The Price of Inequality: How Today's Divided Society Endangers Our Future (57 page)

37.
In effect, with the filibuster, the “decisive” voter (in the Senate) is not the median but the voter at the 40th percentile. Since the filibuster rules are not a matter of the Constitution, but decided by each Congress, there is an interesting question: Why does the “median” voter cede control to the 40th percentile voter? The filibuster was created to protect minority rights on issues that the minority believed were of critical importance but not protected by the Bill of Rights. The irony is that it was used mostly in issues of civil rights, to abrogate the rights of African Americans. Ezra Klein, “Breaking the Filibuster in One Graph,”
Washington Post
, December 23, 2010, available at
http://voices.washingtonpost.com/ezra-klein/2010/12/breaking_the_filibuster_in_one.html
, provides data showing the “shocking” rise in the number of filibusters—a negligible number a quarter century ago, but around 140 filings to end a filibuster in the last Congress. Today the filibuster is used as a matter of routine and, together with campaign contributions, enhances the ability of moneyed interests to exercise their political influence even when what they want is counter to the interests of the majority.

38.
Many factors contribute to voter participation. Disillusionment and disenfranchisement, upon which this chapter focuses, are important. Personalities matter. So too does war (note, e.g., the relatively high turnout in 2004).

39.
Burnham, “Democracy in Peril,” cites data showing that those states where disenfranchasement and disempowerment have been the strongest (the South) have also had the worst voter turnout. The rate has been as low as 1.8 percent in South Carolina (in the house election of 1926) and fallen below 30 percent—usually well below that number—in many of the southern states in elections held over the past 110 years. Although there was a slight increase in voter turnout in the 2008 presidential election, the last time voter turnout in a presidential election exceeded 60 percent was 1968, and the last time it exceeded 70 percent was 1900. See
http://www.presidency.ucsb.edu/data/turnout.php
. Compare this to countries such as Germany, where turnout for parliamentary elections has never dipped below 70 percent in the last 60 years, or France, where parliamentary election turnout has only dipped below 60 percent once in the last 60 years, and where turnout for presidential elections has always been at least 77 percent and often much more since 1965. See Voter Turnout database of the International Institute of Democracy and Electoral Assistance, available at
http://www.idea.int/vt
/.

40.
Such a low turnout is especially striking given that young people have so much more at stake—a lifetime of consequences as a result of government policies that might be enacted now.

41.
This was evident, e.g., in the turnout in early Republican primaries and caucuses in 2012: 1 percent of Maine’s registered voters turned out for its caucuses, 16 percent in Florida, 3 percent in Nevada. The nature of the bias is illustrated by South Carolina’s primary: 98 percent of voters were white (66 percent of the population is white), 72 percent were 45 or older (median age is 36), two-thirds were evangelical Christians (exit polls in the 2008 general election had 40 percent evangelicals). Similar biases are reflected in stances on particular issues. While evidently among Republican primary voters there is strong opposition to mandated health insurance coverage of contraception, a
New York Times
poll in February 2012 suggests that such provisions have a two-to-one popular support. See Erik Eckholm, “Poll Finds Wide Support for Birth Control Coverage,”
New York Times
, March 1, 2012, available at
http://www.nytimes.com/2012/03/02/us/politics/americans-divided-on-birth-control-coverage-poll-finds.html
(accessed March 4, 2012).

42.
Citizens are not required to vote, only to come to the polling station. The mandate largely resolves the “voting paradox” we discussed earlier in the chapter.

43.
This means a reversal of the Court decision in
Arizona Free Enterprise Club v. Bennett
and in
Citizens United v. Federal Election Commission.

44.
See
Washington Post
/ABC News poll from April 26, 2010, which showed two-thirds of Americans favored stricter financial regulation. Available at
http://abcnews.go.com/images/PollingUnit/1109a1FinancialRegulation.pdf
(accessed March 4, 2012).

45.
Paul Krugman, “Oligarchy, American Style,”
New York Times
, November 4, 2011, available at
http://www.nytimes.com/2011/11/04/opinion/oligarchy-american-style.html
(accessed March 1, 2012).

