Monday Morning Links

Miscellaneous material to start your week.

- Joe Stiglitz discusses the link between increased inequality and the U.S.' economic frailty:

Any solution to today's problems requires addressing the economy's underlying weakness: a deficiency in aggregate demand. Firms won't invest if there is no demand for their products. And one of the key reasons for lack of demand is America's level of inequality — the highest in the advanced countries.

Because those at the top spend a much smaller portion of their income than those in the bottom and middle, when money moves from the bottom and middle to the top (as has been happening in America in the last dozen years), demand drops. The best way to promote employment today and sustained economic growth for the future, therefore, is to focus on the underlying problem of inequality. And this better economic performance in turn will generate more tax revenue, improving the country's fiscal position.
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Countries with high inequality tend to underinvest in their collective well-being, spending too little on such things as education, technology and infrastructure. The wealthy don't need public schools and parks. That's another reason economies with high inequality grow more slowly. Indeed, the United States has grown much more slowly since the 1980s, while inequality has been growing more rapidly than it did in the decades after World War II, when the country grew together.

Public investments are of particular importance today; they increase demand in the short run and productivity in the medium to long term. Increasing public investment would help make up for continued weakness in the private sector. Investments in training for new jobs could facilitate the economy's structural transformation, helping it move from sectors with declining employment (like manufacturing) to more dynamic sectors. Strengthening education would help restore the American dream and help make the country once again a land of opportunity where the talents of our young people are fully utilized.

The right says that we can achieve greater equality only by belt-tightening. But that vision would result in a slowdown of the economy from which all would suffer. Because so much of America's inequality arises from rent-seeking and other activities that distort the economy, curtailing inequality would actually strengthen the economy. Investing public money in the collective good rather than allowing it to be captured by rent-seekers would enhance growth at the same time it reduced inequality.

- Meanwhile, Dan Leger highlights the desperate need to properly regulate the financial system:

Carney has the option of using his bully pulpit to call for sweeping change in financial regulations. No doubt any attempt at major reform will present enormous political complications because of the global nature of banking. But it must be tackled.

If it isn’t, we’ll just have repeats of the crises now dragging down the world economy.

That’s why this has to go beyond the central bankers and academics and into the political realm. Governments have to put the financiers on account and they have to hit wrongdoers where it hurts, in their fortunes and their freedom.

Beyond that, states that benefit from the global commerce in money, including Canada, must fix what’s wrong. Carney and his peers have that challenge: to lead change that will actually make a difference in the tainted world of global money.

- Karen Howlett and Bill Curry report on a rare example of public outcry changing a politician's mind, as Christy Clark has been forced to stop pushing the Gateway pipeline on a province which is broadly opposed to the risks involved.

- That said, it remains to be seen whether a similar effort can come together in a short time frame in advance of today's Regina City Council meeting. But recent letters to the editor from Mark Cote and Marc Spooner are worth a read.

- Finally, there's a bit of good news on the accuracy-of-news front, as the CRTC has backed off plans to stop regulating the deliberate broadcasting of false news.