Nobel Prize Winner Stiglitz: “A Lot of People Still Believe In the American Dream. I Think They’re Wrong To.”

October 26, 2012  |  

People in this country and abroad talk lovingly about “The American Dream”; that idea that with hard work, perseverance, a lot of brains and a little luck, one can make their way up the ladder to a better life. Well, according to  Joseph Stiglitz — Columbia University professor, co-chair of the school’s Committee on Global Thought, 2007 Nobel Prize winner for economics and one of Time magazine’s 100 most influential people in the world — you should forget that.

“A lot of people still believe in the American Dream. I think they’re wrong to,” Stiglitz told the suit-wearing audience at The National Museum of the American Indian yesterday. They had all gathered for The Economist‘s two-day Buttonwood Gathering, which brought together experts and executives in areas of finance, business and academics to talk about the economic issues and opportunities available in the modern world.

This “conversation about inequality” focused on the economic problems facing the US right now. From Stiglitz’s point of view, the biggest problem facing our country is not just the huge levels of inequality, but the fact that the people in the middle aren’t doing well.

“Trickle down hasn’t been working,” he said. “Americans believe in equality of opportunity. The data suggests that that has become a myth.” The data he pointed to shows that the US is woefully lacking in equality of opportunity when compared to other modern societies. And he blamed not just the market, but the laws and other “distortions” in the American system for creating this vast inequality. For instance, he took issue with bankruptcy laws that seem very generous when helping banks but stick individuals in financial distress with their student loans.

He also took issue with a system, such as our patent process, which eliminates competition and creates monopolies.  “We need to be more forceful in enforcing competition law.”

On the other side of this conversation was Martin Feldman, the George F. Baker Professor of Economics at Harvard University and the former chief economic adviser to President Ronald Reagan. In his estimation, low incomes, low wealth, and overall poverty are the real problems. Particularly when you take into account that hundreds of millions that the country is spending every year on Social Security only to have a vast number of the elderly living in penury.

Instead, he suggested, we need to address the “inefficiencies in the economy.” Top among them is the education system.

“The education system is not preparing people of lesser ability for jobs where they can support a family,” said Feldman. We should be “trying to educate and train people for market-oriented jobs.” That, said Feldman, would not only strengthen bank accounts, but families, marriages, and other social areas that are suffering because of the financial pinch.

“When people talk about schools, they talk about going to college,” Feldman added. “They should be talking about skills for getting a job.” He also, at one point, brought up European apprenticeship programs, which he thought would be a useful and more effective form of education here.

Stiglitz agreed that education is a top priority. And both believe that tax reform is necessary to alleviate Stiglitz’s aforementioned “distortions” in the system and to encourage wealth accumulation, according to Feldman.

Feldman still seemed to believe in the American Dream, pointing out that many CEOs aren’t Harvard or Yale graduates, and stating that the lack of cronyism here in the US (unlike places like China and Latin America) means that a lot of wealthy Americans made their money on the up and up.

But I thought that Stiglitz’s assertion about the American Dream was an interesting one. I would agree that the path to the middle and upper class in this country has changed. But modern-day success stories like Mayor Michael Bloomberg, Jay Z, Steve Jobs and President Barack Obama show that it’s possible to start small and move into the big time. However, it has gotten to the point where that sort of mobility is reserved for a very, choice few.

What do you think? Is the American Dream dead?

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