Let Them Eat Credit: How inequality is at the root of the Great Recession

Source: Raghuram G. Rajan, The New Republic, August 27, 2010

By most counts, the U.S. economy started growing in the middle of last year. For many Americans, though, it does not feel as if the Great Recession has ended–unemployment and underemployment are still alarmingly high, and job growth is weak. Many causes have been suggested for both the economic collapse and mediocre recovery, but one that is hardly ever mentioned is income inequality. This is a mistake. Growing income inequality in the United States and the policy responses it has spawned have done tremendous damage to our economy. And because we continue to ignore this underlying problem, the risks of our policies leading to another calamity will not go away, no matter what we do to reform the financial sector.

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