Ivan Srbulov

@srbulov.com

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energy economist | interested in inequality and technology | 🇪🇺🇬🇧🇷🇸🇭🇺 | any opinions solely my own.

A chapter of a book that contains: “It is perhaps no accident that this crisis, like the Great Depression, was preceded by large increases in inequality:? when money is concentrated at the top of society, the average American's spending is limited, or at least that would be the case in the absence of some artificial prop, which, in the years before the crisis, came in the form of a housing bubble fueled by Fed policies. The housing bubble created a consumption boom that gave the appearance that everything was fine. But as we soon learned, it was only a temporary palliative. Moving money from the bottom to the top lowers consumption because higher-income individuals consume a smaller proportion of their income than do lower-income individuals (those at the top save 15 to 25 percent of their income, those at the bottom spend all of their income). The result: until and unless something else happens, such as an increase in investment or exports, total demand in the economy will be less than what the economy is capable of supplying and that means that there will be unemployment. In the 1990s that "something else" was the tech bubble; in the first decade of the twentieth-first century, it was the housing bubble. Now the only recourse is government spending.
A page from a book, the focus text is: “”The way globalization has been managed, however, has itself led to still lower wages because workers' bargaining power has been eviscerated. With capital highly mobile and with tariffs low-firms can simply tell workers that if they don't accept lower wages and worse working conditions, the company will move elsewhere. To see how asymmetric globalization can alfect bargaining power, imagine, for a moment, what the world would be like if there was free mobility of labor, but no mobility of capital.26 Countries would compete to attract workers. They would promise good schools and a good environment, as well as low taxes on workers. This could be financed by high taxes on capital. But that's not the world we live in, and that's partly because the 1 percent doesn't want it to be that way.”