The Price of Inequality

This chapter examines the first battlefield upon which inequality in American society is fought—namely, laws and regulations and their enforcement. Stiglitz argues that the rule of law is necessary to give individuals and corporations the right incentive to “consider their externalities” (188), meaning the negative or positive effects of their actions that they do not pay or gain benefit from. For example, when corporations pollute, they should pay for it. To date, corporations have avoided paying for polluting the environment, and if they are sued, they strive to keep the cases in court indefinitely. The issue of justice seen in this example of polluters highlights the political problem of whose rights matter most: the polluter’s right to pollute versus the citizen’s right to good health. Nonetheless, political power is crucial because rules and regulations determine how much a polluter can pollute even if a corporation uses the law to protect their right to pollute.

Since the start of the 21st century, three contexts have emerged by which we can determine how well the market is working: predatory lending, bankruptcy, and foreclosures in the 2007 mortgage crisis.

Generally, the 1 percent and banks oppose regulations designed to rein in their lending behavior, and they fight any additional regulations.