Inequality has diverse economic, social, political and environmental consequences. There is inherent uncertainty, and therefore endless scope for debate, about the precise nature of these impacts. One can only infer what would be the economic, social, political and environmental outcomes if the degree of inequality were greater or lesser. Such judgements are inescapable in the social sciences. We cannot conduct laboratory experiments to see how any one particular nation would fare differently according to whether it had a more egalitarian or inegalitarian distribution of income and wealth. All we can do is to observe the patterns over time and space and draw inferences about the extent to which economic inequality goes hand in hand with particular economic, social, political and environmental problems.

This chapter reviews some of the principal connections – the fallout from economic inequality. From an economic perspective, the key issue is how inequality may affect the capacity of the nation to generate prosperity – through its impact on variables such as labour productivity, the propensity to save, the level of investment and consumption of imported goods. From a social perspective, the issue is how inequality bears on the degree of cohesion within the society – the extent to which there are shared values and some sense of a common purpose. Politically, the key concerns are how economic inequality sits with the formal democratic commitment to equality of rights and whether it generates pressures on government to implement policies of redistribution.