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

by Galbraith, James K.

• ISBN13: 9780199855650
• ISBN10: 019985565X
• Format: Hardcover
• Copyright: 2012-03-30
• Publisher: Oxford University Press

Summary

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.

Author Biography

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.

Table of Contents

Acknowledgments	p. xiii
The Physics and Ethics of Inequality	p. 3
The Simple Physics of Inequality Measurement	p. 9
The Ethical Implications of Inequality Measures	p. 13
Plan of the Book	p. 14
The Need for New Inequality Measures	p. 20
The Data Problem in Inequality Studies	p. 20
Obtaining Dense and Consistent Inequality Measures	p. 29
Grouping Up and Grouping Down	p. 36
Conclusion	p. 43
Pay Inequality and World Development	p. 47
What Kuznets Meant	p. 47
New Data for a new look At Kuznets's Hypothesis	p. 50
Pay Inequality and National Income: What's the Shape of the Curve?	p. 62
Global Rising Inequality: The Soros Superbubble as a Pattern in the Data	p. 69
Conclusion	p. 73
Appendix: On a Presumed Link From Inequality to Growth	p. 74
Estimating the Inequality of Household Incomes	p. 81
Estimating the Relationship Between Inequalities of Pay and Income	p. 82
Finding the problem cases: A study of residuals	p. 87
Building a Deep and Balanced Income Inequality Dataset	p. 91
Conclusion	p. 96
Economic Inequality and Political Regimes	p. 100
Democracy and Inequality in Political Science	p. 101
A Different Approach to Political Regime Types	p. 105
Analysis and Results	p. 107
Conclusion	p. 113
Political Regime Data Description	p. 113
Results Using Other Political Classification Schemes	p. 118
The Geography of Inequality in America, 1969 to 2007	p. 124
Between-Industry Earnings Inequality in the United States	p. 128
The Changing Geography of American Income Inequality	p. 140
Interpreting Inequality in the United States	p. 146
Conclusion	p. 148
State-Level Income Inequality and American Elections	p. 152
Some Initial Models Using Off-the-Shelf Data for the 2000 Election	p. 155
New Estimates of State-Level Inequality and an Analysis of the Inequality-Elections Relationship Over Time	p. 158
Inequality and the Income Paradox in Voting	p. 162
Conclusion	p. 164
Inequality and Unemployment in Europe: A Question of Levels	p. 165
An Inequality-Based Theory of Unemployment	p. 167
Region-Based Evidence on Inequality and Unemployment	p. 170
Inequality and Unemployment in Europe and America	p. 179
Implications for Unemployment Policy in Europe	p. 181
Appendix: Detailed Results and Sensitivity Analyses	p. 183
European Wages and the Flexibility Thesis	p. 198
The Problem of Unemployment in Europe: A Reprise	p. 201
Assessing Wage Flexibility Across Europe	p. 203
Clustering and Discriminating to Simplify the Picture	p. 206
Conclusion	p. 213
Cluster Details	p. 214
Eigenvalues and Canonical Correlations	p. 224
Correlations Between Canonical Scores and Pseudoscores	p. 225
Globalization and Inequality in China	p. 235
The Evolution of Inequality in China Through 2007	p. 236
Finance and the Export Boom, 2002 to 2006	p. 240
Trade and Capital Inflow	p. 244
Profit and Capital Flows into Speculative Sectors	p. 247
Conclusion	p. 249
Finance and Power in Argentina and Brazil	p. 252
The Modern Political Economy of Argentina and Brazil	p. 253
Measuring Inequality	p. 254
Sources of Data	p. 256
Pay Inequality in Argentina, 1994-2007	p. 256
Pay Inequality in Brazil, 1996-2007	p. 261
Conclusion	p. 265
Inequality in Cuba after the Soviet Collapse	p. 269
Data on Pay in Cuba	p. 271
Evolution of the Cuban Economy, 1991-2005	p. 272
Pay Inequality By Sector	p. 279
Pay Inequality by Region	p. 285
Conclusion	p. 286
Economic Inequality and the World Crisis	p. 289
References	p. 295
Index	p. 309
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