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Rising inequality and financial crises
Why greater equality is essential for recovery

Stewart Lansley 10/5/12

Think piece

The UK economy has now entered its first double-dip recession in a generation and growth continues to stagnate. If we are to avoid the risk of near-permanent stagnation, the fundamental imbalances in our economy need to be addressed. If not, growth will continue to evade us.

The aftermath of the greatest economic crisis since the Depression of the 1930s has seen the wealth divide between the richest and the rest continue to grow. In the UK, real wages have fallen by seven per cent in the last two years – and are still falling – while personal fortunes at the top are continuing to rise. Vast income gaps remain.

Historical evidence suggests a strong link between inequality and instability. The two most damaging recessions of the last century – the Great Depression of the 1930s and the Great Crash of 2008 – were both preceded by sharp rises in inequality.

This Think Piece argues that if the UK is to achieve a sustainable recovery from the current financial crisis, the wage share needs to be restored to post-war levels and the great concentrations of income and wealth broken up.

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