Friday, February 2, 2024

Inequality, financialization, and economic decline

"Inequality, financialization, and economic decline"
PDF, 24 pages
by Pasquale Tridico and Riccardo Pariboni, 2017

From the Abstract:

The objective of this article is to argue that the labor productivity slowdown experienced in recent years by several advanced countries can be explained, following a Kaldorian-Classical approach, by a weak gross domestic product (GDP) performance and by a decline in the wage share. Moreover, drawing inspiration from recent post Keynesian literature, the authors identify the ongoing worsening in income equality and the increase in the degree of financialization as other major explanatory factors of sluggish productivity.

Should your nation, empire, or civilization survive all other calamities, financialization is sure to bring it down. Financialization makes transactions increasingly expensive. It increases the factor cost of money, reducing both nonfinancial profit and the wage share. 

The fall in profit leads to the "weak gross domestic product (GDP) performance" noted in the Abstract. And the decline of the wage share makes it so that "labor cannot support life", as Simkhovitch said in "Rome's Fall Reconsidered".

Also, financialization (in the form of growing debt) is a significant source of income inequality.

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