Book review: The Cost of Inequality

How a dodgy ideology made the rich richer, the rest of us poorer and left the economy in ruins.

Around 1980, something changed: a seemingly unstoppable evolution in western societies went into reverse. For half a century the gap between rich and poor had been narrowing: an inevitable consequence, it seemed, of universal education, mass production, trade unionism and the rise of democracy.

Yet within a few years this trend had been sharply reversed. In the subsequent three decades, the western world has witnessed a dramatic growth in inequality. The top 1% have appropriated almost all the fruits of growth, while middle and low income groups have stagnated or worse.

Stewart Lansley’s new book, The Cost of Inequality (Gibson Square, 2011) looks at why this happened, and what have been the consequences. His central argument, impressively documented in a tour through the workings of modern capitalism, is that growing inequality caused the financial meltdown of 2008.

But along the way, he establishes two even more sweeping arguments, both of which tell us something important about the mess in which Europe now finds itself. He shows that the growth in inequality has its roots in an ideological shift that swept the western world from the late 1970s onwards. And he shows that, long before 2008, that ideology had spectacularly failed to deliver any of the promised benefits. Continue reading Book review: The Cost of Inequality

Guest blog from Julian Priestley: What am I bid for a toothless, dumb, blind bulldog?

You know something is wrong when John Redwood, Boris Johnson, the Murdoch press and the Mail are calling it a triumph.

Even on its own terms the December EU summit plumbs new depths of government mendacity and incompetence. Even if one accepts that the aims of Cameron were legitimate – sheltering the financial sector which finances his party, or defending the single market, he came home less than empty-handed.

By forfeiting the right to negotiate an EU Treaty at the very outset, the government ensured that the summit was a quadruple failure for Britain.

First we will have no influence on the final form and content of the new intergovernmental treaty; if the UK had stayed in it could at every stage have fought its corner, paragraph by paragraph.

Second, we have achieved an isolation so melancholic that even our most traditional ‘friends’ like the eurosceptic Czechs and the hard-right Hungarians have abandoned us.

Third, even our established reputation for diplomatic competence is undermined by the crass failure to prepare the ground, by springing a text on the institutions and the other member states at the last moment, and by rejecting out of hand the procedural compromise offered by European Council President Van Rompuy.

Fourth it confirms the message to the Americans and others that doing business with Europe means working with Berlin, Paris and Brussels, not London. The business community may well draw the same lesson.

Cameron’s excuse that we reacted late because the Franco-German proposals were only tabled earlier in the week is doubly lame; a serious government might well have thought it best to take an initiative earlier rather than just reacting to proposals from others; and it has been clear for two months at least that some form of Treaty change was going to dominate this summit’s agenda.

As to our special pleading for the banks, financial services, hedge funds etc., nothing has changed. EU financial regulation is and will continue to be decided by qualified majority. There was no veto on that; there will be no veto- quite rightly because financial services regulation is part and parcel of internal market rules.

The only thing that changes is that the 26 will now develop the habit of working together on the broad range of economic policy, and that the voice of the most economically liberal, free market, high finance-friendly member state will no longer be heard. One would have to be exceptionally naive to imagine that the 26 will refrain from discussions about any aspect of EU economic and social legislation simply out of consideration for a government that has of its own free will boycotted their meetings. Continue reading Guest blog from Julian Priestley: What am I bid for a toothless, dumb, blind bulldog?