Thursday, January 24, 2013

Choosing the Present over the Future

According to my records, the last time Joe Stiglitz tried to teach that gathering of the rich and mighty in Davos known as the World Economic Forum a thing or two was in 2011, when he tried to call attention to the fallacy of using an explanatory model for predictive purposes. Unfortunately, at that time his audience was too drunk on the Kool-Aid of prioritizing technological innovation above all other matters to appreciate the fact that, before one analyzes data, one has to distinguish signal from noise. Fortunately, this time Stiglitz in Davos to sit on a panel on "the perils of economic prediction;" and he seems to have done his level best to keep his audience focused on the perils of the present.

If we are to go by the latest dispatch from BBC News, the greatest of those perils is economic inequality; and, in terms of uneven distribution of wealth, the United States is one of the worst offenders. The numbers behind that offense are striking. 25% of the country's wealth is now controlled by the richest 1% of Americans. Furthermore, that 1% sector has seen their wealth double since 1980. This was the beginning of the era of Ronald Reagan, which promoted blatantly false myths about wealth creation and saw the first wave of economic abuses whose consequences we continue to suffer. (Those consequences include the rise of globalization administered by elite and detached organizations such as the World Economic Forum, in theory if not in practice.)

Since Reagan tended to think in terms of what could fit on a 3 x 5 card, the BBC was kind enough to provide a useful "sound byte" from Stiglitz capturing current conditions.
America likes to think of itself as a land of equality and opportunity, the so-called American dream is very deep to our sense of identity. 
The stats show otherwise, the US has one of the worst opportunity rates of any of the advanced economies. A child's life chances are more dependent on the income of his or her parents than most other industrial economies.
Since, culturally, we have a bad habit of reacting to numbers like these by trying to change the numbers themselves, rather than the conditions they represent, Stiglitz' insights are unlikely to have much impact on our government. There is little evidence that anyone in the White House is paying attention to him. As far as the Congress is concerned, too many (if not all) of those seats have been bought and paid for by that 1%; so we cannot expect our Legislative branch to take action of economic inequality any more than we could expect them to take a substantive approach to health care reform.

To make a case for his goal, Stigliz cited both the Scandinavian countries and Brazil as having governments taking a proactive approach to leveling the playing field; but it is hard to imagine anyone in our own government paying attention to anything happening at such great a geographical distance.

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