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Distribution, ‘Financialisation’ and the Financial and Economic Crisis – Implications for Post-crisis Economic Policies

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  • Hein, Eckhard

Abstract

The severity of the financial and economic crisis which started in 2007 cannot be understood without examining the medium- to long-run developments in the world economy since the early 1980s. The following long-run causes for the crisis can be identified: inefficient regulation of financial markets, increasing inequality in the distribution of income, and rising imbalances at the global (and at the Euro area) level. The focus of the paper is on the changes in distribution triggered by ‘finance-dominated capitalism’ embedded in a ‘neo-liberal’ policy stance since the early 1980s. The three dimensions of re-distribution in the course of ‘financialisation’ and ‘neo-liberalism’ are examined: functional distribution, personal distribution and the development of top incomes. Since the development of functional income distribution is considered to be most important, the channels through which ‘financialisation’ and ‘neo-liberalism’ have contributed to the tendency of the labour income share to fall are identified, the effects of re-distribution on aggregate demand and growth are discussed, and the relationship between re-distribution at the expense of labour and regional (Euro area wide) and global current account imbalances are addressed. Finally, economic policy conclusions with respect to a sustainable income- or wage-led recovery strategy embedded in a ‘Keynesian New Deal at the global and the European level’ are drawn.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 31180.

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Date of creation: May 2011
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Handle: RePEc:pra:mprapa:31180

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Keywords: Distribution; financialisation; global imbalances; financial and economic crisis; economic policy strategies;

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  1. Total disconnect – new data on super rich by the Tax Justice Network
    by Dirk in econoblog101 on 2012-08-01 15:07:08
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Cited by:
  1. Thomas Goda, 2013. "The role of income inequality in crisis theories and in the subprime crisis," Working Papers PKWP1305, Post Keynesian Economics Study Group (PKSG).
  2. Thomas Goda, 2013. "Changes in income inequality from a global perspective: an overview," Working Papers PKWP1303, Post Keynesian Economics Study Group (PKSG).

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