Addressing Economic Inequality and Potential Solutions

On November 22, I moderated a panel on the topic of economic inequality hosted by The Student Leadership and Ethics Board of Columbia Business School. The panel was impressive and included Nobel laureate and Columbia Professor Joseph Stiglitz, former Philadelphia Mayor and Columbia Professor Michael Nutter, and McKinsey Global Institute Partner Anu Madgavkar. Here are some of the highlights from that conversation. The full video can be found here.

What is the Nature of Inequality?

We started the conversation discussing the nature of inequality, particularly in the United States, and the negative impact it creates. Professor Stiglitz noted that “the laws of economics are not like the laws of physics – they get repealed all the time.” This explains how previous economic theories about inequality – that it wasn’t considered a problem or that it was impossible to reduce without a reduction in growth – have been largely debunked over time. Professor Stiglitz also recognized how inequality “divides our society and creates a pernicious effect on our politics” and when referring to the COVID-19 pandemic, mentioned that inequality plays into part of the reason why we have more deaths than any other country.

Madgavkar pointed out that inequality has challenged some foundational values of our society, such as basic sufficiency and advancement. “When you have significant parts of the population not able to reach [a minimum acceptable standard of living for a household], that’s a real problem.” She also noted that while intercountry inequality (between countries) has decreased over the last several decades[i], intercountry inequality (within a country) has worsened, or stayed high. This has led to an erosion of the social contract within countries.

Mayor Nutter pointed to the history of the United States and how it is intertwined with inequality, referencing the preamble to the Declaration of Independence: “I’m focusing on the word ’equal,’” because we know that was not true that day. And it has not been true every day since, and so inequality has been built into this American system from the beginning.”

Mayor Nutter went on to explain how many cities suffer from high poverty rates, concluding that individual engagement and involvement in the American economy is good for the U.S.  and the world.

What Can be Done?

All three panelists agreed that a holistic approach to reducing inequality and ensuring growth is necessary. “There’s no silver bullet. Inequality in our society is so pervasive that you have to get in the weeds in almost everything we do,” said Professor Stiglitz who went on to highlight how much attention is paid to redistribution of income, while the market distribution of income remains a void that should be examined. From his perspective, inequality depends on will, not ability. He harkened back to Biden’s Rescue Bill, which was projected to reduce childhood poverty by 50%, in one year saying,

“Now if you can do that in one year, we could have done that 40 years ago. So, let’s be clear. It’s because of our lack of action in dealing with inequality and extreme deprivation that we have such inequality.”

Madgavkar offered clear actions that the business community can take to address inequality. “As we see a tightening of the labor market, and as the nature of work shifts over the coming decades, firms have a role in equipping workers with skills. Also, in addressing some of the rising costs that drive inequality such as healthcare, education, financial services, and access to broadband and digital services, firms can lead by investing in innovation to increase affordability and access to services.”

Mayor Nutter leaned on the importance of public education in combatting inequality. And because education funding can differ dramatically between districts due to the role of property taxes in school funding, he believes, “education should be considered part of the national defense of the United States of America and funded properly.”

Any Advice for Current Students? 

Each panelist bestowed a nugget of advice on the current Columbia Business School student body about how to address inequality and help create a more equitable society:

Professor Stiglitz: “Recently, a well-intentioned person said he discovered that a third of his labor force was not getting a livable wage, and he finally started thinking about what was going on in his own company. I urge all of you who go out into the business community to think local as well as global. Think about what your own company is doing in the way they treat every stakeholder, worker, customer, and community in which you operate.”

Madgavkar: “Whatever role you go into, think about the impact you're having on a holistic basis. Your bottom line has to be holistic for the people around you – your workers, your communities. If everyone does that, it can help make change happen.”

Mayor Nutter: “Figure out what your passion is and pursue it with virtually reckless abandon. Figure out how to do good and do well. Until an elected or appointed official signs your birth certificate, you have not yet been born, and until some elected or appointed official signs your death certificate, you are not dead. During all the time in between, someone somewhere elected or appointed is making decisions that will affect your life, directly or indirectly. Get engaged.”

[i] Led by one billion people pushed out of deep poverty in Asia through the rise of those economies