The Price of Inequality

This chapter shows how the US political system fails to correct the problems of an unequal economic system and contributes to inequality. Laws like the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 were meant to stave off another Great Recession but did not “far enough,” as federal regulators did not ever fully punish the banks for their fraudulent (and sometimes criminal) conduct. Stiglitz also examines the “economics and politics of voting itself” (119) to see how the rules of the political and economic “game” are controlled by the 1 percent. In so doing, he presents six factors that undermine voting in America.

First is the “voting paradox.” Many people think the system will not work for them, so they do not vote, while those who believe the system will work, and who can invest money into the political system, do vote. This kind of “voter disillusionment” deepens when voters see that they lack the resources to shape the political system toward their interests.

Second, with the inequality and market failures that led to predatory behavior from the banks (e.g., charging usury interest rates on credit cards), trust in the system has fallen so far that if inequality is not managed, it could lead to social conflict.

Third, the system is perceived as unfair, offering less opportunity, so voters see it as designed to help the wealthy while silencing the voices of the poor. Thus, and fourth, disillusionment extends toward the media, as people no longer trust news about the economic and political system.

Fifth are continuing attempts to disenfranchise whole groups of voters. Republicans believe that too many unqualified people are allowed to vote; Democrats believe that people who have the right to vote are being prevented from voting. Federal laws stop the worst abuses, but states use voter restrictions and other initiatives to dampen voter turnout (such as putting too few voting stations in a district, sending out incorrect information, and disenfranchising felons).

Finally, the US electoral system has disempowered voters by allowing too much money to flood campaigns after the 2010 Citizens United Supreme Court decision equated political donations with free speech, which allowed corporations (already viewed as individuals before the law) to make huge donations and shape election outcomes. Add to these problems gerrymandering, in which state representatives redraw electoral boundaries to favor one political party, and people quickly come to believe that their one vote makes little difference.

These factors have lowered voter turnout and led people to move outside of the system, as they did in Occupy Wall Street, to try to effect change. Stiglitz suggests that the 1 percent block the circulation of ideas that threaten their power, so the ideas and interests of the median, everyday voter never get represented. But the 99 percent have little reason to stay in the system because its outcomes are biased: voting and policies favor the top. And the country is biased in “perceptions and beliefs” (137) because the top convinces the bottom that they share the same interests.

Stiglitz also argues that there is a link between inequality, globalization, and democracy. The 1 percent control US politics as well as politics in other countries. For example, when Greece’s economy was suffering under crushing debt, the US financial sector threatened the country with low bond ratings (which would have prevented the government from selling its bonds to raise money) if the Greek government did not follow its financial advice. This means that countries cannot have their own democracy, the right to self-determination, as long as globalization continues to be “full and unfettered” (140).

US influence has taken a hit because of its unfair economic and political systems at home and its actions on the international stage. The United States relies on soft power, meaning its values and beliefs are shared with other countries, which allows Americans to lead the world and spread ideas, like its beliefs in human rights and equality. But the United States has used its influence to shore up the power and interests of the 1 percent—at home and abroad—rather than level the playing field.