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Inequality, the crisis, and stagnation

Till van Treeck

Keywords: income distribution; wealth distribution financial crisis; household debt; current-account imbalances; stagnation


This article focuses on the macroeconomic implications of inequality by identifying four themes on which there seems to be growing consensus among many economists, especially in the various heterodox traditions, but also increasingly in the mainstream of the economics profession. The first theme on which there is growing consensus is the notion that the rise in inequality has contributed in an important way to the unsustainable rise in household debt in the United States and ultimately the financial and economic crisis starting in 2007. Second, there is the by-now widely held view that rising inequality at the international level has contributed to the so-called global imbalances in terms of national current-account positions. Third, there has recently been a shift in the focus of attention from merely looking at income inequality to analysing the longer-term implications of income inequality for wealth inequality. Fourth, the argument has been made that a high level of inequality can, generally speaking, be a cause of low economic growth, or even secular stagnation. The article gives a broad and non-technical overview on how these issues can be seen to be linked.

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