The Real Origins of the Global Crisis

In this paper we present an interpretation of the economic and financial crisis that considers crucial the issue of income distribution (Krugman 2007; Piketty and Saez 2003; Reynolds 2008), a question that is instead ignored by more widespread interpretations. In fact, we ask what lies behind the disaster of the subprime loans and, if a more thorough view is taken, it seems clear that the true causes of the crisis lead back to income distribution, in other words the enormous increase in the gap between rich and poor. This consideration is fundamental. If the crisis were merely financial then (perhaps) the policies of financial adjustment that are currently in place might be sufficient. If instead the crisis is due to more serious causes, and nothing is more serious than distribution inequalities, then the cure must be much more profound (and difficult). In other words, the crisis will be long and severe until such inequalities are reduced, a difficult task when weighed against public intervention in aid of financial institutions.