I agree with you Prof. Roubini, but I believe there is already a strong solution: "Job Creation in the Modern Information Age" http://goo.gl/ig0z1 Please see this article.

Great article!  Join our ongoing conversation on “Occupy Earth” here:

http://www.tedanon.com/conversations/69

Thank you for this overview article.

I would like to bring here two paragraphs which could point to a possible solution.

"...The problem is not new. Karl Marx oversold socialism, but he was right in claiming that globalization, unfettered financial capitalism, and redistribution of income and wealth from labor to capital could lead capitalism to self-destruct. As he argued, unregulated capitalism can lead to regular bouts of over-capacity, under-consumption, and the recurrence of destructive financial crises, fueled by credit bubbles and asset-price booms and busts...

...Any economic model that does not properly address inequality will eventually face a crisis of legitimacy. Unless the relative economic roles of the market and the state are rebalanced, the protests of 2011 will become more severe, with social and political instability eventually harming long-term economic growth and welfare..."

Marx was right, our "American Dream" way of life is self destructing, and the present inequality will solve itself by the crash of the peresnt economical and financial systems very soon based on all the data we see every day.

We live in a closed, global, interdependent system, so no adjustment of the present social and economical model can work as it was designed for the previous "loose" human system, where we still had open, free markets, available buying potential and cheap workforce, not to mention the unlimited resources. Today we have non of those.

We have to re-design the system from bottom up, starting with the social structure, with a completely mutual, equal network, and build our new economic model on top of it.

Marx was not the cause of the Communist failure, the Communist regime was established without a clear motivation for people, that is why it required brute force to maintain, and that is why it failed at the end.

Any new model has to be born out of understanding and willingness, when all participants freely choose to join in, as they understand it is beneficial for them.

This is why the whole building process has to start with education, explaining people the interconnected system we exist in today, and that in such an integral system each individual can only be healthy, successful and happy if the whole system works, lives optimally.

We have both the necessary information and the necessary means for distribution in our hands.

"Thus, the rise of the social-welfare state was a response (often of market-oriented liberal democracies) to the threat of popular revolutions, socialism, and communism as the frequency and severity of economic and financial crises increased. Three decades of relative social and economic stability then ensued, from the late 1940’s until the mid-1970’s, a period when inequality fell sharply and median incomes grew rapidly."

All of our previous economic systems have been dominated by a rigid set of protocols developed to profit exceptional people. I propose that many more people today are aware and educated enough to make substantial contributions to the solution. My sense is that our populations in general are still feeling disenfrachised by the idea that there is a solution made by others for the supposed benefit of all. They are suspended in a childhood waiting for the parents to do something that affects them. This is a dying paradigm.

A fundamental shift in the importance of each and every participant in the human dynamic is needed. Society is as much about values as it is about the mechanics of economics. To see oneself as integral in the solution starts with mutual values. From their the individual becomes a guarantor of the many and feels a sense of inner responsibility, thereby becoming an extemely important member of any society. A society built of individuals who are self empowered to contribute will be the most successful. Smaller cooperating units of people bonding into a larger structure will definitely create a more flexible, responsibe environment less dependenant on some mega system that needs a defined pattern of supply and demand to hold itself up.

When speaking of Karl Marx I think we need to remember a few things.  A) He did not align himself with those who claimed to be Marxists in his lifetime and it's probably safe to say, from looking at his words, that he would not have aligned himself with any regime which has said they followed his theories.  B) Marx spoke predominantly of capitalism failing because he believed it dehumanized men. 

He argued that to work for a capitalist represented a disassociation of the labor one puts into his work and the reward he gets from it.  In essence a person is not "owning" that which he creates in a capitalist system but creating something for the further profit of the capitalist.  Marx believed that this disassociation, of the labor of ones own hands, would eventually lead to the demise of capitalism.  Whether Marx oversold socialism, I think, can not be calculated. 

