Income Inequality and Market Fragility: Some Empirics in the Political Economy of Finance, Part I

Abstract

A line of thinking associated with 19th- and early 20th-century political economy suggests that income and wealth concentration are not only unjust in some circumstances but also can operate as significant sources of systemic fragility in market economies. The issue is that losses below the top of the distribution can impede the functioning of consumer goods markets. That in turn deprives the macroeconomy of the consumer demand needed to support employment and investment.