Nouriel Roubini says the world is headed for a debt crisis. This kind of makes sense. Countries that have to repay their debts in U.S. dollars are in trouble as more of their currencies are required to buy a U.S. dollar. And everybody including the U.S. will be paying more in interest on their debts and this will cut into our budgets for other things.

Income and wealth inequality have been rising within countries for many reasons. Notable factors include trade and globalization, technological innovation (which is capital-intensive, skill-biased, and labor-saving), the self-reinforcing political power of economic and financial elites, the concentration of oligopolistic power in the corporate sector, and the declining power of labor and unions. Together, these factors have triggered a backlash against liberal democracy.

Project Syndicate

I’m with his logic up to that last sentence. Logically, the solution to these problems would seem to be more democracy rather than less. But we seem to be caught in a situation where the rich and powerful are able to influence the masses through propaganda to oppose policies that would help to address these very problems. Solutions would include (1) limits on the ability of wealthy people, institutions and corporations to pay for political campaigns that elect politicians who are then beholden to their interests, (2) value added taxes designed to raise revenue from the fruits of labor-saving technological innovation, which can then be spent on services to benefit the displaced laborers, and (3) anti-monopoly action, and (4) pro-union policies. I’m always a bit shaky on #4, because unions can serve as a break on innovation and efficiency, and they often benefit some workers at the expense of others, and they have a history of corruption. But they are undeniably a political counterweight to corporate power.