Financial crisis, income distribution and a wage-growth strategy
While most economists believe that the 2007-2008 financial crisis was caused by the excessive optimism of financial markets, some economists, mostly heterodox ones, tie this crisis to structural factors, in particular growing income inequalities, as measured by the rising share of profits in national income and by the disparities in wage income. The author presents the results of a research project based on five modules that analyzed the causes of those evolutions as well as the negative impact of the fall in the wage share on the growth of aggregate demand and on the growth of productivity. Neoliberal policies thus ended up having negative effects on the economy, and those effects could only be temporarily avoided and hidden by the rising indebtedness of households or by beggar-my-neighbour export-led policies. It is thus essential to go back to more equitable policies based on full-employment targets and high wages.