New book says equitable income distribution is better than bailouts

A new book being launched at Congress 09 says billion-dollar bailouts aren’t the answer to the current economic crisis.

Instead, say the authors, better regulation of finance and banking, more international cooperation and a more equitable distribution of wealth are what’s needed to pull the global economy out of its troubles – and set it in the right direction.

Bankruptcies and Bailouts: The Current Economic Turmoil and the Crisis of Capitalism is a series of essays by a number of authors. It is published by Fernwood Publishing and edited by Wayne Antony and Julie Guard.

One of the authors is David McNally, a professor of political science at York University.

“Pretty much all the authors agree that a system in which the gains go to the private sector and the losses go the public is unsound both economically and morally,” said Dr. McNally.

He argues that the growth of social inequality over the last quarter-century helped create the financial crisis that has knocked the wind out of the global economy in recent months. Much of the wealth created in the last 25 years, he says, has ended up in the pockets of the richest 10 per cent of the population. Unlike the less well-off, who tend to spend any extra income they get on necessities, the wealthy look for ways of investing their money.

Dr. McNally says many of the questionable investment products in the U.S., such as mortgage-backed securities, were created to provide investment opportunities for wealthy people with extra cash.

“That’s why they went crazy in the U.S. selling mortgages to people who didn’t have the capacity to pay them,” he says. “The purpose was not to create housing for poorer people. It was to package up these mortgages and sell them as investments.”

Dr. McNally says the growth in the financial sector created a bubble that was bound to burst.

“Part of what we’re saying in the book is: You have to reverse the economic policies that only feed wealth to the top. You have to have a more equitable distribution of wealth in society.”

And that, he says, can be done by a properly regulated banking system and international cooperation agreements that limit or regulate – perhaps through a tax – money transfers from one country to another.