Will Denayer — How inequality is evolving and why

 The bottom line – and the fundamental problem – seems to be clear: inequality rose because the labour movement lost out. Today’s lacking investment means that technology does not substitute for labour – the normal trajectory in capitalism, instead cheap labour substitutes for technology. As a result, productivity stalls. After decades of right-wing policies, stripping away protections for workers, the flexibilisation of labour markets, destroying ‘government rigidities’ and waging wars against trade unions, it turns out that these neoclassical recipes have decreased productivity. They make investment in new technologies less rewarding. In an analysis of 20 countries over 44 years, Kleinknecht estimates that 1% lower wage increase reduces, in the medium term, the growth of value added per labour hour by 0.3 – 0.5 percent (see here). Neoclassical policies led to a more labour-intensive and, hence, less innovative growth path. The unsurprising result is political anger. As misery grows, so does the extreme right....

flassbeck economics international
How inequality is evolving and why
Will Denayer