Inequality, stagnation, financialization, and the Global South

The secular decline in the share of wages in national income, the increased concentration of wealth, and growing financialization are among the central causes of slowdown in accumulation and growth in major advanced economies. Attempts to overcome stagnation by creating credit and asset bubbles through ultraeasy money and financial deregulation have not only added to inequality and financialization and aggravated the demand gap, but also entailed significant repercussions for emerging economies. They have generated exceptionally favorable global financial conditions for them and an unprecedented surge in capital inflows in a search-for-yield in high-risk, high-return assets, accelerating their integration into international finance and deepening their linkages with mature markets. These have increased their vulnerability to external financial shocks and led to significant resource transfers to advanced economies through financial channels.