I think he spoke of human nature and that what he said will eventually come to pass as humanity continues to evolve.

The addition of 2.3 billion Chinese and Indians to the global labor force-  Labour force in India is about 500m. Nuriel must be thinking that from cradle one goes to work in India!!!!!!!!!!!

I would be interested in understanding how Marx "oversold socialism".  To my knowlege, as working model apllying Marxian ideas has never been implemented.  True, Engles promoted "collective bargaining" for proletariats, but not even Lennin followed a Marxian model.  "Worker owned" companies are few and far between.  However, there are contemporary examples that seem to confirm that such entities can be successfully implemented.

Selfishness is the root cause of inequality.  Human, like all animals, is inherently selfish.  Selfishness was implanted by nature to ensure survivability.  And, as a lesson from nature, mortality is an effective counter-solution to moderate side-effects of selfishness. 

Karl Max’s socialism model in practice only begged the question.  The have-nots exploited Max’s rhetoric to gang up a class to rob from the haves and then, by selfishness, hold on to monopolistic political power to practice a form of private-ownership over the country’s productive assets only at a meta level.

Today’s thought-leaders need to be careful.  During eras of ideology crisis like the preset, it is dangerous to promote untested ideology.  To gain selfish fame and fortune, any country always has tons of unqualified, uneducated, and unemployed leaders-want-to-be who would spare no second thought on opportunity to volunteer their homeland and their fellow citizens’ lives to offer battlefield to any leviathan’s ideology.

As we all know, communism was very costly worldwide.  Over 50,000 US soldiers and over half million of Vietnamese died to fight communism at a time when, in substance, the US was a great deal closer to socialism than was Vietnam: The poor in the US in the late 60’s and early 70’s received government welfare substantial enough to eat to obesity, own a car, and receive totally free medical care; whereas in Vietnam, even to date after decades of communism development, transfer payments to the poor are nowhere on the government’s agenda.

To solve inequality at its root, we need to make mortal the superior power of financial capital.  In recent decades, the invert-bathtub curve of wealth inequality, that a country traverses as it develops technology base, implies that technological skills of middleclass workers gradually replace financial capital as the more valuable factor required for competitiveness.

But now as seen by the ongoing civil unrests, the invert-bathtub hump resurfaces again in developed countries which should have gone pass it.  This implies that demand for technological skills at cost levels significant enough to share wealth has become too elastic, perhaps, because of off-shoring as a side-effect of labor-market globalization without living-standard equalization.  

Now the economic modeling question is “how to impove superiority of the value of middleclass’ productive skills over that of financial capital to restore the market’s spontaneous forces towards equality?”   One imperfect answer is to restore labor-protectionism.

Hi bluebear,

"Human, like all animals, is inherently selfish.  Selfishness was implanted by nature to ensure survivability." This is only partially correct. Human also has altruism side (cooperation, sense of community, empathy).

"Darwin's explanation of how preferential survival of the slightest benefits can lead to advanced forms is the most important explanatory principle in biology, and extremely powerful in many other fields. Such success has reinforced notions that life is in all respects a war of each against all, where every individual has to look out for himself, that your gain is my loss.

In such a struggle for existence altruism (voluntarily yielding a benefit to a non-relative) and even cooperation (working with another for a mutual benefit) seem so antithetical to self-interest as to be the very kind of behavior that should be selected against. Yet cooperation and seemingly even altruism have evolved and persist, and naturalists have been hard pressed to explain why."

See http://en.wikipedia.org/wiki/Evolution_of_cooperation#Modern_developments and http://en.wikipedia.org/wiki/Altruism#Evolutionary_explanations.

Share vision, get committed, improve ourselves.
Tony
http://think4sustain.wordpress.com

This article provides a good summary of the obvious, but it is not in any way prescriptive.

Clearly, un-restrained predatory capitalism does not work to the benefit of the world at large. 

