Nobel Laureate Joseph Stiglitz can stake some claim to being the intellectual father of the ‘Occupy’ movement with his May 2011 Vanity Fair article ‘Of the 1%, by the 1%, for the 1%‘. He followed up with a book in 2012, ‘The Price of Inequality‘. This, in turn, builds on inter alia the 2003 and 2004 scholarly works of Thomas Piketty and Emanuel Saez on income inequality in the US since 1913.
Piketty, Saez and others – including Ireland’s Brian Nolan – have since worked to bring together data on top income shares for some two dozen countries and counting in a consolidated database (complete with helpful interactive graphics).
When Barack Obama was elected on a wave of euphoria three years ago this month, the US was in the grip of its deepest recession since the 1930’s.
Times were tough, but when the silver-tongued President-elect spoke of hope and change, of America as a place where all things were possible, he spoke to the American dream. People wanted to believe.
After three years of economic pain and political bickering, Americans are angry and frustrated. They have lost faith in their political class. For the first time in living memory the American dream itself is being called into question. People are no longer so sure that if they work hard and save hard, they will be able to provide a secure future for their children. Continue reading
Barack Obama knows that his 2012 re-election chances may hinge on his ability to tackle unemployment which has remained stubbornly above 9%. With the US purse strings in the vice-grip of a US Congress controlled by a Republican Party with a deficit fetish, he knows better than to expect help from this quarter.
If more fiscal stimulus is impossible, whether because of real funding constraints, as in Ireland, or because of purely political constraints, as in the US, then the next best approach is to get more bang from the government buck. It is this concept, formally known as the ‘balanced budget multiplier’, that underpins President Obama’s latest jobs plan. Continue reading
Much of the orthodox analysis of the West’s recent economic travails puts the blame squarely on a failure of political leadership.
Reality requires a more complex narrative.
Yes, the US came inexcusably close to committing hari kari by failing to lift its debt ceiling with a balanced, timely, comprehensive programme for long term fiscal sustainability.
Yes, the European Union struggles to deal with the fallout from the inherent contradictions at the heart of its monetary union.
Certainly, political failure doesn’t help lift the pervading sense of crisis, and the uncertainty it breeds contributes to financial market volatility, but it is market failure, not political failure, that is at the root of our economic malaise.
In short, the West’s growth model is broken. Continue reading