Economic inequality in America is a problem that is not going away. Even before the COVID-19 crisis wrought havoc on the economy, the disparity between the rich and the poor was at levels not seen since World War II.
Moonshot proposals to curb inequality in America include progressive tax reform aimed at the one-percenters, mass cancellation of student loans, and an overhaul of public education. While these may all be formidable weapons to fight inequality, they have little chance of clearing the necessary political hurdles in Washington.
Without bipartisan consensus, are we doomed to watch idly as the yawning gap between the rich and poor grows dangerously out of control?
As one of the most insightful policy observers in the world, Karen Petrou argues we’re looking for solutions in all the wrong places. In Engine of Inequality, she persuasively takes dead aim at the Federal Reserve as a crucial but unrecognized source of economic inequality and offers meaningful policy proposals that don’t require an act of Congress.
Since the 2008 financial crisis, inequality has been rapidly increasing in no small part because of policies enacted by the Federal Reserve. Monetary and regulatory policy may seem far afield from economic inequality—but who gets the money how is the mission-critical job of central banks such as the Fed, which move money across our financial system. Like it or not, the Fed’s policies have a profound impact on the balance of equality.
Petrou boldly suggests the Fed must pull its head out of the sand. She details the hard data showing how the Fed’s post-crisis policies have unintentionally exacerbated the problem: reliance on aggregate data like Gross Domestic Product (GDP) obscures the economic reality of American families, trickledown programs that rescue financial markets only benefit the rich, ultra-low interest rates impede meaningful savings by the middle class, and others.
Engine of Inequality also reveals several pragmatic actions that the Federal Reserve can and should take immediately to reverse its adverse influence on economic inequality and turn its power to move the money into a force for shared prosperity. Engine of Inequality unveils the powerful financial policy levers that could be pulled to address economic inequality in America and offers a veritable playbook for a more equitable Federal Reserve. Petrou’s proposals are within reach and cut across wealth, racial, and gender divides.