46.
President Obama put it equally forcefully in his Osawatomie, Kansas, address on December 6, 2011: “[I]n 1910, Teddy Roosevelt came here to Osawatomie. . . . Our country,” he said, “. . . means nothing unless it means the triumph of a real democracy. . . of an economic system under which each man shall be guaranteed the opportunity to show the best that there is him.” The president went on to say, “Inequality also distorts our democracy. It gives an outsized voice to the few who can afford high-priced lobbyists and unlimited campaign contributions, and it runs the risk of selling out our democracy to the highest bidder. It leaves everyone else rightly suspicious that the system in Washington is rigged against them, that our elected representatives aren’t looking out for the interests of most Americans.”

47.
There is a third explanation that may play some role. Politics in a democracy requires the formation of coalitions. Our analysis has proceeded as if the only issues that individuals cared about were economic issues. But voters also care about social issues, and they choose candidates that reflect their perspectives, weighting in different ways social and economic issues. At least for a while, Republicans formed a coalition of social and economic conservatives, which though it advanced an agenda that was consistent with the desires of the social conservatives, was often against their economic interests. See Thomas Frank,
What’s the Matter with Kansas? How Conservatives Won the Heart of America
(New York: Metropolitan Books, 2004)
.

48.
There are many parallels between global financial problems and those in the United States: in many cases, it is the banks that actively encouraged the excess indebtedness, that persuaded individuals and countries to take on more debt than they should have. In some cases, matters are even worse: East Asia, with its high savings rate, had no need to borrow from abroad. But the United States and other advanced industrial countries (both directly, and indirectly, through the IMF) put pressure on these countries to allow their firms to borrow freely from Western banks. Money flowed in. But when attitudes changed about the prospects of the region, money rushed out the door, and thus the region faced the 1997 East Asia crisis. The banks made large profits as money flowed in, but, through the good offices of the IMF and the U.S. Treasury, they also made money
after
the crisis, by forcing the countries to have fire sales of their assets. See J. E. Stiglitz,
Globalization and Its Discontents
(New York: Norton, 2002).

49.
For a more extensive discussion, see J. E. Stiglitz, 2006,
Making Globalization Work
(New York: Norton, 2003),
chap. 8; and David Hale, “Newfoundland and the Global Debt Crisis,”
Globalist
,
April 28, 2003, available at
http://www.theglobalist.com/StoryId.aspx?StoryId=3088
(accessed March 7, 2012).

50.
Technically, the governments were voted in by their parliament; but many, if not most, of the parliamentarians felt they had little choice.

51.
For an account of officials and banks’ reactions—and the impact on banks and the stock market—see Quentin Peel, Richard Milne, and Karen Hope, “EU Leaders Battle to Save Greek Deal,”
Financial Times
, November 1, 2011, available at
http://www.ft.com/intl/cms/s/0/cc377942-0472-11e1-ac2a-00144feabdc0.html
#axzz1oBCs0Dlj (accessed March 4, 2012).

52.
In that election, Goldman Sachs went so far as to create the Goldman Sachs “Lulameter” to measure risks associated with Mr. da Silva’s chances of becoming president, with the implicit notion that his election put at risk investments in that country. See
http://moya.bus.miami.edu/~sandrade/Lulameter_GS.pdf
. Apparently that report (link above) got them into a bit of trouble as they subsequently backed off. The
New York Times
reported, “Goldman, Sachs seems to have distanced itself from a report its strategists released earlier this year using a ‘Lulameter.’ Since then, Paulo Leme, its managing director for emerging markets research, has presented a relatively balanced view of Brazil’s prospects.” Available at
http://www.nytimes.com/2002/10/12/business/worldbusiness/12BRAZ.html?pagewanted=all.

53.
As we noted in chapter 3, even the IMF has now conceded that at times capital controls may be desirable. There is a large literature on the subject. See, e.g., Jonathan D. Ostry et al., “Capital Inflows: The Role of Controls,” IMF Staff Position note 10/04, February 19, 2010, available at
http://www.imf.org/external/pubs/ft/spn/2010/spn1004.pdf
(accessed December 28, 2011), and the more extensive discussion of the issue in the next chapter.

