Review of The Price of Inequality by Joseph Stiglitz – Term Paper

SUMMARY

The book The Price of Inequality by Joseph Stiglitz discusses the circumstances surrounding the difficult economic circumstances facing the average American citizen. Unlike the popular information being doled out by the politicians, economical upsurges are often caused by controlled actions by those who hold most of the wealth in the Americas. To secure this control, these individuals will ensure that they oil the political machinery with enough finances to maintain this hold. This goes to provide the rich with an even tighter hold on the financial sector of the country.

According to Stiglitz, some of the problems that have been argued to influence the economical situation in the Americas include technological and social change. For instance, it is argues that the introduction of technology is solely responsible for the loss of jobs for most of those who have been replaced by the technologies introduced. It is also argued by the politicians that the social changes that are being impressed upon the people are radically modifying the economical climate and thus causing the sudden upheavals in the economy. To the untrained eye, this can be accepted to be the truth. However, Joseph Stiglitz has provided the reader of his book with a general idea of the different possibilities behind the real influences (Stiglitz 234). He attributes warped politics to the influence of a market that is solely shaped to provide the rich with the utmost advantage. This gives those other financial groups such as the middle income and the low income groups with little or no power to control the eventualities of their financial power.

Being a Nobel laureate, Joseph Stiglitz has had one of the greatest influences in the opinions and ideas regarding global economy on more than one instance (Stiglitz 19). His radical approach to the common ideologies regarding the economy, have attracted both support and ridicule. However, the book The Price of Inequality provides a reader with a fresh pair of eyes with which to analyze the long held notions regarding the American economy. Joseph Stiglitz vehemently opposes the inequality that results from the influence by the wealthy on the political class. He also provides the reader with a radical approach towards the annihilation of this situation, by forcefully opposing the wealthy where it would hurt the most. According to Joseph Stiglitz, this would be most effectively implemented by refusing to comply with the financial rules being implemented by the wealthy. This would reduce the political insulation that wealthy have accumulated over the years. It will also ensure that there is a lasting method of countering the influence being instigated by the wealthy. The insulation that Joseph Stiglitz refers to in his book is what he refers to as rent seeking.

There are several instances that the author points out to the difficulty of ensuring a free market. This is because free markets have often resulted in to the concentration of economical power among the few. This is also a direct way of ensuring that the same individuals have a concentrated influence on the political arena. Even with the introduction of competition among those in business, the previous presence of economical elites ensures that those measures are pointless. Some politicians have also fought for the introduction of laws that would remove a limit to the contributions in the electioneering period. In fact, such a measure would serve to ensure that there is continued influence of the wealthy on those who play politics. The wealthy would have more control of the politicians through the contributions they make to the campaign teams. Therefore, it would only work to introduce measures that completely lock out the wealthy in the contribution process to the political campaigns.

Joseph Stiglitz has often through his book pointed out to the fact that competition is good for the economy. According to him, the introduction of competition is the best way to ensure that the wealthy do not influence the economy of the country. However, the author also points out that it is important for the market to be regulated by the government. According to Joseph Stiglitz, this would be crucial in ensuring that the wealthy do no introduce any form of leverage into the market and make it one of their pawns (Stiglitz 177). The introduction of such leverage would only serve to minimize and constrain the possibilities as well as the strength of the market. Therefore, it is important to realize that the regulation process needs to be at the optimum level. This is to say that the government should ensure that the market does not fall into the hands of a few. To Joseph Stiglitz, this would be tantamount to putting too much regulation on the market and therefore limit the markets possibilities.

Some of the key institutions that should be providing guidance regarding the importance of economical power in shaping politics do not know how to address this issue. The key institution that Joseph Stiglitz has referred to in the book includes the congress. Second in influence regarding this matter are the news media. According to Joseph Stiglitz, these two institutions lack the knowledge on how to control the moneyed individuals and groups that have vehemently held a tight grip on the economy. As a matter of fact, these institutions are also under the influence of the financial control being exhibited by the few rich individuals. To them, the consistent fiscal and budget surpluses are of no importance. However, a close analysis of such events that caused Alan Greenspan, the former Federal Reserve chairman, to fret may be something to worry about. The choice by Greenspan to introduce moderating policies to arrest the situation with budgetary surpluses was meant to solve the aforementioned problems (Stiglitz 93). However, as it ended out, it resulted in the recession in the year 2008. The lack of knowledge on such issues and matters by the political elite ensures that there is a continuation in such issues.

