Income Inequalities, Public Debt And Social Cohesion: A Postkeynesian-Institutional Approach

Please cite the paper as:
Guglielmo Forges Davanzati, (2018), Income Inequalities, Public Debt And Social Cohesion: A Postkeynesian-Institutional Approach, World Economics Association (WEA) Conferences, No. 2 2018, The 2008 Economic Crisis Ten Years On, 15th October to 30th November, 2018

Abstract

This paper aims at discussing the links existing between the increasing income inequality on the global scale and the processes of financialization, with particular reference to the increase of public debt. It will be argued that i) the increase of income inequality reduces the rate of growth and contribute to the explosion of public debt; ii) the increase of public debt involves a redistribution of the fiscal burden at the expense of workers, thus fuelling income inequalities.

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6 Comments ↓

6 comments

  • Métayer Robbes says:

    Très intéressant. Félicitations.

  • guglielmo forges davanzati says:

    thanks. this is a preliminary draft.

  • Maria Grazia Criscuolo says:

    What is in your paper the role (in theory and in policy action) of thereal interest rate?

    • guglielmo forges davanzati says:

      My argument if that the explosion of public debt is mainly due to the increase of the real interest rates. This, in turn, depends on the deflationary effects of increasing income inequalities.

  • guglielmo forges davanzati says:

    it plays a crucial role and I will approach this issue in the final draft of this paper. My argument is that the explosion of public debt is mainly driven by the increase of the interest rates, which, in turn, also depends on the deflationary effects of increasing income inequalities. Policy implications are not discussed in this draft.

  • Arturo Hermann says:

    In effect, a turning point for the explosion of public debt and of the financialisation of the economy is constituted by the “inflation targeting” policies of the early 1980s. These were mainly promoted with great fanfare by the “Reagonomics”, which realised a noxious mixture between monetarism and supply side economics. The result was that large public deficits were financed by selling bonds at high interest rates. The negative effects of this turn have been analysed by numerous heterodox economists. And so deleterious was this trend that also the Nobel prized economist Edmund Phelps – who, although belonging to neo-Keynesian stream, cannot be considered as a heterodox economist – underscored how high real interest rates in the US have caused a permanent slump in Europe. And, it can be added, have paved the way for outbreak of the 2008 economic crisis.