54.
The Globalization Paradox: Democracy and the Future of the World Economy
(New York: W. W. Norton, 2011).

55.
The high costs of medicine that result also play an important role in the immiseration of those at the bottom. See Stiglitz,
Making Globalization Work
, chap. 4,
for a fuller discussion of the issues surrounding intellectual property rights.

56.
As an example, no one believes that any incentive was provided by the extension of copyright to seventy years after the author’s death
for works already created under the older, more restrictive regime.
It was simply a provision that enhanced rents for Disney and other owners of copyrighted material. Developing countries have worried, in particular, about how intellectual property regimes imposed on them have restricted access to generic drugs, forcing them to pay prices beyond those they can afford, leading to untold numbers of unnecessary deaths.

57.
These provisions are called “regulatory takings.” For a discussion of this controversy, see, e.g., Stiglitz,
Making Globalization Work
, chap. 7, and J. E. Stiglitz, “Regulating Multinational Corporations: Towards Principles of Cross-border Legal Frameworks in a Globalized World Balancing Rights and Responsibilities,”
American University International Law Review
23, no. 3 (2007): 451–58, Grotius Lecture presented at the 101st Annual Meeting of the American Society for International Law, Washington, DC, March 28, 2007, and the references cited there.

58.
I should emphasize that it is not that the 1 percent has “conspired” to ensure that this would happen; rather, it pushed for rules of games that have had that effect—and that have served its interests well. See the discussion of chapter 6.

59.
Later we argue that to a large extent the 1 percent (like the bankers) have been shortsighted—they have pushed for policies that may be in their short-run interests, but not in their long-run interests.

Chapter Six
1984 I
S UPON
U
S

1.
Lenin saw the shaping of public opinion as essential in bringing on the revolution, but to some extent all countries and all leaders develop narratives that shape how people perceive their government and country. Anticolonial leaders had an easier time persuading the citizens of their country of the illegitimacy of colonial rule.

2.
Ads could provide information, e.g., about what goods are available at what prices. But statements about the attributes of a product by the seller (unless accompanied by a money-back guarantee) would be taken as just self-serving. There are Ptolemaic attempts to describe ads, like that of the old Marlboro cowboy (retired in the United States around the turn of the century after a forty-five-year stint), as providing consumers information: most individuals who buy the cigarettes are not cowboys, but may identify themselves as hardy, like a cowboy. The ad conveyed information about what kind of person enjoys this brand of cigarette, and the ad would have been successful, and persisted, only if those who self-identify themselves in this way do in fact enjoy the product.

3.
In chapter 4 we argued for the importance of publicly provided goods and a sense of social cohesion and economic fairness and justice. A major divide in voting patterns across states is among the affluent, with more of the more affluent in “liberal” states seemingly recognizing this (and treating social justice as a basic value in its own right) than in the conservative states. Paul Krugman, “Moochers against Welfare,”
New York Times,
February 16, 2012 , available at
http://www.nytimes.com/2012/02/17/opinion/krugman-moochers-against-welfare.html?_r=1&scp=1&sq=krugman%20moochers&st=cse
(accessed February 20, 2012). Krugman cites the work of Andrew Gelman of Columbia University, who has shown that the rich everywhere vote more conservatively, but it is the rich in poor states who vote much more conservatively—leading to the phenomenon of Republicans’ often representing poorer states. See Gelman,
Red State, Blue State, Rich State, Poor State: Why Americans Vote the Way They Do
(Prince-ton: Princeton University Press, 2010).

4.
Suzanne Mettler of Cornell University cites statistics showing that 44 percent of Social Security recipients, 43 percent of recipients of unemployment benefits, and 40 percent of those on Medicare say that they “have not used a government program.” Cited in Krugman, “Moochers against Welfare.” See Suzanne Mettler, “Reconstituting the Submerged State: The Challenges of Social Policy Reform in the Obama Era,”
Perspectives on Politics
8, no. 3 (2010): 803–24. This partially accounts for the quandary that states that are the largest recipients of federal assistance tend to be most against government programs. See also the anecdote described below, in the next section, involving the elderly objecting to Obama-care because it threatened to socialize Medicare.