The Price of Inequality

Stiglitz presents his argument for why America’s level of inequality is not sustainable over the long term. He then refutes the idea that inequality promotes economic growth and any attempts to fix it will “harm the economy” (84).

Inequality will harm the US economy in the long run because with wealth concentrated at the top, inequality lessens overall demand (the 99 percent consume less) and causes unemployment (less demand means less supply). Stiglitz writes that if only 5% of the top 1 percent’s share of US income was shifted to the 99 percent, in 2012 the US unemployment rate would have been two points less. But government responses to downturns, like the tech bubble in the 1990s and the housing bubble in the 2000s, are weak; policymakers fail to enact proper regulations to protect the consumer, which leads to more inequality. The result is underutilized resources, which adds up to significant losses to the US economy.

Inequality also makes the economy inefficient and less productive. Political gridlock hurts the public sector because it causes less investment in infrastructure, which leaves the 99 percent with fewer services, less hope, and higher anxiety, as they constantly worry about making ends meet, putting social cohesion at risk and lowering productivity.