A prescription:  The primary needs of food, shelter, health care, and education must become fundamental, inalienable rights of all people everywhere.  Capitalism can continue to exist, but as a neighbor, not a ladnlord.

small correction: the most generous welfare states in northern europe also have the soundest public finances and stongest economic growth. Conclusion: (1) it really is about inequality and not about some fatalistic historical trend. (2) The model you seek already exists.

Stop trying to find all kinds of "middle" economic solutions. Before it was the welfare state which was proposed as a "the third way" between socialism and capitalism. Now you're searching for smth. between the welfare state and the laissez-faire.

it has to do with the human mentalities, with the way people understand to live into a society, with the formal and informal institutions which are created as a consequence. if the human being would be well educated (not a superior education to compete on the world market, but primarily education to correctly understand how one should act in various situations - social, economic & political) any sistem would be good.

if such education would be provided, one would accept that being driven only by the profit is not the right way to live in a society (social education). By the same token, those who took morgages would have understood the risks such actions involve (economic education).

You  are using the term  "concentration of power among economic, financial, and political elites ",

however  in lots of cases  the power  is not in the hand of an elite but in the hand of criminals (e.g. Hitler .... )  which like to see themselves as an "elite"   ,  much better than those which they can dominate (or even kill )

what better  description  could there be  instead of "elite"  ? ruling class ?  
You and Your colleges writing newspaper comments might  find  more fitting expressions

Gamesmith94134: the Instability of Inequality

“Any economic model that does not properly address inequality will eventually face a crisis of legitimacy.” Each economic model failed respectively on the macroeconomical system since the scale of supply and demand  have been altered by the regulations or manipulation after the globalization. Macroeconomic and microeconomic had took a cakewalk whenever the competition appears, because each applications have a contradiction as shifts in the scale from the market and state; as just as you descripted in, “The increase in private- and public-sector leverage and the related asset and credit bubbles are partly the result of inequality.

Perhaps, you my mixed with the atmospherical force on an explosion and implosion of a balloon that microeconomical strategies became irrelevence that supply and demand is not react to each other like America. When it met its macroecomonics in the price strucrtures, The emerging market nations created another price structure that made the baloon collapsed under the pressure of competition and its market shrinks by its agregated demand even after the quantitive easing I & II.  First, Mediocre income growth for everyone but the rich in the last few decades opened a gap between incomes and spending aspirations. It concurs with a lack of economic dynamism that led to sclerotic growth then and the eurozone’s sovereign-debt crisis now. Secondly, price structure collapsed,and deflationary to adjust became the catalyst to its implosion since America or the  Anglo-Saxon countries, the response was to democratize credit that were not fully financed by taxes, fueling public deficits and debt. In both cases, debt levels eventually became unsustainable.

In the part of China or India, low currency exchange rate and low labor cost may not made the best of the product available in its contest of quality; but the aggregated demand from China, India and US combined make the conbustion on price that inflation is changing the status of the currency exchange rate and labor cost to rise. In addition, the high rise of price create hardship for those are below the rising living standard since they live on salary; and which polarized the rich and the poor more. With the pressure of the macroecomonic on surplus and workforce, it must face the inequality of the middle class is driving the inflation to eyelevel of its governments that price control and more regulation is put in the situation to halt its price system to synchonize with the developed nations. Its price structrure exploded of its price limits after the demoncratize credits is put into contest with its economical developments. Besides, the aggregated demand rose significantly above the level of supply that is living standard elevates that created the short fall for the poor.

In turn of atmospheric pressures in the free market system, we complete with state and private development. When the soverirgnty confronts each other, it is how the O2 turn O3 and became the sunscreen even the sun ray is not coming through----it is just a mere reflection and it is how stable we are now that rule and regulations are kites floating in the sky and it became instability even for economists who cannot take their breath in O3. Or, how much rubber is in the balloon is required to the skin of the balloon when it blast or collapse? As the power of the middle class if you attempt to restore, you must know which side of the rubber you are taking; ”Burgernomics” is the closest crisis I know of its legitimacy. More O3?

