiglitz is a kind of dissident establishment economist, a Nobel Prize winner and former Chief Economist at the World Bank, yet who is in some ways at odds with conventional views. This volume consists of shortish essays from publications such as the New York Times and Vanity Fair, with some extra material. Most deal with the United States, but there is also some discussion of other countries, including China, Scotland and Mauritius.

The central theme is inequality and its consequences, though strangely there are no references to Wilkinson and Pickett’s The Spirit Level. As an example of the extent of inequality, an article from 2012 notes that the family that owns Walmart has wealth of $90bn, equivalent to that of the poorest 30 percent of the US population. In three years of recession, median wealth declined by 40 percent, and workers are on average worse off than their parents were. In the first three years of the so-called recovery, 95 percent of the increase in income went to the top one percent. There is no equality of opportunity in the US either, as the life chances of a child are dependent on their parents’ income and education. The children of the poor suffer disproportionately from asthma and learning disabilities.

Among the consequences of a high degree of inequality are greater instability, lower growth and less aggregate demand. This is because the very rich consume less, as a fraction of their income, than lower-income individuals. So a less inegalitarian system would supposedly lead to a more buoyant economy and almost everyone being better off. Moreover, the current astonishing levels of inequality are not inevitable but the result of deliberate policies, including the growth in importance of the financial sector.

Stiglitz sees the present system as an example of ‘phoney capitalism’, where ‘losses are socialized and profits privatized’ and markets are not truly competitive (a position more usually associated with the ‘right’ than with the ‘left’). Corporate welfarism means the banks and so on are bailed out by the government, but those who own them still make big profits and their top bosses still get massive bonuses. He is particularly opposed to what economists term ‘rent seeking’, which includes preferential tax treatment, government subsidies and the profit from controlling a monopoly. It is a zero-sum activity, devoted to gaining a bigger share of the pie rather than increasing the size of the economic pie, and just leads to an increase in wealth at the top of the scale.

As for the kind of society he wants instead, Stiglitz says we should choose both capitalism and fairness. He prefers a far more equal system and rejects austerity, which weakens demand and so discourages investment. Inequality stifles growth, and committing resources to education, infrastructure and technology will be a way of ‘putting America back to work’. With bland views like this, it is little wonder he is on the Labour Party’s Economic Advisory Committee (with Thomas Piketty).

One essay here is entitled ‘Of the 1 percent, by the 1 percent, for the 1 percent’. Nothing Stiglitz says suggests that he stands for a society where things will be different in any significant way from this.      Paul Bennett