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Inequality and Instability: A Study of the World Economy Just Before the Great Crisis [Kindle Edition]

James K. Galbraith
3.8 out of 5 stars  See all reviews (13 customer reviews)

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Book Description

As Wall Street rose to dominate the U.S. economy, income and pay inequalities in America came to dance to the tune of the credit cycle. As the reach of financial markets extended across the globe, interest rates, debt, and debt crises became the dominant forces driving the rise of economic inequality almost everywhere. Thus the "super-bubble" that investor George Soros identified in rich countries for the two decades after 1980 was a super-crisis for the 99 percent-not just in the U.S. but the entire world.
Inequality and Instability demonstrates that finance is the driveshaft that links inequality to economic instability. The book challenges those, mainly on the right, who see mysterious forces of technology behind rising inequality. And it also challenges those, mainly on the left, who have placed the blame narrowly on trade and outsourcing. Inequality and Instability presents straightforward evidence that the rise of inequality mirrors the stock market in the U.S. and the rise of finance and of free-market policies elsewhere. Starting from the premise that fresh argument requires fresh evidence, James K. Galbraith brings new data to bear as never before, presenting information built up over fifteen years in easily understood charts and tables. By measuring inequality at the right geographic scale, Galbraith shows that more equal societies systematically enjoy lower unemployment. He shows how this plays out inside Europe, between Europe and the United States, and in modern China. He explains that the dramatic rise of inequality in the U.S. in the 1990s reflected a finance-driven technology boom that concentrated incomes in just five counties, very remote from the experience of most Americans-which helps explain why the political reaction was so slow to come. That the reaction is occurring now, however, is beyond doubt. In the aftermath of the Great Financial Crisis, inequality has become, in America and the world over, the central issue.
A landmark work of research and original insight, Inequality and Instability will change forever the way we understand this pivotal topic.

Editorial Reviews


"[P]otentially groundbreaking new methodology . . . Galbraith discredits a number of shibboleths of the economics profession. . . . In this rich study, the author brings both transparency and a fresh approach to a profession where a shake-up seems more than overdue. Economics specialists will enjoy this book, but so too will general readers disenchanted with current economic orthodoxies." --Kirkus Reviews

"In Inequality and Instability, James K. Galbraith brings to bear his considerable experience in government and academia to examine one of the most pressing issues of our time. In this accessible and far-reaching volume, he investigates not only the depth and breadth of inequality in Europe, America, and elsewhere, but also its implications for politics and society. It's no surprise that Galbraith, who is well known for having pioneered new understandings of economic inequality, leaves no stone unturned in his discussion of metrics and methodologies...It is a must-read for anyone who wishes to understand our political and economic era."--Joseph E. Stiglitz, author of Freefall: America, Free Markets, and the Sinking of the World Economy, winner of the 2001 Nobel Prize in economics

"Inequality is at the heart of our modern economic predicament,but its kaleidoscopic nature makes it as hard to summarize as it is to understand. In this important book, Jamie Galbraith and colleagues develop a powerful new measure of global inequality trends and show how it can be used to shed new light on everything from economic growth to voter turnout. The result is a truly pathbreaking work of scholarship."--Barry Eichengreen, author of Exorbitant Privilege

"While most economists 'slept' and some were busying themselves making sure there is no level playing field, Jamie Galbraith was one of the few who kept on insisting on the dangers of runaway inequality, financial-sector driven growth and crony capitalism. In this book, he takes the reader on a journey through the years that preceded the financial meltdown, skillfully links inequality and macroeconomics, and, after showing the why and the how of the crisis, points the way out of it." --Branko Milanovic, author of Worlds Apart: Measuring International and Global Inequality

"Based on a mountain of new data, this book undermines much of what scholars thought they knew about economic inequality. James Galbraith's readable and compelling dissections of how financial bubbles and macroeconomic forces shape inequality and its effects on society and the state are seminal. Inequality and Instability is a work not just for scholars, but for citizens." --Thomas Ferguson, Professor of Political Science, University of Massachusetts, Boston

