Why Inequality Starts Becoming A Problem Now | Economics Explained

The issue is not just who holds the money, but the control it buys them over other people. The distribution of things is not as important. Social Democracy can fix that piece. Without social democracy, however, capitalism is as fragile as the business cycle - or rather -the fiscal policy driven cycle of speculation and bailout.  

Government spending is the yeast of any society. In social democracy, people getting benefits for education and retirement, as well as household spending by government employees and contractors spread the money out in fairly equal chunks. No business assets are ever acquired without the prospect of household or government consumption (or exports). 

Financing, however, is not the same as investment. When taxes are cut, there is a financial boom, but it may not be in any way linked to actual investment in plant and equipment. Indeed, it probably is not. Financial booms take money out of consumption and put it into speculation. Making a deal becomes more important than making a product. Until this is absolutely clear in our economic discussion, we will continue to make the same mistakes decade after decade.