May the Buddha bless you?

Great Article and insight as usual from Roubini.  A few things I would like to point out. 

The fact that income inequality was so low during the 40's-70's of this century can aptly be contributed to the fact that we were the only developed nation not destroyed by both World Wars.  The Europeans have had slower growth than the US and a larger Social Welfare system.  You can see the European model destroying itself.  The Europeans always claim that the US is not very progressive in taxation etc. 

You point out that Karl Marx's thesis was that capitalism would lead to bubbles and crisis.  It is wrong however to think that any system of capital organization will not go through low points.  See Hayek's Pretense of Knowledge.  Central controlled governments cannot detect demand better than price driven markets.  

You assume that with some tinkering here and there we can not go through deep troughs.  

Another point I would point out is inequality.  By definition is immeasurable.  You can point to the gini coefficient but that is arbitrary.  What is unequal?  That is a moral discussion.  

Income inequality does exist in a binary state.  That is, some are more well off than others.  I would say that income inequality is a false problem.  
Two false assumptions are made and this is why I call it a false problem.
1.  Income inequality assumes that wealth is created by taking from someone else and the solution is to take from one to give to another.  That is wrong in so many ways.
2.  I will assume for this point that income inequality has grown over the past 30 years.  The middle class is relatively worse off yet the standards of living are better off? How are living standard increases (greater I might add than the rest of the world) a bad thing? 

Of course every system is going to have inequality and disenfranchised people.  I think the problem is us trying to lie to the masses and say we know everything and if you elect a certain politician it will all be better.  

Capitalism with all of its faults is the best system.  It should remain a goal in our country.  Profit should not conjure a negative image in peoples minds.  CEO"s shouldn't all be seen as evil and corporations shouldn't be seen as evil.  Of course lobbying should also stop but that’s a topic for another day.

Great article again Noureil.  Sorry to hear your selling your business.  

Hi Tony,

Please accept my apology that my mentioning of human selfishness could be construed (out of the context of its cause of inequality) to offend you. What I meant was that Marx’s theory was naive.  It suffered from a long list of moron’s problems, some follow:

1.       Begging the question: Replacing selfish capitalists who overly own the assets by altruistic socialists ended up having the socialists disguising their selfishness by holding on to political power to control the assets. 

Any other economic model that counts on volunteered altruism to replace the bad guys by the good ones to run government would also be as stupid as Marx’s. 

A workable socioeconomic model must think through to organize the factors and structure the distributions so that by having everyone pursuing his/her own selfish interests the model is sustainable and whole society becomes better.

2.       Killing competition:  Focusing on equal distribution does not provide incentives for gifted and well conditioned people to take risk, work harder, and innovate. The longer a country stays in communism, the less competitive become its domestic capabilities relative to other countries’.

3.      Government revenue from state enterprises’ profits exposed to extremely high risk and volatility: To reduce risk, state needs not fund and operate businesses. It should use its authority to be a gain-only risk-free partner who contributes no funding but shares top-seniority’s profits in the form of taxes. 

Further, revenue volatility can be significantly reduced, as compared to operating state enterprises, by taking government shares from both profitable and unprofitable private businesses through workers’ employment and income taxes.  As you may already know, in the US employment taxes made up almost 50% and personal income taxes contributed about 30% of the $2.9B total annual Federal revenue.

4.       Government public assets are poorly leveraged:  Instead of funding all state enterprises in hope of earning profits, a government should enjoy being a gain-only partner who needs only invest much less money in no-risk administrative functions of regulating, arbitrating, and revenue collecting.

Gamesmith94134: Business schools and globalisation

MasahikoF,

What Mr Ghemawat’s question was, “if there is some impulse to get them to pay attention to local realities? Wouldn’t you want some differentiation on that basis?”

