Joe Stiglitz is always worth reading,and if you missed it, you should go read AKAlib's piece on his advocacy for progressive capitalism. Better yet, follow the link to the NYT oped.
It's easy for anyone remotely liberalto agree with Stiglitz. Then I wondered, why is there so much opposition to policies incorporating these views? Short answer in my view is some mix of ignorance and greed. But the topic is important and deserves an exploration of how we got here.
And to start that exploration, I have to assert a minor quibble with Stiglitz's reference to Adam Smith in the final paragraph of his Oped, that “exploitive capitalism has shaped who we are as individuals and as a society. The rampant dishonesty we’ve seen from Wells Fargo and Volkswagen or from members of the Sackler family as they promoted drugs they knew were addictive — this is what is to be expected in a society that lauds the pursuit of profits as leading, to quote Adam Smith, “as if by an invisible hand,” to the well-being of society, with no regard to whether those profits derive from exploitation or wealth creation.” Bear in mind that Smith's thesis was published in 1776 and was justly celebrated for its insights at that time. It was a simpler time, at least for the branch of scholarly thinking that came to be known as economics. Most market transactions were made where buyers and sellers had direct knowledge of who was offering what, product quality, delivery time, ablity to pay, etc. Or, if not in a position to have direct knowledge, one dealt with a trusted intermediary. To use a term that is currently in vogue,markets were transparent, far closer to the ideal of having all relevant information available to both buyer and seller such that a rational decision can be arrived at.
Thus,the “invisible hand” was a fairly powerful predictor for the time (and indeed had a moral component that in our more enlightened times has been sadly neglected.) But it worked as well as it did only because of the nature of markets of the time. Two problems arose. One was a rather slavish devotion to the notion that unfettered markets always wrought the best outcomes. This is the laissez-faire school of economic thinking. The second is that the idea was so damned attractive that for most people their understanding of economics largely started and ended there.
On a related front, as business became more and more complex, there arose a need for an entity which could subsume the functions of a single proprietor or a partnership, but operate on a vastly larger scale and without the limitations of human lifetimes. Corporations filled that need. We liberals tend to scoff at Mitt Romney's statement that“Corporations are people my friend.” But he was at leas partially correct, in that corporations are an entity created with some of the attributes of a person for a specific purpose. In other words, corporate person hood is a convenient legal fiction. Please note also that corporations are created by state charter, and have at least a theroretical obligation to abide by the conditions of their charter.
These circumstances led to great changes in markets, most of which put the buyer at a disadvantage and which allowed the greedy to push the boundries of fraud, price gouging, and shoddy products. Those who have a historical bent will recall the muckrakers of the late 19thand early 20thcentury, who uncovered numerous instances of rapacious corporations taking advantage of imbalanced market power.
So, to return to Stiglitz, his positions and prescriptions are not the far-out socialist dreams our conservative friends would have us believe them to be. So why are they willing to defend “Vulture Capitalism.” My guess is that it is less a matter of conviction regarding free market economics and more a matter of staying in the good graces of the moneyed class.