Forum Post: Tinkering on the Economic Brink

"We're locked into a slump unless we actively tackle the towering inequalities that led to financial crisis."

For the last 30 years the proceeds of rising prosperity have been increasingly colonised by big business and a small rich elite. In the United States, living standards for most have been stagnant; in Germany, average real wages have not risen since the millennium.

Moreover, the income gulf has widened further throughout the economic crisis. In the UK, executive pay has continued to spiral, and this year seven out of 10 employees have had a freeze or cut in pay. Throughout the world, the number of billionaires rose by nearly a third between 2007 and 2010, while just over a thousand individuals enjoy a combined wealth of $4,500 billion, the equivalent of a third of the output of the American economy. In the US, corporate profits have risen sharply, with business taking advantage of the slump to shed labour, cut hours and halt pay increases. In the UK, large corporate cash holdings are at near-record levels.

Those seeking an explanation for why the global economy is tinkering on the brink of a second collapse need look no further. Squeezed wages, booming personal fortunes and idle corporate surpluses are a recipe neither for economic vitality nor recovery but for a sustained crisis.

For years it has been argued by the architects of market capitalism that a sharp dose of inequality would kick-start enterprise, boost growth and be good for us all. In the event, the main outcome of the post-1980 experiment has been an economy that is both much more divided and much more unhealthy.

Nor are these outcomes unrelated. There are four powerful reasons why the current crisis has its roots in excessive concentrations of income and wealth.

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