This situation will continue until there is real competition from emerging-market schools, which can teach globalization from their own viewpoints. So, the present school of economics teaches macro and micro economics based on the data and theorems of the western culture which the basis of marketing is not integrated to the standard of Globalization. So, the advanced students must understand the burgernomics statistics; that what your burger values different to mine; in competitive labor markets, currencies, commodities that regions of local and foreign make its own stands to both micro and macro economics.

It is not how the students of foreigner to integrate in a school that called international or globalization. It is not just international laws on trade or treaties either; perhaps, the present approach toward globalization is to understand many competitive markets with different angles.

“Why there isn’t a real economist talk of my 30K custodian is worth more of two RMB110000 MBAs financial planners I can hire in Shanghai; and I must pay my custodian’s health care $6000 more just to keep him working in US? It is my Fear Factor in operating in United States.”

From the recent loss of the oil contracts to Nigeria, Angola, Iraq and more, our American flied back in secret private airplane; and locals welcome Chinese, who sent them their medical and technical team with olive branches. What is about trade? Or how did American attempt to purchase their politicians to cut their deals? What advantage of trade and purchase in a specific culture?

Everyone study Globalization must acknowledge the clientele of the Starbuck in Shanghai is different to ones in California. A cup of coffee, worth $4 in California with the equal value of a RMB35 in Shanghai have made the divisions of businessmen with Jeans and suits, and ones with computers and the other with financial newspapers. What do they order after Coffee?

How do Japanese, German or Brazilian drink theirs? To-day, our macroeconomic became their microeconomic, since emerging market produced 60% more of American or Developed nations. It is a great opening to all knowledge and not all students of kinds; languages of economic do not make the category of Globalization. It is the culture, competition, market, currencies, resources and more to combine. Integrate is a half baked.

May the Buddha Bless you?

Thank you Professor Roubini for covering so much ground so fast, so readably, in this amazing article. I hope some day you will find time to turn it into a book.

I can't help thinking that America is worse off for escaping the destruction and rebuilding that Europe went through in multiple wars. They learned that cooperation works better than aggression - as did Emperor Ashok of India circa 300 BC. But America hasn't yet learned the necessity of moderating fear and greed and of limiting aggression. Indeed, to do so would be learning from Marx, as you imply - impossible in America.

As you say, iinequality causes instability. One might add that high GDP results from high incomes across a large section of the workforce. Extremely high incomes in a minuscule number of hands is typical of banana republics. Thus high income inequality makes the nation as a whole poorer, not richer, even before instability is reached.

Unfortunately, recognizing that income polarization is (a) inevitable, as Marx observed, and (b) destabilizing, as you astutely conclude, is not enough to guide policy-makers. You also need a government that isn't beholden to the rich. The solution involves mass political action and consciousness-raising. Occupy Wall Street is a sputtering start.

@bluebear 08:30 17 Oct 11

With all due respect, you can't blame Marx for socialism. He was a philosopher who correctly deduced that human nature (aka fear vs. greed) would turn Adam Smith's invisible hand into a cycle of boom and bust (as anyone who has bought a house in the US knows), which would destroy wealth - unless the extremes were moderated. That is a key function of the state - even though the tea partiers in US disagree.

@dannyrussell53 03:54 17 Oct 11

I am not an expert in political economy (which may be good!) but it seems to me that income distribution and aggregate wealth are different issues. The latter grows when you bring into play new ideas/ products/ markets/ sources, or otherwise create value. The former is a function of the kind of society one wants: gated oceanside enclaves in the midst of hungry masses and warring drug gangs, or open suburbs with adequate education and public services to sustain that model? It is the latter model, not that of Saddam Hussein & Sons, that makes the nation as a whole proseprous.

It follows that income distribution is not a matter of economics. It is a matter of core social values and political institutions. The advent of TV advertising in elections has exploded campaign budgets and thereby cemented the link between a handful of business interests and government. That is as far from Jefferson's vision as the evangelicals are from Christ's vision. Both these aberrations are robbing America of its idealism and egalitarianism, which in the end will make us a bana republic.

