Chapter 7: Structural Explanation of the Financial Crisis
7. Structural explanation of the financial crisis The financial crisis has confirmed the contradictions between capitalism and democracy. Capitalism needs democracy since the process of democracy gives legitimacy to the economy. The revolutions in the Middle East of 2011 confirm the limitations of autocratic capitalism, of a concentration of elites and growing income inequalities. The financial crisis is also evidence of growing income inequalities in the advanced economies: of stagnant incomes for 99 per cent of the population and a skewed income distribution towards the top 1 per cent of earners. The dual ethics of a capitalism of one dollar, one vote, and a democracy of one person one votes has resulted in the ability of those on high incomes to hire lawyers and accountants that ensure tax breaks for a few, and also a process that is shaped by financial donations and lobbyists and which undermines the democratic process. In the context of these contradictions this chapter seeks to explore social structures, ideology, power and influence and how these processes provide a framework for analysing the nature of the financial meltdown. It is therefore an attempt to provide an interdisciplinary approach, borrowing concepts from sociology, politics, economics and anthropology to try and locate the financial crisis in wider social, political and economic landscapes. Social structures, including institutions of government and private sector entities, by their nature create issues of power and influence. Looking at the financial sector, with investment banks worth twice UK GDP and in the USA the...
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