From Marx to Morgan Stanley: Inequality and financial crisis Michael Lim Mah-Hui and Khor Hoe Ee

Despite robust growth, rising inequalities and financial instability have affected many countries. This is a result of skewed distribution of economic output between labour and capital favouring the latter. Consumptions of households have been falling with rising savings by the rich. This tension between declining consumption and rising savings is ‘resolved’ by the financial system through the recycling of funds from the rich minority to the average household in the form of credit. At the global level, the tension is ‘resolved’ through recycling ‘excess savings’ from China to the US, adding to the debt and asset bubble in the US.

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(This article was originally published in Development and Change 42(1) in 2011.)