Neoliberal Policies, Income Distribution Inequality and the Financial Crisis

In the last 20 years, the within countries income and wealth inequality has continuously increased. This trend largely depends on the diffusion of neoliberal policies which, along with financial globalization, is among the causes of the recent international financial crisis. Neoliberal financial globalization (Washington Consensus) went along with reforms of labour and financial markets which caused income and wealth concentration to rise. All this contributed to the growth of debt bubbles in several countries and, after 1990, gave rise to a series of local financial crises that eventually ended in the global crisis of 2008. The austerity-based response of the EU governments to the crisis is another example of policies prescription based on neoliberal theories that cannot work. The example of Latin America countries, which in the 2000s abandoned the Washington Consensus view and have been able to reduce inequalities, shows us that alternatives to neoliberal policies are feasible.