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Capitalism and Inequalities

Michel Aglietta * Conseiller, CEPII et France Stratégie. Contact :

Inequalities have spurred in most countries with financial globalization. Nonetheless average inequalities of income between countries have abated with the rise in emerging market countries boosted by China. Absolute poverty has declined under this impetus.

Disparities are huge within advanced countries. Inequalities have been growing to the extreme in the US, while social security mechanisms have kept them moderate in most of Western Europe.

Those evolutions are explained by two determining forces in the long run: drastic changes in corporate governance on the one hand, very large rise in low cost labor force with the trade opening of large Asian countries on the other hand. A structural increase in the cost of capital relative to the cost of labor has ensued.

Ultra-liberalism has imposed the principle of shareholder value in corporate strategies. The latter has produced inequalities of wealth, hence of power much higher than inequalities of income. Furthermore it fosters leveraged financial cycles which generate macroeconomic instability sparking financial crises.

This unbalanced growth regime is going to meet challenges it cannot handle: demographic ageing, climate change, environmental degradation, under provision of public goods. It is why inclusive and sustainable development calls for a profound mutation of societies.

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