Inequality must be ended to prevent another financial crisis

An economic model that allows the richest members of society to accumulate a larger and larger share of the cake will eventually self-destruct.

Stewart Lansley is the author of “The Cost of Inequality: Three Decades of the Super-Rich and the Economy”; Stewart will be speaking at the Fabian Conference this Saturday

In the build-up to 2008, soaring inequality merely brought a dangerous mix of demand deflation, asset appreciation and a long squeeze on the productive economy which has ended in prolonged economic turmoil.
This is now being recognised at the highest levels.

As President Obama put it in his December attack on the great concentrations of wealth:

‘This kind of inequality – a level we haven’t seen since the Great Depression – hurts us all.’

Yet, despite the growing recognition, the great wealth divide has continued to grow through the recession. The lessons – across the political spectrum – are clear.

To avoid an era of near-permanent slump, the great concentrations of income and wealth need to be broken up – as they were from the 1930s; the wage share needs to be stabilised and restored to the post-war levels that brought equilibrium and sustained stability; creating more equal societies needs to be restored to a primary goal of domestic and global economic policy.