Economist Stiglitz: “American Dream is a myth”

Nobel winning economist Joseph Stiglitz discusses the effects of income inequality in the United States:

In his latest book, The Price of Inequality, Columbia Professor and Nobel laureate Joseph Stiglitz examines the causes of income inequality and offers some remedies. In between, he reaches some startling conclusions, including that America is “no longer the land of opportunity” and “the ‘American dream’ is a myth.”

While we all know stories of people who’ve moved up the social stratosphere, Stiglitz says the statistics tell a very different story. In the last 30 years the share of national income held by the top 1% of Americans has doubled; for to the top 0.1%, their share has tripled, he reports. Meanwhile, median incomes for American workers have stagnated.

Even more than income inequality, “America has the least equality of opportunity of any of the advanced industrial economies,” Stiglitz says. In short, the status you’re born into — whether rich or poor — is more likely to be the status of your adult life in America vs. any other advanced economy, including ‘Old Europe’.

For example, just 8% of students at America’s elite universities come from households in the bottom 50% of income, Stiglitz says, even as those universities are “needs blind” — meaning admission isn’t predicated on your ability to pay.

Social mobility is key to American Dream as the idea goes like this: work hard and you should be able to rise from the lower ranks to the top. This is linked to recent comments sociologist William Julius Wilson made about promoting “affirmative opportunity.” In America, we assume that people with good traits and skills, such as hard work, motivation, creativity, etc., will be able to move up the social ranks. However, this “rags-to-riches” tale obscures the fact that relatively few people are able to do this. We love to hold up examples of people like Bill Gates or Steve Jobs as people who didn’t even need college to become fabulously successful and wealthy but we forget that their cases are rare, we likely wouldn’t advise our own kids to drop out of college, and both of them had some advantages (read Outliers for some details about how Gates’ background helped him get ahead).

If social mobility is much more limited today, how long is it before this part of the Dream falls apart? I wonder how long it takes for a national mythos to catch up with reality.

From this brief excerpt, it doesn’t sound like Stiglitz is saying much new about inequality. Others have been talking for years about growing inequality with commentary about American headed for a “two-class society” stretching back to the early 1960s.

 

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