Joseph Stiglitz on ‘Ersatz Capitalism’ and Moral Bankruptcy
by ilene - January 20th, 2010 11:43 pm
Joseph Stiglitz on ‘Ersatz Capitalism’ and Moral Bankruptcy
Courtesy of Lynn Parramore at New Deal 2.0
Roosevelt Institute Senior Fellow and Chief Economist Joe Stiglitz told CNBC yesterday that we’ve got something he calls “ersatz capitalism,” in the US, and it isn’t pretty. The version of capitalism we’ve ended up with is a flawed, unfair system that socializes economic losses and privatizes the gains.
“‘An awful lot of people are not managing their own money,’ Stiglitz said. ‘In old-style 19th Century capitalism, I owned my company, I made a mistake, I bore the consequences.’
‘Today, (at) most of the big companies you have managers who, when things go well, walk off with a lot of money. When things go bad the shareholders bear the costs,’ he said.”
As Stiglitz sees it, this upside-down economic paradigm is a symptom of a deeper, society-wide problem. In a recent piece in Mother Jones, he writes:
“We have created a society in which materialism overwhelms moral commitment, in which the rapid growth that we have achieved is not sustainable environmentally or socially, in which we do not act together to address our common needs. Market fundamentalism has eroded any sense of community and has led to rampant exploitation of unwary and unprotected individuals. There has been an erosion of trust — and not just in our financial institutions. It is not too late to close these fissures.”
Is Wall Street shaping us into a monstrous image of itself? he asks. The answer is disturbing. Stiglitz cites the example of compensation as a place where our values have gone haywire:
“There used to be a social contract about the reasonable division of the gains that arise from acting together within the economy. Within corporations, the pay of the leader might be 10 or 20 times that of the average worker. But something happened 30 years ago, as the era of Thatcher/Reagan was ushered in. There ceased to be any sense of fairness; it was simply how much the executive could appropriate for himself…The bankers knew — or should have known — that while high leverage might generate high returns in good years, it also exposed the banks to large downside risks. But they also knew that under their contracts, this would not affect their bonuses.”
Stiglitz has the courage to…
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW.