Engine of Inequality

Chapter 10Rules to Equitably Live By

If you want to change the way your banking system is regulated, if you want to learn the mistakes of what's gone wrong, then you have to change your government.

– George Osborne*

Must we overturn government as we know it to regain economic equality? We saw in Chapter 4 that inequality threatens the very fabric of our government even as many Americans think their government threatens their equality. And, even if one thinks government as a whole still functions well, one might easily conclude from the analysis in Chapters 8 and 9 of post-crisis financial rules that regulation has run amuck and must be tightly curtailed. Conversely, one might conclude that companies that follow money can never be held to higher purpose and thus must be nationalized so that better forces govern finance. Either way, one might despair of constructive reform without wholesale regime change.

However, as we have seen time after time, blunt-force deregulation is dangerous to systemic stability and economic equality. Government control may well do no better and could well be still worse. We have already seen that well-intentioned Fed control of the financial system only makes inequality worse. What if so much economic power or still more were granted to a less well-meaning government agency? We could allow capitalism to rule or overtake it with socialist solutions; many of each are certainly on the table.

There is, though, a middle and more practical course. It ...