Inequality in the Age of Finance
Ken-Hou Lin & Megan Tobias Neely
Finalist, 2020 Robert W. Hamilton Book Awards
Finance is an inescapable part of American life. From how one pursues an education, buys a home, runs a business, or saves for retirement, finance orders the lives of ordinary Americans. And as finance continues to expand, inequality soars.
In Divested, Ken-Hou Lin and Megan Tobias Neely demonstrate why widening inequality cannot be understood without examining the rise of big finance. The growth of the financial sector has dramatically transformed the American economy by redistributing resources from workers and families into the hands of owners, executives, and financial professionals. The average American is now divested from a world driven by the maximization of financial profit.
Lin and Neely provide systematic evidence to document how the ascendance of finance on Wall Street, Main Street, and among households is a fundamental cause of economic inequality. They argue that finance has reshaped the economy in three important ways. First, the financial sector extracts resources from the economy at large without providing economic benefits to those outside the financial services industry. Second, firms in other economic sectors have become increasingly involved in lending and investing, which weakens the demand for labor and the bargaining power of workers. And third, the escalating consumption of financial products by households shifts risks and uncertainties once shouldered by unions, corporations, and governments onto families.
A clear, comprehensive, and convincing account of the forces driving economic inequality in America, Divested warns us that the most damaging consequence of the expanding financial system is not simply recurrent financial crises but a widening social divide between the have and have-nots.
"Divested explores how the expansion of finance in the U.S. since the 1980s has profoundly impacted many aspects of the American economy. The book is particularly astute at showing the myriad ways in which the rise of finance has directly and indirectly been implicated in the rise in income inequality. This is a big and important book that is certain to be widely acclaimed for its broad synthesis and able marshalling of evidence."
-Neil Fligstein, Class of 1939 Chancellor's Professor, University of California-Berkeley
"The rising influence of finance is the most important business development in modern times. Lin and Neely's insightful and important book explains how finance became the most important priority in business and connects the dots to show how that development contributes to a range of contemporary problems, from falling investment in business to rising inequality in society and the precarious nature of modern jobs."
-Peter Cappelli, George W. Taylor Professor of Management, The Wharton School, University of Pennsylvania
"Divested is a powerful book that methodically demonstrates how the financialization of America is increasing income inequality. This book is the new go-to source to better understand these debilitating social and economic trends and convince policymakers why financial reform is needed."
-J. David Stein, host of the Money for the Rest of Us podcast and author of Money for the Rest of Us: 10 Questions to Master Successful Investing.
"Beautifully-written, wide-ranging, accessible, and persuasive, Divested captures the defining flaw of American capitalism in our time. The link of inequality to finance is plain as day in data. But here Ken Hou-Lin and Megan Tobias Neely give a clear and full account of how it actually happened."
-James K. Galbraith, Lloyd M. Bentsen Jr. Chair in Government/Business Relations at the University of Texas at Austin, author of Inequality: What Everyone Needs to Know