Sunday, February 06, 2011

Financial inequality and the crisis

In the 1920s the US reached record inequality. In the 1930s it slowly reduced to to reach a low point after World War II. From then it stayed low to around 1970 when it slowly started to rise again. Nowadays it is setting new records.

Globalization may be one cause. A political system where the rich can buy their laws another. Many more explanations are going around.

But most interesting is the suggestion that the similarity between the 1920s and the last decade are no coincidence. Both era's saw rising inequality ending in a financial crisis. In both cases the root of the crisis were very relaxed credit standards. It is claimed that these standards were a direct consequence of too much inequality: the rich had too much money to spend and the poor too little. By lending it to the poor the rich could keep the consumption boom going.

I could go on much longer but other did it better than me. So three recommended articles:
- Deepening crisis traps America's have-nots by Ambrose Evans-Pritchard. This is good as an introduction.
- The United States of Inequality by Timothy Noah. This is a thorough series of articles.
- Plutocracy Now: What Wisconsin Is Really About. How screwing unions screws the entire middle class. by Kevin Drum. This article explain how with the decline of the trade unions the Democrats have lost their basis. The article is also a good entry point to other articles on Mother Jones.
- Of the 1%, by the 1%, for the 1% is an article by Joseph E. Stiglitz. He nicely formulates it all, although I didn't find much new insights.

1 comment:

Anonymous said...

The difference between income between the have and the have-mores is a non-issue.