REDUCED COMPETITION

“[economic] Rents are nothing new — if you go back to the 1950s, many big American corporations faced little competition and enjoyed what amounted to oligopolies. But there’s a good case to be made that the sheer amount of rent-seeking in the US economy has expanded over the years. The number of patents is vastly greater than it once was. Copyright terms have gotten longer. Occupational licensing rules (which protect professionals from competition) are far more common. Tepid antitrust enforcement has led to reduced competition in many industries. Most importantly, the financial industry is now a much bigger part of the US economy than it was in the 1970s, and for [Joseph] Stiglitz, finance profits are, in large part, the result of what he calls ‘predatory rent-seeking activities,’ including the exploitation of uninformed borrowers and investors, the gaming of regulatory schemes, and the taking of risks for which financial institutions don’t bear the full cost (because the government will bail them out if things go wrong).”

James Surowiecki, “Why the Rich Are So Much Richer,” in the New York Review, September 24, 2015, pp: 32-36.

MAKING CONSUMERS WORSE OFF

“[. . .  economic] rents make the economy less efficient, because they move it away from the ideal of perfect competition, and they make consumers worse off. So from the perspective of the economy as a whole, rent-seeking is a waste of time and energy. As [Joseph] Stiglitz puts it, the economy suffers when
“ ‘more efforts go into “rent seeking” — getting a larger slice of the country’s economic pie—than into enlarging the size of the pie.’ ”

James Surowiecki, “Why the Rich Are So Much Richer,” in the New York Review, September 24, 2015, pp: 32-36.

WEALTHY’S SHARE HAS DOUBLED

“The fundamental truth about American economic growth today is that while the work is done by many, the real rewards largely go to the few. The numbers are, at this point, woefully familiar: the top one percent of earners take home more than 20 percent of the income, and their share has more than doubled in the last thirty-five years. The gains for people in the top 0.1 percent, meanwhile, have been even greater. Yet over that same period, average wages and household incomes in the US have risen only slightly, and a number of demographic groups (like men with only a high school education) have actually seen their average wages decline.”

James Surowiecki, “Why the Rich Are So Much Richer,” in the New York Review, September 24, 2015, pp: 32-36..

CEOS’ PAY RISING ‘BRISKLY’

“The idea that high CEO pay is ultimately due to poor corporate governance is a commonplace, and certainly there are many companies where the relationship between the CEO and the board of directors (which in theory is supposed to be supervising him) is too cozy. Yet as an explanation for why CEOs get paid so much more today than they once did, [Joseph] Stiglitz’s argument is unsatisfying. After all, back in the 1960s and 1970s, when CEOs were paid much less, corporate governance was, by any measure, considerably worse than it is today, not better. As one recent study put it:

“ ‘Corporate boards were predominately made up of insiders…or friends of the CEO from the “old boys’ network.” These directors had a largely advisory role, and would rarely overturn or even mount major challenges to CEO decisions.’

“Shareholders, meanwhile, had fewer rights and were less active. Since then, we’ve seen a host of reforms that have given shareholders more power and made boards more diverse and independent. If CEO compensation were primarily the result of bad corporate governance, these changes should have had at least some effect. They haven’t. In fact, CEO pay has continued to rise at a brisk rate.”

James Surowiecki, “Why the Rich Are So Much Richer,” in the New York Review, September 24, 2015, pp: 32-36.

‘TOO HARMFUL TO BE IGNORED’

“Income inequality has become such an undeniable problem, in fact, that even Republican politicians have taken to decrying its effects. It’s not surprising that a Democrat like Barack Obama would call dealing with inequality “the defining challenge of our time.” But when Jeb Bush’s first big policy speech of 2015 spoke of the frustration that Americans feel at seeing “only a small portion of the population riding the economy’s up escalator,” it was a sign that inequality had simply become too obvious, and too harmful, to be ignored.”

James Surowiecki, “Why the Rich Are So Much Richer,” in the New York Review, September 24, 2015, pp: 32-36.

INEQUALITY DOES NOT HELP ECONOMIES GROW FASTER

“ . . . conservative economists once insisted [that] inequality is good for economic growth. In fact, it’s clear that US-style inequality does not help economies grow faster, and that moving toward more equality will not do any damage. We just can’t yet say for certain that it will give the economy a big boost.”

James Surowiecki, “Why the Rich Are So Much Richer,” in the New York Review, September 24, 2015, pp: 32-36.

REDUCED COMPETITION

“[economic] Rents are nothing new — if you go back to the 1950s, many big American corporations faced little competition and enjoyed what amounted to oligopolies. But there’s a good case to be made that the sheer amount of rent-seeking in the US economy has expanded over the years. The number of patents is vastly greater than it once was. Copyright terms have gotten longer. Occupational licensing rules (which protect professionals from competition) are far more common. Tepid antitrust enforcement has led to reduced competition in many industries. Most importantly, the financial industry is now a much bigger part of the US economy than it was in the 1970s, and for [Joseph] Stiglitz, finance profits are, in large part, the result of what he calls ‘predatory rent-seeking activities,’ including the exploitation of uninformed borrowers and investors, the gaming of regulatory schemes, and the taking of risks for which financial institutions don’t bear the full cost (because the government will bail them out if things go wrong).”

James Surowiecki, “Why the Rich Are So Much Richer,” in the New York Review, September 24, 2015, pp: 32-36.