Thank you for explaining this so well, Dr. Roubini.  We're finally getting away from Wall St. and government policy narratives to the underlying fundamentals about why we're in this mess.  And not a minute too soon.

Society is not a business model.  Generalizations about the economy are therefore of limited usefulness. There is no unified field theory of human affairs.

Society is not a business model.  Generalizations about the economy are therefore of limited usefulness. There is no unified field theory of human affairs.

Society is not a business model.  Generalizations about the economy are therefore of limited usefulness. There is no unified field theory of human affairs.

It maybe time to look to emerging currents and movements that can bring about new models, such as the Post Autistic Economics Movement. Economics should be a discipline (or science) that talks to all others, specially psychology and sociology, IMHO

Warm regards,

I totally agree with your evaluation Mr. Roubini and would like to add.  To solve this problem, looking at the future scenarios is necessary: 

    Delay until it manifests clearly
    Failure to help
    Help 

Looking at human development, we see that it is leading us to full integration.  This development towards unity is contrary to our personal state and national egoism, but we must come to understand and accept this natural evolution as a fact, as it obligates us to make decisions according to it. 

Europe united somewhat as it feared a coming war, rather than desiring integration.  But now the EU and the whole world should ponder our necessity for integration according to the evolution of human society.  We cannot ignore the fact that integration is our next form.

We must rebuild our relationships at all levels, otherwise the whole humanity will collapse. Maybe Europe should set the example for us?

Gamesmith94134: Striking Euro Gold (and Silver)

 “Milton Friedman’s bimetallic standard inherently more stable than a monometallic (gold-based) regime.”

When you recieve two bids of Euros, in from Germany and the other from Greece; you would take the bid from Germany over Greece. Would you discount the euros of Greece with 15% just for sake of the confidence vote? Why should you discriminate one over the other as in Euros? It was the deficiency of credit that Greece may bear or the contagion as you may believe. If it is the investment consisted of US dollar and Euro in the open market trading, you would have no choice on the bids. Reluctently, you may have to accept the higher bid, even though you realized that you are under the attack by a raider or hedge fund manager. Suddenly, you may lost your company with the lesser of 51% of the control of it. It is how hedge fund managers or raiders use monetarism to undermine the weaker ones with weak currencies even for sovereignty nations; since the open market system does not provide a gatekeeper to stop the manipulation. Since the investments from aboard may not create growth or productivity if there is not sufficient time to grow in completion of the business cycle or create productivity on the invested with no innovation or products. It is merely exchange of hands for such transaction. It is  how the sovereignty debts are created under the influence of the activity of hedging with the cost of living rises; and loss of credit as the pooling of its fund weakens. Therefore, it is advisable to revive the bimetallic standard to create the gatekeeper on the handicaps of the domestic currencies and international currencies; whenever investments are made by the foreign communities or sovereignty debts.

If the bussiness transaction happens in a community only like London, people buy, people sell within a single circuitry of currency that share the same standard of credits, commodities and culture; such transaction do not affect the value of the its currency or increase on productivity. If a foreign investment is involved; the  circuitry expands or contracts for its excesses or shortages in the pooling of its currencies, or commodities. Subsequently, it would create a shortfall or surge in value of the exchange that is not a bottomline to the business cycle or productivity.

When there is a 3% interest credit charge on the market, I would gain 2% with my 1% interest credit charge even I have my US dollars exchanged to British Pounds, since there is no handicaps on the exchange. It is why many complain on the fiat money and the liquidity traps when the foreign investments are often being manipulated the currency rate changes for a stronger currency to weaken its own that caused inflation of the weaker currency; or withdrew at great mass that cause the shortage of cashflow or credit.

