When economists talk about inequality and the current economic crisis, things tend to get weird. Discussions of possible mechanisms don’t seem to go anywhere. Empirics generally rely on time-series correlations of aggregate figures. The overriding sentiment is, “but how?”
We’ve talked a lot on this blog about the relationship between inequality and the crisis. The right answer, I think, is that the conditions that produce inequality and are reproduced with its help had a major role in the crisis. All of this, though, requires two things- first, abandoning the characterization of this crisis as a financial one; and second, a discussion of class, at which most mainstream economists’ eyes glaze over. Inequality in and of itself did not cause the crisis. However, inequality is endemic to our version of capitalism, which I think did.