Can extremely high wealth make us less of a community?

While Nobel Laureates in Economic Sciences may theorize many different approaches for a potential solution – the right application is still not in sight.

Global inequality is rising. It is not only worse than at any time since the 19th century, it’s getting worse within countries, with income inequality at an all-time high. The need for a solution, it’s pressing.

The debate around inequality is one of the most heavily discussed ones of our time. How should we distribute resources and how can we get along in a world where inequalities are so vast? While Nobel Laureates in Economic Sciences may theorize and assess many different approaches for a potential solution – the right application is still not in sight.

Nobel Laureate Joseph E. Stiglitz, who has written many books on the topic, agrees that there’s no easy, overnight way to do this. But he’s sure, that if we wrote the rules to make the economy more unequal, we should be able to rewrite them to make them more equal. "Give workers more bargaining rights, curb the power of corporations, create better corporate governance, keep checks and balances on the financial sector,” he says. He’s speaking of the US economy, a place where incomes of the top one percent have doubled since the 1980s. It’s the same place where a full-time male worker’s income is lower today than it was half a century ago.

If you take the old trade theory seriously, it actually suggests that there are very frequently losers in international trade. – Krugman

Nobel Laureate Paul Krugman is another specialist in the area. In 2015, Krugman moved from Princeton University to the City University of New York (CUNY), where he started his research on the trade theory aspect of inequality. “If you take the old trade theory seriously, it actually suggests that there are very frequently losers in international trade,” Krugman explains. “We’ve seen a growth of trade since the 1980s, taking labor-intensive parts and doing them in low-wage countries.”

Krugman references the Chinese middle class which has benefitted greatly from global trade. But why can’t we pay workers in developing countries first-world wages? Is the question naive?

“If that’s what you insist on, then you’re basically saying they can’t export at all,” he answers. “If you say, can consumers choose to buy products that are produced under better conditions than those that otherwise prevail? Yes, to some limits, you can do that. But in a world that’s as highly unequal in its level of development, of technology, of productivity, there are going to be huge inequalities. And a lot of the things you buy are going to be made by workers who are paid very little, who work under terrible conditions by first world standards.”

I don’t think it’s going to happen without a battle. – Stiglitz

Inequality is no longer distinguished by wealthy Western countries versus the rest of the world; it’s a problem deeply rooted within societies. According to the International Monetary Fund, increased inequality also leads to greater political polarization and lower economic growth. Calls for national protectionism in some of the more advanced countries are, after all, often a public backlash against globalization.

Stiglitz, at least when looking at the US and Europe, has faith that we will succeed in narrowing this gap. “I have enough confidence in the democratic processes that over the long run, probably, we will in the United States and even more likely in Europe,” he says. “But I don’t think it’s going to happen without a battle.”
Krugman rejects the notion of “conventional wisdom,” arguing that it’s often simply the wisdom of powerful elites. “Extremely high wealth makes us less of a community,” he says. The desire to find a solution becomes urgent when there’s a real need and there are things we can – and should – be doing to restore the balance. “Redistribution, taxes and transfers, guarantee of basic income in some form for the less fortunate, paid for by taxes on the most fortunate.” He nods confidently. “We can do that.”

More Nobel Laureate stories

Can economics solve financial injustice?

Joseph E. Stiglitz

Nobel Laureate, 2001

How can we reduce inequality?

Paul R. Krugman

Nobel Laureate, 2008