Inequality and Instability A Study of the World Economy Just Before the Great Crisis

In the press, at the Capitol, on Wall Street and around the world, people are waking up to the dangers of inequality as never before. Mainstream journalists now note that income inequality in America today is greater than at any time since 1929--just before the Great Depression. Perhaps this is not accidental. Where does inequality come from? And how does it lead to economic instability? InInequality and Instability, leading economist James K. Galbraith demonstrates that finance is the driveshaft that converts inequality into instability. Those without money--made more numerous by inequality--find little recourse but to the ancient remedy of the loan. Their urges and needs, for bad and for good, are abetted by the aggressive desire of those with money to lend. But if the balloon of debt explodes, as it did in 2008, it disrupts an entire economy built upon a financial house of cards. And not merely in the United States: debt crises and economic instability can be linked to inequality all around the world. To buttress this conclusion, Galbraith marshals the data as never before, examining it in light of geography, economic change, and politics. For example, the dramatic rise of inequality in the United States in the 1990s correlated with the information-technology boom, whose wealth was concentrated in just three counties of Northern California, the Seattle area, and Manhattan. As for what drives this inequality, he writes, we need look no further than the capital markets--since those at the top have benefited not simply from salaries and bonuses, but increasingly from stock options, asset valuations, and capital gains. A landmark work of research and original insight,Inequality and Instabilitywill change forever the way we understand this pivotal topic.

James K. Galbraith is professor at the Lyndon B. Johnson School of Public Affairs, the University of Texas at Austin, where he holds the Lloyd M. Bentsen Jr. Chair in Government/Business Relations. He is a leading economist whose books include The Predator State, Inequality and Industrial Change, and Created Unequal.