In term of redistribution of wealth, the middle class of earnings did not match the growth after inflation; because the investment was dislocated while business cycle was not completed; or the productivity was not sufficient for a pay raise in matching the profit growth. Perhaps, we can blame on the competitions, but there is no comparison if there is no foreign investment or import of goods; and if it were a enclosed environment that no export is made. But, if we are taking advanage of the foreign investment or imported goods or resources to create productivities, sovereignty nations must restore the soveignty currencies to safeguard its citizenry from the invasion of currencies or resources that creates hardship for its people and allot resources for the exchange of goods and services from the foreigners. Then, the citizen must not pay for what the banker did; and stop telling me to pay tax my million dollar house that I did not earn. Parhaps, the line is drawn that the politicians must realize they must pay their bills too; instead of raisng our tax fo thier mishaps.

As we learn from the recent soveriegnty debt crisis an financial disaster, we are clear at principle of the fiscal and monetary system must sustain both of balance and growth. Free Trade must free of mainpulation of the resources or invasion of others by using currencies or political powers; and each sovereignty nations are entitled to feed its people with domestic currency and trade it goods with the common currency availbale to obtain a better bargain for imported or exported. In addition, I prefer Zones in continents in protection of the weaker sovereignty nations with its neighbors nations to fend off the unwelcomed transaction that would be considered as hostile; because some investments are not solely privatized as it claimed; and free trade must be invited and not broken in or out at free will. If we all play the same rule, the world would be better for the citizens and governments too.

May the Buddha bless you?

I agree with the premisethat inequality leads to instability, but in my opinion the hard part is what comes AFTER the global money-mess is unravelled, which may not be all that difficult if a sharp judicious sword is taken to that vast Gordian tangle, a balanced cancelling-out of all those inter-dependent, layered trillions and trillions!

In agreement with Zsolt above, the emphasis should then be on the social good, cooperation and global citizenship. Let us not use the words re-distribution, retribution or other such terms. The negative emotions unleashed too often lead to violence, which on a large scale too often spells war. And we have definitely had enough of wars.

This is a stunningly bad article. Just look around you. Do people look equal? Some are smarter, or they have more drive. There are all kinds of real world reasons why the world is not equal.

Inequality does not cause instability. It is stability that causes instability.

Why?

Society moves into the future just like a forest moves into the future - both are heavily reliant on history. These types of systems exhibit self-organized criticality. That means they automatically go from a stable state to a pre-collapse state and finally a collapse state.

What happens to a forest when fire fighters put out every fire? Putting out a fire means they are keeping the forest stable. By trying to maintain stability, the fire fighters set up the forest for a major crash that wipes out everything.

Societies put out their fires by suppressing recessions and economic problems in the name of stability. They wish to keep society stable when it wants to crash. Usually the crashes are small, but after suppressing the small crashes since World War II the west in now ready for an unstoppable massive crash. It's time for payback.

If you want to prevent a depression, then you have to embrace the small crashes. At this point it is too late.

Thank you for this excellent summary review of the historical background to our current economic situation in this country and elsewhere in the world.  The statistical data and the public perception of how things are today certainly confirms your assessment.  I will read your other postings hopefully to see some approaches to solution of this dilemna.  My personal feeling is that a significant increase in worker hourly wages is one thing that would make a strong positive change.  Unfortunately the only way that might be instituted would be by a re-emergence of a strong union work environment.  That will be very difficult if impossible to accomplish.

Great article on Instability of Inequality by Nouriel Roubini, an indepth analysis.

Dr.A.jagadeesh  Nellore(AP),India

To my knowledge there is no asian or chinese macroeconomic growth modell. But if they apply their so called Chinese sciences well described by Professor Needham it would probably will look like this: http://tinyurl.com/bqe39dk. Difficult to put the details of such a system in my comment here, thus the link. Thank you.

MattW has it right.  But Roubini's message is simpler than it appears. What people today on the Arab Street and elsewhere—perhaps, soon, even North Korea—are protesting is perceived unfairness.  That type of instability is to be expected and is even, if it manages to produce the positive change intended, a good thing.

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moulin a farine