Financial capitalism and Democracy: Distribution models

Abstract

Over the course of the last centuries, distribution of income has proven to be perhaps one of the most important determinants of economic development. As such, the relationship between the two has been a source of constant debate. Some argue that inequality is a necessary precursor to economic growth, as those with more economic power can contribute more to economic growth; if an economy grows, all are better off in absolute terms, even if inequality does not abate. Others argue that greater economic equality is a necessary condition for any sustained economic growth. In historical terms, the viewpoint that periods of economic liberalization have led to greater growth and not necessarily greater inequality is seriously flawed, not least for the economic unsustainability of such periods. During the era of globalization, there is an abundance of evidence of increasingly unequal distribution of income. However, such a condition does not only have economic implications. Economic inequality equals an unequal distribution of power. As the gap deepens between the democratic ideals of political equality and growing economic inequality, the risks of the system collapsing also rise. As modern capitalism enters into a new era, new forms of democracy must be addressed.