In this article, we analyze inequality changes in Peru under the first Garcia government (1985–1990). Our findings indicate that stability in consumption inequality and a substantial decline in wealth inequality were achieved, probably thanks to the government's demand-led policies, despite their deleterious effects on other macroeconomic indicators. The following analysis reveals that inequality in most functionings, including overall well-being, diminished, as did geographical disparities. We thus offer here (i) a methodological contribution to the debate on inequality, stressing the need to go beyond consumption/income inequality if one wants to track inequality changes across time, and (ii) a contribution to the debate about the socioeconomic situation in Peru between 1985 and 1990. Copyright © 2011 John Wiley & Sons, Ltd.