Inequality and Instability: A Study of the World Economy Just before the Great Crisis

By James K. Galbraith | Go to book overview

CHAPTER 13
Economic Inequality and the World Crisis

Cette lettre est longue, Monsieur le Président, et il est temps
de conclure.

—Emile Zola, to Felix Faure, president of the French Republic

This work summarizes many years of observation and measurement. Each of its major chapters contains an element of new evidence, based on calculations not elsewhere or previously published.1 It thus represents, taken as a whole, a large body of fresh information, even though the data sources used are commonplace and have been readily available for a long time.

What have we learned? Are there lessons to be taken from the diversely measured experiences of the United States, Europe, Latin America, and China?2 Are there central facts or common patterns that emerge unambiguously from the evidence?

First, the evidence points clearly at the need to redefine the study of economic inequality, and to restructure, to a degree, the main lines of research in the field. In the study of global inequality, trends and common patterns emerge with great clarity and persistence. This fact alone proves that the dominant forces affecting the distribution of pay (and therefore incomes) worldwide are systematic and macroeconomic. They are the product of forces affecting the global economy in common and systematic ways, forces impinging on individual countries and perhaps modified by the institutions those countries have and the policies they apply—but nevertheless forces that originate beyond their control.

Second, these forces are largely financial in character. They have to do first and foremost with interest rates, the flow of financial investments, and the flow of payments on debts, internal and international. At the global level, the data give no support to the vast outpouring in the professional literature arguing

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