Financialisation, income distribution and the crisis

Abstract

This symposium contains five complementary papers on the present crisis, the one that started in 2007–08 and in which most European countries currently remain. All of these papers underline the close relationship between financialisation, income distribution and the crisis. Explanations of the crisis have tended to focus on the financial factors that triggered the crisis, mainly by emphasizing microeconomic factors, such as the incentives for the bank managers that encouraged them to take risk or the incentives created by government institutions like the Basle II accord. Other explanations have drawn on the work of Minsky and Fisher, taking a more macroeconomic view that focuses on the debt-cycle and on debt-deflation. Still others have focused on international trade imbalances and capital flows. As relevant as these explanations might be, they are partial views that leave an important factor out of the picture: rising inequality. The data clearly show that there have been drastic changes in both functional and personal income distribution over the three decades preceding the crisis. The wage share has diminished by about 10 percent in continental European countries, and by about 5 percent in the United Kingdom and the United States. The changes in personal income distribution have been particularly pronounced in Anglo-Saxon countries, and in particular in the United States, where the top 1 percent now own roughly 25 percent of the national income. At the same time, distributed profits have increased and the gap between profit and accumulation has widened.

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