Saturday, June 28, 2014

The Myth of America’s Golden Age

What growing up in Gary, Indiana, taught me about inequality

By JOSEPH E. STIGLITZ
July/August 2014

I hadn’t realized when I was growing up in Gary, Indiana, an industrial town on the southern shore of Lake Michigan plagued by discrimination, poverty and bouts of high unemployment, that I was living in the golden era of capitalism. It was a company town, named after the chairman of the board of U.S. Steel. It had the world’s largest integrated steel mill and a progressive school system designed to turn Gary into a melting pot fed by migrants from all over Europe. But by the time I was born in 1943, cracks in the pot were already appearing. To break strikes—to ensure that workers did not fully share in the productivity gains being driven by modern technology—the big steel companies brought African-American workers up from the South who lived in impoverished, separate neighborhoods.

Smokestacks poured poisons into the air. Periodic layoffs left many families living hand to mouth. Even as a kid, it seemed clear to me that the free market as we knew it was hardly a formula for sustaining a prosperous, happy and healthy society.

So when I went off to college to study economics, I was astonished by what I read. The standard economic texts of the time seemed to be unrelated to the reality I had witnessed growing up in Gary. They said that unemployment shouldn’t exist and that the market led to the best of all possible worlds. But if that were the case, I decided, I wanted to live in a different world. While other economists were obsessed with extolling the virtues of the market economy, I focused a lot of my work on why markets fail, and I devoted much of my Ph.D. thesis at MIT to understanding the causes of inequality.

(More here.)

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