Joseph Stiglitz points out that there are regulatory authorities already in place. However, he points out that these bodies and individuals are under the influence of those they are supposed to be regulating. As a result of this influence, it becomes difficult for these individuals to be regulated. The author also points out that there are different psychological influences that are being exacted on those who are supposed to be ensuring that there is a continued free market (Stiglitz 123). Due to this influence, it becomes difficult to ensure that a free market is maintained without outside influence. The regulatory bodies are influenced by the consistent discussion and analysis of current events with the aim of ensuring that the control is reverted back to the wealthy. This has been seen to have happened before the 2008 economic down surge (Stiglitz 98). Such events have also been seen to be repeated after the collapse of 2008. This is a repeat of those events and is abound to result in a similar collapse or an even worse financial down surge.

While one may tend to think that the book may be alluding to the lack of the importance of democracy, the opposite is actually the truth. The reason behind this ideology s that the author points out that the real problem is that the tendency towards a reduction of the amount of inequality. According to Joseph Stiglitz, the presence of inequality actually works to destroy the strength of that capitalistic government that was put in place by the people. The presence of inequality only works to increase the difficulty of matters on the ground. It works to increase the violence in the streets, reduces the morale of the people, and increases the possibility that there will be negative publicity by the people regarding the policies brought about by the current government. Therefore, it becomes important to provide the specific regulatory bodies with the tools to prevent against the said influence. This would ensure that there is as little negative influence by the wealthy as possible. It would also ensure that the government is learning from the experiences of economic collapse such as that of the year 2008.

Joseph Stiglitz has directly related inequality to the reduction on the productivity of a nations people. According to him, an increase in inequality reduces the optimum productivity of a majority of a society. As a result of this, it becomes impossible for the country to obtain the progress that everyone wants (Stiglitz 73). This results in the production of a low income and medium income class that is producing at their minimum. This will directly influence the society in a negative manner. It will also provide loopholes for the rich to continue influencing the economy. This results in a reduction the quality of justice for the public. In fact the author points out that such an event results in the increase in an overall favoritism of the rich. The end result is an increase in the number of people who will be facing foreclosures from the banks. It also becomes easy for big banks to fail in their endeavors and get punished for such failure.

The author has also pointed out to the fact that the society is increasingly being ruled by the rules of the game. What Joseph Stiglitz is referring to are the rules that are used by the wealthy in playing the games associated with business. Associating the political arena with the rules of business pushes aside the original intention of politics (Stiglitz 84). It provides the wealthy with a tool to control the politics that would limit the power they wield in the society. It also provides the society with little or no protection from the negative influence of inequality. The cumulative effect is that such events will only serve the rich and hit the poor. The only instance that the wealthy were affected by this system is during the 2008 economic crisis. The book clearly depicts a pessimistic view held by Joseph Stiglitz. According to him, the inequality levels will continue to increase. He sees that there will be no influence or any changes no matter the individuals introduce to the presidency of America.

RELATION TO HRM

The book has a close relationship to human resource management. The economics and political influence involved in the operations of the HRM clearly enact the same issues depicted by the book authored by Joseph Stiglitz. The concentration of power within the few with economical power will directly influence the processes and strategies being influenced by the human resource management teams. The result is a flawed HRM that will tend to place employees on a disadvantaged position. This will in turn result in strife between the worker unions and the politicians representing them. However, the politicians find themselves in a catch twenty two situation. This is because on one hand they have their pockets line by money from the wealthy. However, they owe their people all the support in the form of introducing laws that will ensure that the employees are not outwitted by the wealthy. However, more often than not it is the rich that win this battle.

