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The Neoliberal Model

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Since the late 1970s, a deep transformation of the propagation process is detectable, as contagion starts to proceed mainly through the financial side of the economy. This structural change occurred in consequence of the profound transformations of the financial system often summarised with the label of “Second Financialisation”. The neoliberal policies systematically pursued since the late 1970s aimed to liberalise the sector of finance that policy makers had strictly regulated and controlled in the Bretton Woods period. The liberalisation of cross-country capital flows in the 1980s was a crucial driver of the process of globalisation. This process produced a growing global interconnection among decision makers in economics and finance, and …show more content…

Its alleged successes in the early 1980s, in particular the rapid disinflation and the flattening of the Phillips curve, were obtained through a harsh redistribution of income and power from workers to entrepreneurs, and from the poor to the rich. The neoliberal policy makers sought greater flexibility in labour markets and industrial relations by increasing the precariousness of jobs and by reducing the rights of workers. What neoliberal advocates considered a success for the economy as a whole, and was certainly a success for most entrepreneurs and shareholders, was instead an epoch-making defeat for blue and white collars that started the decline of the middle and lower classes. Moreover, this alleged success from the point of view of macroeconomic performance materialised only at the cost of serious side effects that in the longer period would have provoked the outbreak of the recent crisis. First, the transfer of power from labour to capital soon translated in an analogous transfer of income and wealth within most OECD countries and many developing countries adopting similar policies. The indexes of inequality in the distribution of income started to increase since the late 1970s and continued the upward trend until now. In addition, the increasing inequality often reflected growing poverty also in the richest countries (including the US and many European countries). The neoliberal policies systematically violated the basic conditions of social sustainability during all the period. This failure had a significant impact also on economic sustainability as measured by the growth of GDP. The stagnation of the aggregate income of middle and lower classes consequent to the increase in inequality and poverty brought about a persisting stagnation of aggregate consumption. Since also the aggregate investment in the

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