The political upheavals of the past three years have unearthed a profound state of polarisation, which has been brewing in a large part of western societies.
The success of Brexit supporters in the EU referendum, and Donald Trump’s ascent to power in the US are only two of the most evident examples of the endemic contempt ‘the people’ seem to display for those currently wielding political and economic power.
Joseph Stiglitz’s book cleanly traces the origins of this malaise to the wild ride enjoyed by free marketers, following the decline of the Soviet Union.
The underlying theme then is that of a worrying failure of unbridled capitalism as an engine of growth and social justice. Against this backdrop, the damning question is: how exactly did we get here and, most importantly, how can we get out of this hole?
The first part of the book zooms in on the several ways in which free markets can fail to sustain growth and allow its proceeds to be shared in a fair way.
The evidence in this respect is pretty clear, with the 2007 financial crisis still fresh in our memory as the most recent example of how de facto unregulated financial intermediaries can profit from opaque activities at the expense of the public.
The crisis spread to the real market, triggering the great recession.
On the face of this, government intervention focused on saving the payment system, allowing those who allegedly had the largest responsibility for the crisis to get off scot-free.
The recovery, when it finally materialised, showed little pick up for wages, while benefitting those at the helm of financial institutions, thus exacerbating an already lopsided wealth and income distribution.
In Mr Stiglitz’s view, this narrative testifies to how market power – not only in the financial sector – can create a dangerous imbalance in a society, which, if unaddressed, sows the seeds of discontent in a large share of the population.
This, in turn, opens the way for political demagogues to thrive, exploiting a well-rehearsed script: pit the disenfranchised fringe against the occasional scapegoat (immigrants in the US, but also, the EU, and the ‘citizens of nowhere’ in the UK), promising an easy way out for people of apparently pressing concerns.
All these remedies, in fact, do little to tackle real problems, but allow ruling elites to strengthen their grip on economic and political power.
The second part of the book illustrates the only, truly liberal, way forward.
There, Mr Stiglitz outlines a clear agenda in which he champions government intervention in several realms of economic activity: the provision of health services, support to education and research, and the supply of financial services (mortgages and retirement annuities).
The underlying idea is that, far from being inefficient, public provision of public goods can only benefit the market, introducing a healthy dose of competition in an economy mired in a dangerous spiral where entrenched market power supports political concentration, which in turn allows those at the top to write the rules that strengthen their economic entrenchment.