The recent Global Financial Crisis, from which the world is
only now recovering, has had a massive negative impact .Many have seen their savings
decimated, those about to retire or
already retired , have suffered immensely. Job losses have been huge The causes
of the GFC are debated, but widely attributed to unethical or at least inadequate
sub-prime lending practices by financial intermediaries. Yet few whistleblowers came
forward to warn the financial community , or the regulatory authorities of the perverse practices of Lehman Bros, Goldman Sachs
,etc. who were at the heart of
the problems. The CEO of the last mentioned company has publicly argued for a reduction in old age entitlements (here
writers even attribute the crisis to the growing inequality between the rich and the poor, noticeable worldwide but particularly in the
US. From 1980 to
2005, more than 80 percent of
total increase in Americans' income went to the top 1 percent.
Noah in The United States of
The United States' economy is
currently struggling to emerge from a severe recession brought on by the
financial crisis of 2008. Was that crisis brought about by income inequality?
Some economists are starting to think it may have been. David Moss of Harvard
Business School has produced an intriguing
chart that shows bank failures tend to coincide with periods of
growing income inequality. "I could hardly believe how tight the fit was,"
he told the New York Times. Princeton's Paul Krugman has
similarly been considering whether
the Great Divergence helped cause the recession by pushing middle-income
Americans into debt. The growth of household debt has followed a pattern
strikingly similar to the growth in income inequality (see the final graph).
Raghuram G. Rajan, a business school professor at the University of Chicago, recently argued on the New Republic's
Web site that "let them eat credit" was "the mantra of the
political establishment in the go-go years before the crisis." Christopher
Brown, an economist at Arkansas State University, wrote a paper in 2004
affirming that "inequality can exert a significant drag on
Labels: ethics, Justice as fairness, practical ethics, whistleblowing