IDEAS home Printed from https://ideas.repec.org/p/tek/wpaper/2010-13.html
   My bibliography  Save this paper

From Marx to Morgan Stanley: Inequality and Financial Crises

Author

Listed:
  • Michael Lim Mah-Hui
  • Khor Hoe Ee

Abstract

Dispite robust growth, rising inequality is widespread in manu countries. At the same time financial instability and crises are occurring with greater frequency and severity. These two phenomena are related to the contest for a greater share of economic output between labor and capital, with capital gaining a greater share over the past few decades. As a result, there is a tendency towards falling‐consumption by the average household and rising savings by a rich minority that could cause stagnation in the economy. This contradiction between falling consumption and rising saving is “resolved” through the financial system by the recycling of funds from the rich minority to the average household in the form of credit. Financial engineering in the U.S. exacerbated this process that led to excessive lending and borrowing, and the creation of an unsustainable debt and asset bubble that eventually imploded. There is a similar tendency towards greater inequality, falling share of consumption, and rising share of savings and investment in China. However, in the context of a globalized world economy, the contradiction is “resolved” through a recycling of the “excess savings” from China to the U.S. adding to the debt and asset bubble in the U.S.

Suggested Citation

  • Michael Lim Mah-Hui & Khor Hoe Ee, 2010. "From Marx to Morgan Stanley: Inequality and Financial Crises," Working Papers 2010/13, Turkish Economic Association.
  • Handle: RePEc:tek:wpaper:2010/13
    as

    Download full text from publisher

    File URL: http://www.tek.org.tr/dosyalar/MAH_HUI_Marx_to_Morgan_Stanley.pdf
    Download Restriction: no

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Thomas Goda, 2017. "A comparative review of the role of income inequality in economic crisis theories and its contribution to the financial crisis of 2007-2009," REVISTA FINANZAS Y POLÍTICA ECONÓMICA, UNIVERSIDAD CATOLICA DE COLOMBIA, vol. 9(1), pages 151-174, February.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:tek:wpaper:2010/13. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ercan Uygur). General contact details of provider: http://edirc.repec.org/data/tekkkea.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.