Nobel laureate Joe Stiglitz on the ‘myth’ of the American Dream, the economic noose hanging around Gen Z’s neck—and what business leaders really think about Donald Trump

Stiglitz says the protest movement gripping his institution and many others “does hit home” and recalled his own history as a civil-rights protester in the 1960s. “This may sound hard to believe,” he says, “but I was there in the march in Washington in August 1963, with Martin Luther King. And I was there when he gave the ‘I Have a Dream’ speech.” This had an influence on his thinking as a young man, he says, and “an enormous impact on the direction of our country, at least for a while.” 

This mournful tone fits much of Stiglitz’s career, as the left-leaning economist and author finds himself in increasingly lonely company: the pro-capitalist progressive. Opinion polls widely indicate a disaffection with capitalism among some millennials and more Gen Zers, exemplified by the surprising electoral successes in the last decade of the so-called Democratic Socialists, Alexandria Ocasio-Cortez and Bernie Sanders. But Stiglitz has all along maintained that socialism is not the answer; rather, a well-regulated capitalism is sorely needed. At the same time, he has decried the hard-right turn in American political and business culture, to the point where he doubts the impact of Reverend King’s famous speech. 

“Neoliberal capitalism devours itself,” Stiglitz tells Fortune, arguing that it rewards dishonest people and leads to a lack of trust. It’s not sustainable, in his view, because it places self-interest above any sense of community and the broader interests of society. “We’re seeing it begin to fray now,” he adds.

Everywhere, countries have done too little to guard against the neoliberal turn, he argues, and these countries that have done too little to protect citizens from the marketplace have seen the rise of populism and authoritarianism. Obviously, he fears Trump’s return in November. “I think it’ll be terrible for the economy. And even worse, for our basic rights.” But he also says Americans are underrating the international reaction. Businessmen abroad have expressed a “kind of nervousness” about Trump’s re-election, he says. “And the closer we get to the election, the more nervous they say they feel.”

Freedom for the wolves

The title of Stiglitz’s book is an implicit callback to one of Regan’s favorite thought leaders, the Austrian economist Friedrich Hayek, who preached the efficiency of free markets above all in his landmark work “The Road to Serfdom.” As Stiglitz writes, freedom has more than one meaning, and in the America of the 21st century, there’s “freedom for the wolves and death for the sheep.” (Stiglitz notes this is a paraphrase of Isaiah Berlin, an anti-Communist, pro-capitalist liberal intellectual from the Cold War era.)

In Stiglitz’s book, he argues the country’s neoliberal turn since the days of Ronald Reagan has pushed the American Dream further out of reach for everyone, especially Gen Z. He tells Fortune the media likes to tell “nice stories” akin to the 19th-century young-adult novelist Horatio Alger: of upward mobility being rewarded, reinforcing the idea that anybody can make it if they work hard. “But from the point of view of social science, the question is, what is the likelihood, and it’s very rare,” he adds, citing data of worse outcomes for the United States than any other advanced economy. “I would say it’s a myth.”  

But the American Dream is also about freedom, which includes freedom from harm and freedom to live up to your potential. “And again, America does more poorly,” he says, specifically citing the epidemic of gun violence that grips the country. “An important freedom is freedom from fear. And from a very early age, we tell our kids to be afraid.” 

We should listen to our children, he adds: “The disparity between what they were told and the reality is very large.” As they enter the labor market, being raised on notions of the American Dream, he adds, “they know it’s going to be really hard to get to own a home…they know the average college graduate has about $30,000, $40,000 in student debt, so it’s going to be a noose around their neck for a long while.” 

Stiglitz declines to be drawn on the question of excessive police brutality in breaking up the Columbia protests, citing the long tradition of peaceful protests from Martin Luther King back to Mahatma Gandhi, but also a tension with civil disobedience that may be warranted by a specific cause. “I’m aware of the tensions between various freedoms,” he says, adding that he usually wishes for a civil dialogue that arrives at a peaceful resolution.

The coercion of the traffic light

As for a fix, Stiglitz uses the word “coercion” in his book, but he offers up a potentially illuminating metaphor: the stoplight. “You can’t go through an intersection when it’s red. And if you do, you’ll see all kinds of consequences. You’ll be arrested. So it’s coercion unambiguously. But in New York, or London, if you didn’t have stoplights, you couldn’t move at all. And you’d have gridlock.”

When Fortune brings up the biggest economic gridlock going these days, the housing market, Stiglitz refers back to his previous work. 

While cautioning that he hasn’t studied the current housing market closely, he has studied mortgage financing, a “peculiar system” where the government bears roughly 90% of the risk through underwriting, unchanged since the great crash of 2008. “Remarkably, for me, [is that] in the 16 years since then, we haven’t really fixed the financial part.” We still have a system where a lot of the profits go to the financial sector, but the government continues to bear most of the risk. If this were a stoplight, in other words, it might be blinking yellow without directing traffic efficiently at all.