"The most comprehensive examination to date of the connection between the financial sector, the Achilles heel of 'free enterprise' economies, and income inequality across countries. Galbraith and his fellow researchers at the University of Texas Inequality Project demonstrate how the seeds of the current economic crisis were sown by the refusal to confront and reverse an unequalizing worldwide spiral of income disparity. This could be the empirical Bible for the Occupy movement."--William Darity, Arts and Sciences Professor of Public Policy, Economics, and African American Studies, Duke University

"Galbraith's timely and provocative book adds some economic and statistical ballast to the vague rhetorical slogans of the Occupy protesters. Drawing on meticulous academic research, it argues that the main source of the growing inequality across the world in recent years has been not industrial change, educational reform, or geopolitical shift but the financialization of the modern world." --Foreign Affairs

"Galbraith's book presents an extremely varied and nutritious fare for all of those who want to find out more about the things that they 'were afraid to ask' during the last twenty years: why did inequality increase so much and who benefited from it? But Galbraith did notice the increase, wrote about it, and here in a sort of collected works, are his essays, fully vindicated by time. Not many economists can say so." --Journal of Economic Literature

About the Author

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.

Product Details

  • File Size: 6576 KB
  • Print Length: 344 pages
  • Page Numbers Source ISBN: 019985565X
  • Publisher: Oxford University Press, USA; 1 edition (February 29, 2012)
  • Sold by: Amazon Digital Services, Inc.
  • Language: English
  • ASIN: B006VY8MJ0
  • Text-to-Speech: Enabled
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  • Lending: Enabled
  • Amazon Best Sellers Rank: #532,041 Paid in Kindle Store (See Top 100 Paid in Kindle Store)
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Customer Reviews

3.8 out of 5 stars
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Most Helpful Customer Reviews
73 of 74 people found the following review helpful
5.0 out of 5 stars Revolutionary April 18, 2012
James Galbraith deserves the Nobel Prize in Economics for his several decades of work on economic inequality. _Inequality and Instability_ attempts to summarize, synthesis, and further develop this phenomenal research. Galbraith has redefined the study of economic inequality; for Galbraith inequality is not merely an ethical issue, but inequality radically determines a society's level of unemployment, growth and development, and frequency and depth of economic crises.

Galbraith's research argues and convincingly demonstrates inequality largely determines (1) the relative stability of a macroeconomy, (2) market economies generate inequality, and inequality destabilizes the economic system, i.e. generates economic crises, (3) the primary industry responsible for inequality is finance and the institutional structure of finance within a society, this implies (4) technology is not the primary cause of inequality, nor even a significant cause of inequality at a national level, and (5) outsourcing and international competition has not been a significant cause of inequality, instead (6) macroeconomic policy (both monetary and fiscal, but more accurately especially monetary policy, but also fiscal policy determine the degree of inequality and inequality determines the level of stability or instability of an economy) and political ideology, i.e. political economy radically determine the degree of inequality.

Now for the less happy analysis.

In a three sentence evaluation of the book, Nobel Prize winner economist Joseph E. Stiglitz writes: "In _Inequality and Instability_, James K. Galbraith examines one the most pressing issues of our time.
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7 of 9 people found the following review helpful
4.0 out of 5 stars Very interesting August 12, 2012
Format:Hardcover|Verified Purchase
Research on income inequality has been plagued by a lack of good data on inequality within countries. The World Bank put together a data base in 1996 (updated and extended since), based on surveys in various countries, but the data are sparse and seldom really comparable. The University of Texas Inequality Program (UTIP) has built a new data base which they hope is better. This book is a description of that new data base (the first third of the book). As well it describes uses of the data base to explore voting patterns and other political impacts of inequality (most of the second third of the book) and some economic consequences of inequality (the rest of the book).

UTIP uses inequality in manufacturing wages (i.e. pay rates in the manufacturing sector) as a proxy for income inequality. If the proxy is good enough, that vastly improves the quality of the data, and so the range of questions that can be addressed. Galbraith spends Chapters 2 and 3 arguing that the proxy is good enough -- that manufacturing wage disparities do reflect income disparities closely enough for his analyses.

