- Joseph Stiglitz discusses how the U.S.' extreme inequality is limiting its prospects for economic recovery:
There are all kinds of excuses for inequality. Some say it’s beyond our control, pointing to market forces like globalization, trade liberalization, the technological revolution, the “rise of the rest.” Others assert that doing anything about it would make us all worse off, by stifling our already sputtering economic engine. These are self-serving, ignorant falsehoods.- Meanwhile, The Economist's Free Exchange blog notes that cities and neighbourhoods which make the effort to fund public services tend to generate a virtuous cycle in terms of overall well-being - while those who have tried to operate on the cheap have paid the price by falling behind further:
Market forces don’t exist in a vacuum — we shape them. Other countries, like fast-growing Brazil, have shaped them in ways that have lowered inequality while creating more opportunity and higher growth. Countries far poorer than ours have decided that all young people should have access to food, education and health care so they can fulfill their aspirations.
Our legal framework and the way we enforce it has provided more scope here for abuses by the financial sector; for perverse compensation for chief executives; for monopolies’ ability to take unjust advantage of their concentrated power.
The good news is that our thinking has been reframed: it used to be that we asked how much growth we would be willing to sacrifice for a little more equality and opportunity. Now we realize that we are paying a high price for our inequality and that alleviating it and promoting growth are intertwined, complementary goals. It will be up to all of us — our leaders included — to muster the courage and foresight to finally treat this beleaguering malady.
(C)ities that hoovered up more skilled workers became more productive and paid higher wages to high and low skill workers. But cities that attracted a large share of skilled workers then experienced a major improvement in their local amenities. The quality of local schools rose, for instance. Crime fell. Cultural and entertainment opportunities expanded. Thanks to slow housing supply growth, housing costs in these places soared. And because low skill households have been less willing to pay for the improvements in amenities, they've left for cheaper cities.- Benedict Carey discusses the poverty trap - where those with less money wind up paying more for necessities as immediate needs override any capacity to plan:
And here's the kicker: once one takes into account the rising amenity values in skilled places it turns out that growth in welfare inequality has been larger than growth in income inequality.
The usual explanations for reckless borrowing focus on people’s character, or social norms that promote free spending and instant gratification. But recent research has shown that scarcity by itself is enough to cause this kind of financial self-sabotage.“When we put people in situations of scarcity in experiments, they get into poverty traps,” said Eldar Shafir, a professor of psychology and public affairs at Princeton. “They borrow at high interest rates that hurt them, in ways they knew to avoid when there was less scarcity.”The psychological burden of debt not only saps intellectual resources, it also reinforces the reckless behavior, and quickly, Dr. Shafir and other experts said. Millions of Americans have been keeping the lights on through hard times with borrowed money, running a kind of shell game to keep bill collectors away. The average debt for households earning $20,000 a year or less more than doubled to $26,000 between 2001 and 2010, according to the Urban Institute. The averages for households in slightly higher brackets grew by 50 to 90 percent in the same period.
- Finally, the Star's editorial board salutes Edgar Schmidt's much-needed whistleblowing against the unconstitutional legislation. And Iain Hunter notes that the problem is particularly obvious when the lack of a proper review from the civil service is combined with the Cons' habit of ramming through legislation without debate (or even any particular thought).
[Edit: fixed typo.]
[Edit: fixed typo.]