Aditya Chakrabortty is an economics leader writer on the Guardian. He’s very good at his job. He is not just a good economist, he is a good writer too.
[M]any of the ministers who talk about tackling inequality are this week laying into the teachers, jobcentre clerks and other public servants preparing to strike to protect their wages and pensions.
As Aditya points out, ministers who have made it their mission to suppress the wages of the ordinary working people of this country are doing us a great disservice. As recent research from the IMF has shown, and as he notes that research:
looks at what happens when a thin slice of people at the top of society see big rises in their income while everyone else is left behind – exactly what happened in the US both before the Wall Street crash of 1929 and before the great banking meltdown of 2008. The end result, conclude researchers Michael Kumhof and Romain Ranciere, is an almighty crisis.
To keep making healthy returns on their cash, well-off people have to lend to poor and middle-income households so they can keep buying stuff. “The inevitable result is that loans keep growing, and therefore so does . . . the probability of a major crisis that . . . also has severe implications for the real economy.” The credit bubble pops and the resulting mess lands all over the economy.
This is one of the first full-blown studies of the link between inequality and financial crises, and it is explicit that there is one. What’s more, Kumhof and Ranciere argue that the “restoration of the lower income group’s bargaining power is more effective”
The conclusion is inescapable: inequality is causing a crisis in our economy and strong unions can help put matters right.
Would Mr Cameron like to comment because right now it’s the inequality he supports that is causing the harm in our economy, and the demands of unions that would set things right.