This article on neoliberalism and ongoing financial crises was published last month, but it is a good read considering this weeks news about an unstable global economy. Here is an excerpt:
How did we become hostage to financial markets? A generation of neoliberal finance set the stage for chronic worldwide financial instability:
Inequality has skyrocketed
Worldwide, we have seen a growing trend for wealth and income to become more unequally distributed. In a more egalitarian society, regular folks use their slice of the economic pie to do regular stuff like buy a car or repair the roof, which sets the stage for real economic activity (the production of goods and services).
When the affluent get their hands on a greater piece of the economic pie, they don’t need the extra cash for daily living. They have a greater tendency to use these funds to fuel financial speculation.
Taxes are wrong
Taxes are one way to reduce inequality, but neoliberalism has mounted one long tax revolt, particularly by the wealthy and corporations. As governments under tax (or let the affluent off the hook with tax loopholes or lax enforcement,) they face a dilemma. They either impose austerity on their own people (Canada in the near future) or they borrow money (Greece). To the extent that governments borrow money from the affluent (rather than taxing them), government debt increases.
Government debt is not necessarily a problem. But struggling countries that take on a whole lot of debt can be the target of speculators. (Speculation in government debt is one of the ways that the 2008 financial crisis keeps reverberating worldwide.)