Comments on: Want to avoid financial crises? Then reduce inequality, says the IMF

By: Jem Bendell

Jem Bendell — Sun, 30 Jan 2011 10:40:04 +0000

Last year my organisation published a study showing how CSR and responsible investment were overlooking the issue of economic inequality, and that this posed both public and commercial problems. We mapped out a few things that responsible companies and investors could do. See: http://www.lifeworth.com/consult/2010/09/inequalit/

By: max

max — Wed, 26 Jan 2011 08:55:04 +0000

David Harvey in a fascinating RSA Animate lecture on the financial crisis draws attention to the fact that this great recession differs from previous ones in that the comprehensive defeat of labour in the eighties in the US and UK mean that despite many years of growth this has not been accompanied by a rise in real wages as bargaining power has been lost http://www.youtube.com/watch?v=qOP2V_np2c0
this has led to many on the right agreeing with the left that the power of capital and not labour is the problem here and we need more unions.

in contrast to the great analysis by the IMF the economist this week contains an embarassing eulogy to inequality, concluding tht the new elite of super rich and growing inequality are in fact a largely benign and in fact positive fact in the world economy, and that unlike the middle ages the super rich of today are largely there because they are very clever and work so hard. well that’s ok then.

By: Owen Allen

Owen Allen — Sat, 22 Jan 2011 09:13:56 +0000

It seems this just verifies, perhaps once again, that failing to address the disparity between the wealthier &poorer of the global population is to the detriment of all of us.
The real question is about method to address.
Structurally, taxation should be set to realize provision of the whole population with the infrastructures that mediate their path to their best potential i.e. Transport, communications, health, education.
Ultimately, however, because some will always manage to realize greater wealth accumulation, there is a cultural imperative towards a philanthropic attitude, service to humanity, and complex collective problem solving as the traits of a mature citizen.

By: Sam Gardner

Sam Gardner — Fri, 21 Jan 2011 06:47:09 +0000

The bargaining power of the poor and middle-income category.
Is this not in the first place the strength of the Labour Unions? Those that are perceived as a dam for the tide that would “rise all boats” eventually?

By the way, is there still anybody supporting the institution building of labour unions out there? Is it more convenient to support NGOs instead? All these pesky organisations with internal democracy, doing what the members ask for, are just not as dependable as the NGOs we create.

By: gawain kripke

gawain kripke — Thu, 20 Jan 2011 18:39:04 +0000

that’s really excellent.

does the debt-to-income fragility analysis apply for the Great Depression? Or just the Awesome Recession?

Would be a more robust theory if the former. Although I think the explosion in consumer credit and easy housing debt is post Depression. but maybe I’m not seeing something.

By: Pete H

Pete H — Thu, 20 Jan 2011 17:06:05 +0000

Wow – I wish I understood all that! did everyone else?

I failed to see how the financial crisis are caused by inequality To me, the post says that the crises were caused by unsustainable debts of lower and middle income people. Reducing access to such debt seemed to be the solution rather than reducing inequality.

I don’t see how “restoration of poor and middle income households’ bargaining power” would lead on it’s own to a reduction in debt for these people. It’s not my experience that if people get a higher income they don’t want to spend yet more.

Could the rise in inequality be caused by the richest in society benefiting from the servicing of the debts of the rest, rather than causing it?

Maybe I need to look at those equations, that should keep me quiet…. Thanks for the post.

By: Alice Chapple

Alice Chapple — Thu, 20 Jan 2011 13:09:31 +0000

The role of inequality in financial crises is also the theme in an excellent documentary film called The Flaw – worth looking out for.
http://theflawmovie.com/

By: Robert K. Walker

Robert K. Walker — Thu, 20 Jan 2011 08:09:24 +0000

An interesting counterpoint to those of the Austrian school (most recently Lleyellen Rockwell) who argue that central banks are the cause of, not the remedy for, financial crises. Keynes aside, maybe one answer lies in cash transfers (instead of or complementary to loans), whether targeted, universal or conditional. The logic of the latter option is actually rather neo-liberal: parents have an opportunity cost when they send their children to school instead of putting them to work, so they are on the supply side of the equation and deserve remuneration for their sacrifices. See Oportunidades in Mexico and Bolsa Família in Brazil.