Inequality, financialization, and political disintegration

Russo, Alberto (2025): Inequality, financialization, and political disintegration.

Abstract

Drawing on Peter Turchin’s structural-demographic theory, this paper provides a preliminary examination of how rising inequality and financial liberalization contribute to political instability through the interplay of mass immiseration and elite overproduction. We capture these dynamics through a simplified agent-based macroeconomic model, introducing two structural shocks - growing inequality and financial liberalization - that reflect the transformations reshaping advanced economies in recent decades, a process intertwined with political disintegration. A wealth tax on the richest households can reduce political fragmentation and improve economic performance, but lasting resilience will require embedding such measures within a broader rethinking of the policy paradigm that has prevailed since the 1980s.

• Item Type: MPRA Paper
• Language: English
• Keywords: growing inequality; financial liberalization; political instability; agent-based model
• Subjects: C - Mathematical and Quantitative Methods > C6 - Mathematical Methods ; Programming Models ; Mathematical and Simulation Modeling > C63 - Computational Techniques ; Simulation Modeling; D - Microeconomics > D3 - Distribution > D31 - Personal Income, Wealth, and Their Distributions; E - Macroeconomics and Monetary Economics > E0 - General > E02 - Institutions and the Macroeconomy

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