The free market has been critically analyzed in the book the Price of Inequality. The employment sector has its own free market. However, there is a general tendency by employers to work together in determining the pay for the employees. This is a HRM policy that is meant to ensure that there are minimal recurrent costs that are associated with the remuneration of employees. As a result of this, the employees will often find themselves whereby they lack the necessary power to control the outcome of any petitions they make against such action. The only solution is for the employees to join unions that would champion their rights. However, this raises more problems for the people are the individuals who are supposed to raise such issues are often found to support the very rich individuals in question. The fact that employees are the ones who are more in need of the employer reduces their bargaining power. This creates a free market for the individuals looking to be employed by the companies in question. Placing the employee at such a disadvantage reduces their potential and thus their motivation.

The HRM has little or no control over the rules it can put in place to govern the employees. This relationship is similar to the way the wealthy have already rigged the system so that the individuals who should regulate them are actually providing them with a shield from the rules and regulations that should affect them. This is also true in the HRM setting where there is rampant cronyism. This results in the hiring of individuals with poor skills rather than hire an individual with great skills. The result of this method of hiring is that the company performs at the least possible level. This is in relation to a decreased performance and thus output of Americas economic performance as a result of the limitation of access to resources by the wealthy. The regulatory bodies in the HRM are also bombarded with propaganda. This happens through office gossip and the transfer of distorted information. This may lead o the firing of an individual who is genuinely performing well. The same applies in the economic inequality experienced around the globe. Legitimate businesses are losing out to businesses held by the wealthy.

The core aim of the HRM is to ensure that the needs of the employees are met. However, according to the book The Price of Inequality, it is clear to see that the current events with regards to the US economy do not favor the employee. The rich have influenced the legal and political arenas to suit their own needs. This leaves out the employee in the cold. The employee will often find themselves in the category of the middle income earners or the low income earners. The rich will often push the political elite to set up laws that will protect them from any type of retaliation from employees. Industrial action becomes limited with those participating in such action facing regular legal measures from the owners of these companies. This limits the action that such employees can take to mitigate their employers hold over them. The HRM will also implement laws that will limit the general activities that the employees can take to fight back such actions.

The HRM has also been used by the rich to enhance their control over employees by pushing their employees to take loans that have them bogged down on their job. The employer knows that the employee can move to another employer. However, to avoid this, the employer will dangle a carrot via the HRM. These include the attractive financial support from the employer that allows the employee to get credit on the job. While this seems attractive, it only serves to provide the employer with more finances. The employers financial power increases as the payment by the employee is guaranteed as long the individual continues to work for the company in question. It also becomes evident that the employee may pay at higher interest rate in comparison to any other credit sources. This can be concluded as a result of the inconveniences aforementioned.

PERSONAL OPINION

The wealthy will always have a trick up their sleeve with regards to the strategies they will use to protect their money. Introducing a means of making competition in the market equal will only be futile. The social structure is such that at any given time, there will always be someone or a group of people who will be the best at something. Therefore, it is true to say that whichever actions are taken against the rich will always prove pointless. Stiglitz has found this to be true and based his arguments on research as well as recent provable economical events. Therefore, the best way to address this problem is to change the mindset of the populous.

Setting up measures to curb the strength of the wealthy will always backfire. However, having an informed public would ensure that the choices made involving personal finances are radical. It will also ensure that the results achieved reduce the financial and thus political influence of the smallest portion of the society. However, like all economic cycles, the period where the rich are in full control of what the poor accrue will definitely come to an end. For instance, ancient civilizations have all exhibited the tendency of a shift in economic cycles. All these civilizations have at one point or another have had to do away with the self appointed most important people. The changes in economic status came as a result of a strained economic system. This will undoubtedly happen with the current economic problems. When these issues become too much, there are high chances that the bubble will bust and the cycle will start a fresh. It is only then that all people will have an equal chance with the wealthy members of the society.

Works Cited

Stiglitz, Joseph E. The Price of Inequality: [how Today’s Divided Society Endangers Our Future]. New York: W.W. Norton ; Co, 2012. Print.