A new survey of economists by the Initiative on Global Markets indicates that 67 percent agree or strongly agree that the rise in income and wealth inequality represents a major threat to capitalism.
The primary cause of inequality’s threat to capitalism, according to economists surveyed by IGM, is the erosion of faith in the capitalist system that inequality produces.
“It’s a threat to people’s belief in capitalism as an institution of economic governance,” said David Autor, an economics professor at MIT. “Absent shared belief, we are in trouble.”
Other economists tended to agree, such as Barry Eichengreen of UC Berkeley: “Certainly the perception that economic outcomes are unjust is a challenge to the legitimacy of the economic system.”
One economist brought up concerns that extend beyond the popularity of capitalism as a system. Darrell Duffie of Stanford pointed to a paper that found inequality lowers demand and economic output.
“Inequality can lead to social instability, low demand, and other threats to successful capitalism,” Duffie said.
However, not all economists were convinced. Among those that were uncertain, there was mention of another system that inequality is likely threatening: democracy.
“It’s certainly a major threat to democracy,” said Maurice Obstfeld of Berkeley.
Robert Shimmer from University of Chicago disagreed with the statement, yet conceded: “The perception that the rich don’t play by the same rules is a major threat, but not their wealth per se.”