Financial Expansion Fuels Income Inequality

Financial expansion fuels greater income inequality, mainly because: People with higher income benefit more than poorer ones from credit-financed investment opportunities and the sector pays high wages, which are above what employees with similar profiles earn in the rest of the economy. This premium is particularly large for top-income earners[**] / OECD Report

Of course, central banks are not charged with the task of addressing inequalities in the distribution of wealth, income or consumption – nor are they dealing with the broader challenge of promoting economic justice for society as a whole.[**]

The gap between the very richest and the rest of us has increased continuously over the last thirty years.

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12 Comments

  1. Thanks for this post. The process of a rising influence and proportion of financial activity in the economy has become known as ‘financialisation’. Many non-orthodox economists have documented the damaging effects on the economy of this process. This includes rising inequality for the reasons you cite, but also instability. Increased borrowing and a rise in debt as a proportion of GDP make the economy more fragile and when these trends reverse as they eventually must do, we get a financial crisis and recession. It seems as if these processes took a long time to really cause economic havoc, ie from the 1980s to the 2007 start of the crisis. But it happened. Have we learned lessons? I have my doubts.

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    1. Thank you Nick for the comments. I do agree with you and further if learned, there must be something special going on to mitigate or avert the crisis. Everything came forward without solution. For me, who are benefitted from the current ‘fragility’ dont let the economy go fairly. Please share your thoughts.

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