News

According to the author, the neoliberal economic model has led to the crisis by compressing wages and by driving an increasing proportion of the population into poverty. In the United States, the average wage has increased 2.5 percent each year between 2000 et 2007 while the wage of the median worker only increased 0.1 percent and the real wage of the median household has fallen during this same period as a result of downward pressure on wages coming from free trade.



To keep its standard of living, the American middle class got indebted, in particular through mortgage loans. These have increasingly replaced consumer credit. Increasing home prices enabled mortgage borrowers to take Home Equity Lines of Credit (a home loan that allows a borrower to open up a line of credit using their home as collateral) to finance their consumption. This explains the very rapid rise in household debt (today valued at 93 percent of US GDP): credit access was opened to more people at the same time as household creditworthiness deteriorated as a result of the downward pressure on wages. This has led to a strong increase in household debt levels, which was aggravated by the rising number of adjustable rate mortgages (ARM).



The author argues that the current financial crisis is above all the result of the important amount of bad debt in the system. As such, the origin of the crisis is better explained by financial, social and industrial deregulations that have characterised neoliberal capitalism rather than solely by finance.





The full text can be read (in French) at the following address:

http://www.m-pep.org/spip.php?article969