The Price of Inequality: How Today's Divided Society Endangers Our Future by Joseph E. Stiglitz Read Free Book Online Page B

have opportunities to help shape globalization—opportunities not available to others.
    In reshaping globalization, we have to realize that there has occurred a race to the bottom from which we have all suffered. The United States is in the best position to stop this (if its politics would allow it); it can fight for better worker rights and conditions, better financial regulations, better environmental conditions. But other countries, working together, can also fight against the race to the bottom.
    Even the advocates of globalization should understand that tempering globalization is in their interests. For if globalization is not managed better than it has been, there is a real risk of a retreat, into protectionism or forms of beggar-thy-neighbor policies.
    There are specific policies that the United States can undertake to rebalance globalization in ways that are consistent with increasing global equity and efficiency. For instance, current U.S. tax law, where U.S. corporations are taxed only on profits that they bring back home, encourages outsourcing of jobs. Our system of global competition encourages firms to locate on the basis not of global efficiency but of tax competition; while it’s understandable why corporations like this, since tax competition increases their after-tax profits, it distorts the global economy and undermines the ability to impose fair taxation on capital. The United States is in a position, for instance, to tax corporations that operate in the United States on the full basis of the profits they derive from their sales in the United States, regardless of where their production occurs. 13
    Restoring and maintaining full employment
    A fiscal policy to maintain full employment—with equality. The most important government policy influencing well-being, with the most important consequences for distribution, is maintaining full employment. Unless the United States is careful, it could move into a situation similar to that of some European countries, with permanently higher unemployment—a vast waste of resources, which would simultaneously lead to more inequality and weaken both our economic and our fiscal situation. For seventy-five years we’ve known the basic principles of how to maintain the economy at or near full employment. Chapter 8 explained how well-designed macropolicies can actually achieve all three objectives simultaneously—lower debts and deficits, faster growth and employment, and an improved distribution of income.
    A monetary policy—and monetary institutions—to maintain full employment. Historically, however, there has been greater reliance on monetary policy than on fiscal policy for short-term stabilization, simply because it can adjust to changing circumstances more rapidly. But deficiencies in governance, and in the prevailing economic models, have led to a massive failure of monetary policy. Chapter 9 explained the reforms in theory, in governance, and in policy that are needed: a more accountable and a more representative central bank, and a shift away from the excessive focus on inflation to a more balanced focus on employment, growth, and financial stability.
    Correcting trade imbalances. One of the reasons that total demand is so weak is that the United States imports so much—more than half a trillion dollars more than we export. 14 If exports create jobs, then imports destroy jobs; and we’ve been destroying more jobs than we’ve been creating. For a while, a long while, government spending (deficits) made up the difference, allowing the United States to maintain full employment in spite of the gap. But how long can we continue to borrow at such a clip? As I argued in chapter 8, the benefits of borrowing, especially for high-return investment, still well exceed the costs; but sometime in the future, perhaps the not-too-distant future, this may not be true. In any case, politics in the United States is making the sustaining of deficits, even for financing