Redefining Inequality: Globalization, Corporate Power, and a New Economic Paradigm

This podcast episode features Joe Stiglitz and Winnie Byanyima discussing the failures of globalization over the past third of a century, arguing that it has not delivered promised results but instead produced more inequality and slower growth. Stiglitz contends that the globalization agenda was largely corporate-driven, designed to weaken the bargaining power of workers and maximize corporate profits through mechanisms like resisting trade assistance, crafting investment agreements that prioritize corporate property rights over national comparative advantages, enabling tax avoidance, and pushing for intellectual property rights that benefit big pharma without creating jobs. He highlights how these policies, often hidden from public and even congressional scrutiny, served a specific corporate agenda rather than broader societal welfare.

Stiglitz further explains that economists like Paul Samuelson had already predicted the ambiguous effects of trade liberalization, such as the factor price equalization theorem leading to lower wages for unskilled workers in developed countries. He criticizes the mainstream economic paradigm, rooted in competitive equilibrium theory, for being fundamentally flawed. This paradigm, he argues, relies on unrealistic assumptions about fixed preferences, competitive markets, and the absence of rents, failing to account for the significant role of corporations, households, and market power (monopoly and monopsony) in shaping economic outcomes. He points out that while labor and capital shares of income are declining, the share of 'rents' – including monopoly, land, and intellectual property rents – is increasing, explaining paradoxes like rising wealth-income ratios alongside falling capital-income ratios and stagnant productivity.

Stiglitz proposes that the current crisis is a result of deliberately rewritten market rules that have fostered these rents and distorted the economy. He offers two pieces of good news: first, these rules can be rewritten again to create a more egalitarian and productive society; second, rents are taxable, providing a potential source of revenue for progressive policies. He advocates for "social protection without protectionism" and systemic change, rather than merely compensating losers, emphasizing that large economies like the US and EU can implement measures like a global minimum corporate income tax to capture these rents. He draws parallels to the Progressive Era in the US, suggesting that political will and collective action are crucial to overcome the current economic and political inequality.

Winnie Byanyima reinforces Stiglitz's arguments, emphasizing that today's inequality crisis is "entirely human-made" and a product of 40 years of economics benefiting only the top 1%. She critiques the economics profession for being an "intellectual desert" that has ignored big questions and been influenced by money, leading to a "zombie economics" that persists despite its lack of credibility. Byanyima shares personal anecdotes and examples from Oxfam's work, such as exploited garment workers in Myanmar earning below a living wage despite being above the global poverty line, and poultry workers in the US suffering debilitating injuries. She calls for new, forceful ideas to shift economic norms and harness the full potential of humanity, stressing the need for both hope and active struggle to achieve economic justice.

the only thing that it did produce is more inequality it produced slower growth

it isn't a lot of these issues are not north-south issues developed less developed countries but really issues about the running of the global system for the interest of the vast majority or for the corporate agenda

that collateral damage which includes lowering wages may have been the main show that may have been the main thrust of the globalization agenda

if you can tell your workers if you don't take a lower wage we're gonna move the factory abroad and they will have more secure property rights than in the United States that makes it a more credible threat

Paul Samuelson talked about the factor price equalisation theorem that in fact trade liberalisation would lead to the wages of unskilled workers in the developed countries coming down to increase inequality unless you did something about it

the basic paradigm that is so ingrained in us is probably a wrong is not a give us a good guide to the economy

the share of labor is going down share of capital is going down where is the money going well it's the share of reps

we've rewritten the rules of the market economy in ways that have allowed these rents to grow

we now you can tax ranks Henry George great American economists of the 19th century said you ought to have a hundred percent tax on ranks

today's inequality crisis is entirely human-made is the product of 40 years of an economy and in an economics that benefits just 1% at the top and we can change that

economic thought has been an intellectual desert for so long the big questions have been ignored

the neoliberal consensus is stumbling it is stumbling one of my friends described it as zombie economics