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