Book Review: ‘The Cost of Inequality’ by Stewart Lansley

Travelling from London’s opulent central streets to its eastern outskirts, I was struck by the level of inequality. One only has to travel ten miles out from the centre to find impoverished areas in which the excessive wealth of Mayfair seems a distant memory. This encouraged me to read ‘The Cost of Inequality’ by Stewart Lansley, an economist at the University of Bristol. Once I finished reading this book, I felt it was an informative and enjoyable read on the problems of wealth inequality.

The book focuses on the widening gap between the higher classes and everyone else within both UK and America, examining how the role of increasing inequality has played since the 2008 financial crisis. The purpose of this book is to analyse how deregulation of financial, capital and product markets and the focus on individual wealth, since Margaret Thatcher’s government, has led to the recession the UK is currently suffering. To underline this point, constant comparisons are made between the inequality that characterised the great depression, in the 1920s and 1930s, and the situation just before the most recent recession.

The author’s key argument is that the excessive earnings (largely untaxed) of large corporations and very rich individuals, rather than being used for productive investment, has been used to fund speculation on a massive scale by international banks. Furthermore, real incomes of lower and middle income earners have continued to fall, leading to a contraction of aggregate demand in the economy. This has been made even worse by increasing indebtedness and the drying up of credit since 2008. Lansley concluded that greater equality of earnings and progressive taxation is vital for the recovery of the economy and the needed halt of the recession.

Within the book, several aspects of both the causes of growing inequality in the UK and its effects are explored. For instance, Lansley examines of the labour market in the UK and the decline in the prosperity of the middle class. Further on in the book, there is a greater focus on the banking system within the UK. Lansley is particularly critical of aggressive take-overs which have little economic value.

In the last chapter of ‘The Cost of Inequality’, Lansley summarises his argument and sets out what he believes is fundamentally wrong with the system and what must be done to aid economic recovery. He asserted that it is essential that banks and the government maintain a reasonably high level of spending in order to facilitate growth. In addition, he favours banking reforms which restrict debt- financed buy outs and other risky portfolio investments. He argues for a more equal, regulated society, going back to the reforms which were introduced after the 1929 crash and the Second World War.

It is evident in this book that there is certainly a left wing bias within it. He spends much time attacking Margaret Thatcher’s government and subscribes to the suggestion that her government made the rich richer and the poor poorer. However, that said, the main purpose of this book is not undermined by this bias and it does acknowledge a few of the advantages of inequality (such as higher profits at times). Furthermore, Lansley uses factual content, for the most part, to support his points. In spite of his left wing bias, he still makes critical points of Obama’s policies and the Labour government under Blair and Brown, demonstrating a balanced viewpoint.

An issue one may find with many economics books is the use of technical terminology which makes reading difficult for someone who has not studied economics at all. Yet, this book is far more readable with simpler language used, allowing the reader to gain a better understanding. The evidence provided within the book and the frequent use of real world examples also help one’s understanding. Finally, it is efficiently organised with clear chapters enabling one to effectively ‘drop’ into the book without ever struggling to get back into it.

Overall, I recommend this book to anyone who is looking for an economics text that addresses the problems of inequality in our society. Not only does the book contain  interesting, factual content, it delivers the content in an accessible and light hearted manner.

Contributed by Robbie Lunniss

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