Joseph Stiglitz: The American Dream in Asia's Century

NEW YORK, April 9, 2013 — Nobel Prize-winning economist Joseph E. Stiglitz sat down here with author and investor William D. Cohan to discuss Stiglitz's insights into the current state of the global economy. Co-sponsored by the Harvard Business School Club of New York, the event was part of Asia Society's Business of Asia series.

Stiglitz laid out shocking statistics regarding the rich-poor gap in the United States, calling the U.S. the most unequal country in the developed world, running contrary to many Americans' self-perception. According to him, all new wealth generated in the past two decades has gone to the top tier of earners, and one-fifth of American children live in poverty.

Stiglitz cited four mechanisms — lack of opportunity, rent-seeking by vested interests, Instability and lack of public investment —as being responsible for this vicious circle of income inequality. So why do Americans put up with it? Stiglitz believes that the U.S. has been sold a "bill of goods," namely, that equality sacrifices growth. In fact, when asked which income distribution they deem most fair, a large majority of Americans choose the Swedish model. The "toxic products" and ideas marketed to Americas are, Stiglitz believes, responsible for the disparity between what Americans believe about their country and the reality.

So what can be done? Stiglitz looks to Asia for models of success. Korea, Taiwan and other "tiger" economies exerted a lot of effort to ensure that their economic development would be egalitarian, and their successes have helped ensure their continued rise. Japan, long a byword for stalled growth, is set to unroll Prime Minister Abe's new government-led economic reforms, and is actually doing better than the U.S. in GDP growth when adjusted for a declining labor force. And as for that great bogeyman of inequality, China? Stiglitz is convinced that the new leadership sees growing inequality there as a problem that requires immediate attention as China's influence abroad continues to grow.

China's model may not be the right one for America, but Stiglitz's convincing argument is that the current U.S. model isn't working. There's "no magic bullet," but steps can be taken to fix the problem. Without addressing growing inequality, however, average Americans could be left in the dust by their counterparts in Asia and around the globe.

Reported by James Kochien

Video: Highlights from the discussion (6 min., 28 sec.)

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