Roosevelt Institute Senior Fellow and Chief Economist Joe Stiglitz told CNBC yesterday that we’ve got something he calls “ersatz capitalism” in the US, and it isn’t pretty. The version of capitalism we’ve ended up with is a flawed, unfair system that socializes economic losses and privatizes the gains.
“‘An awful lot of people are not managing their own money,’ Stiglitz said. ‘In old-style 19th Century capitalism, I owned my company, I made a mistake, I bore the consequences.’
‘Today, (at) most of the big companies you have managers who, when things go well, walk off with a lot of money. When things go bad the shareholders bear the costs,’ he said.”
As Stiglitz sees it, this upside-down economic paradigm is a symptom of a deeper, society-wide problem. In a recent piece in Mother Jones, he writes:
“We have created a society in which materialism overwhelms moral commitment, in which the rapid growth that we have achieved is not sustainable environmentally or socially, in which we do not act together to address our common needs. Market fundamentalism has eroded any sense of community and has led to rampant exploitation of unwary and unprotected individuals. There has been an erosion of trust — and not just in our financial institutions. It is not too late to close these fissures.”
Is Wall Street shaping us into a monstrous image of itself? he asks. The answer is disturbing. Stiglitz cites the example of compensation as a place where our values have gone haywire:
“There used to be a social contract about the reasonable division of the gains that arise from acting together within the economy. Within corporations, the pay of the leader might be 10 or 20 times that of the average worker. But something happened 30 years ago, as the era of Thatcher/Reagan was ushered in. There ceased to be any sense of fairness; it was simply how much the executive could appropriate for himself…The bankers knew — or should have known — that while high leverage might generate high returns in good years, it also exposed the banks to large downside risks. But they also knew that under their contracts, this would not affect their bonuses.”
Stiglitz has the courage to call a spade a spade. Financial operators have, in many cases, been guilty of more than just self-deception and bad judgment. “Moral depravity” is what Stiglitz dubs it:
Far harder to forgive is the moral depravity—the financial sector’s exploitation of poor and middle-class Americans. Our financial system discovered that there was money at the bottom of the pyramid and did everything possible to move it toward the top. We are still debating why the regulators didn’t stop this. But shouldn’t the question also have been: Didn’t those engaging in these practices have any moral compunction?
Is it time, finally, for a recalibration of values? Or will we be content with business as usual — which continues to bring us inequality and the erosion of our democracy? Stiglitz believes it is not too late…let’s hope his prediction on that is right.
Click here to read full Mother Jones piece.
Stiglitz’ new book, Freefall: America, Free Markets, and the Sinking of the World Economy, hit stores on Monday.