Why has inequality increased so much over the past 40 years? Common answers to that question cite changes in trade, technology, globalization, and education. Cheap imports from low-wage countries, in particular China, sapped domestic manufacturing. Companies offshored jobs, fired people, and hired robots. Demand for skilled workers far outstripped the demand for unskilled workers, depressing earnings for those without an advanced degree.
In their excellent, slim new book, Brink Lindsey and Steven Teles—the former the director of the Open Society Project at the libertarian think tank the Niskanen Center, the latter a political scientist at Johns Hopkins—point to an important and overlooked additional cause. In The Captured Economy: How the Powerful Become Richer, Slow Down Growth, and Increase Inequality, they argue that it is not just that technology and offshoring have wiped away middle-income jobs, but that high-income individuals and big-profit businesses have rewritten the rules of the economy, “capturing” the regulatory system and using it to squeeze out their competition. The result is both greater inequality, and a more sclerotic economy.
The “capture” of the economy shows up in preferential regulations enacted at the local, state, and federal level, Lindsey and Teles argue. Together, rules made to benefit not the public good, but big firms or rich people, have led to money and wealth being distributed from the poor to the rich and the small to the big. The result of all this “capture,” they write, is an overpaid white-collar professional class, a bloated financial sector, a lack of affordable housing, the growth of fewer and bigger companies, and a dearth of new startups.