Inequality, financialization, and political disintegration

Drawing on Peter Turchin’s structural-demographic theory, this paper provides a preliminary examination of how rising inequality and financial liberalization contribute to political instability through the interplay of mass immiseration and elite overproduction. We capture these dynamics through a simplified agent-based macroeconomic model, introducing two structural shocks - growing inequality and financial liberalization - that reflect the transformations reshaping advanced economies in recent decades, a process intertwined with political disintegration. A wealth tax on the richest households can reduce political fragmentation and improve economic performance, but lasting resilience will require embedding such measures within a broader rethinking of the policy paradigm that has prevailed since the 1980s.