The rest of the book depends on whether the reader accepts these assertions or not. The problem, of course, is that the services sector is changing very rapidly, and any inferences from manufacturing to services may quickly be out of date. In any case, even the numerical analyses that Galbraith presents are not very convincing. For example, he uses the UTIP data to replicate the World Bank data. While the correspondence is good, it is not very good. (He fits a linear regression and gets R-square statistics of about 0.6, i.e. the UTIP data explains about 60% of the World Bank data.
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11 of 15 people found the following review helpful
3.0 out of 5 stars Overly Technical - May 28, 2012
Galbraith's book is chock full of esoteric equations and explanations built up over 15-some years, definitely not light reading, undoubtedly intended for serious econometricians only. It presents evidence that the rise of inequality mirrors the stock market in the U.S. and the rise of finance and free-market policies elsewhere. The data purport to show that more equal societies enjoy lower unemployment.

Galbraith has concluded from his research that waht has driven rising inequalities of income in the U.S. has been rising stock prices, asset valuations, and income drawn from stock option realizations, as well as wages and salaries paid in sectors financed by new equity. (Think Instagram, acquired after about seven years' of their work for $1 billion, and with only 27 employees.) These incomes at the very top were highly concentrated into 15 counties, and five in particular - the NYC area, three associated with Silicon Valley, and King Co. Washington. States with higher levels of inequality tend to have lower voter turnout rates - consistent with the idea the wealthier voters have a strong interest in restricting access to voting by poor people. (Yet, none of Galbraith's examples of the highest income counties - California, New York, and Washington, do so.)

Within Europe, Galbraith reports that countries with less pay inequality systematically enjoy less unemployment, other things being equal. He also asserts that Europe overall has more income inequality than the U.S., something that does not fit with my understanding that the U.S. and China lead in this dimension. Continuing, Galbraith tells us there is strong evidence that inequality rose through most of the world during globalization, and that recent winning sectors in the U.S. have not generated many jobs - (eg. Facebook's initial $100 billion valuation is linked to only 3,200 jobs).
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Most Recent Customer Reviews
4.0 out of 5 stars Four Stars
Solid & important
Published 5 months ago by Matt Joseph
5.0 out of 5 stars a very hot topic and what to do about it.
Both sides Dem and Gop argue continually about this.PERSONALLY I want to help people help themselves and do not favor redistribution which only leads to greater problems.
Published 14 months ago by rh
4.0 out of 5 stars It's not as simple as some would argue...
Inequality is one of the major themes in Galbraith's work, as in his father's. In this fairly dense tome, he provides a pretty convincing description of the empirical relationship... Read more
Published 16 months ago by David Last
5.0 out of 5 stars A must for decision makers
Decision makers , policy designers and strategists of all sorts should read James Galbraiths book. Reproducing the pre-crisis conditions, via faulty policies and strategies, will... Read more
Published on May 4, 2013 by Luis Maldonado Lince
3.0 out of 5 stars Statistical study of inequality
This contains statistics of inequality with interpretation of economic and political causes, a difficult job in the light of admittedly weak correlations. Read more
Published on February 4, 2013 by Gderf
5.0 out of 5 stars Excelent Book!!!
Galbraith place in perspective the economic factors that better explain why we are where we are now in America and Europe. Read more
Published on January 14, 2013 by Delfino VARGAS
1.0 out of 5 stars A Horrid Deception Regarding U.S. Income "Inequality"
Galbraith's decetive book is guilty of the sin of omission (as are many others with this same theme) because they refuse to admit that the official U.S. Read more
Published on January 1, 2013 by Angelo Mysterioso
5.0 out of 5 stars Why do all the failed economists and pundits still sit high in their...
In the 12 hapless years of the present millennium, we have looked on as three great bubbles of consensus vanity have inflated and burst, each with consequences more dire than the... Read more
Published on September 11, 2012 by A Citizen
4.0 out of 5 stars Rigorous and Quantative
Galbraith's work here builds on much of his previous. It is a carefully argued and fully grounded quantative analysis that does what the title advertises. Read more
Published on September 6, 2012 by WhoKnew
1.0 out of 5 stars Seldom have I seen such a product description full of hyperbole
This is a collection of the author's published academic articles. Nowhere is this mentioned on amazon, which presumably gets the information from the publisher. Read more
Published on April 20, 2012 by Jackal
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