The New Zealand Herald has published a brief but fascinating analysis of the current economic crisis by Robert Wade, New Zealand born professor of political economy and development at the London School of Economics. In the article, Wade sketches the outlines of the crisis and examines its origins, and in so doing clearly identifies the guilty party: the neoliberal ‘Washington consensus’ of the past 30 years.
In the course of the article Wade indicates how the distribution of wealth has changed in that 30 years. In 1980 the highest earning 1% of the US population earned just under one-tenth of disposable income; by 2007 the highest earning 1% had cornered almost one-quarter of disposable income. Such shocking inequity, Wade suggests, might have led to popular unrest but for the easy availability of credit to allow increased household consumption.
Now the credibility of the global Ponzi scheme is in tatters, many governments have suddenly rediscovered intervention, not only to prevent the complete collapse of the financial system but also to maintain their own legitimacy in the face of recession and rapidly climbing unemployment.
Robert Wade has presented his analysis of the crisis in lengthier and more detailed form in the New Left Review. This article, Financial regime change?, is well worth a read. Here’s just a flavour: