The Political Economy of the Redistribution of Risk
One of the themes of my book Manufacturing Discontent was the redistribution of risk in the neoliberal era. There are two dimensions to this redistribution of risk. The first, which was most obvious, was shifting risk downward for those who are least able to defend themselves. In this downward shift, both government and business walked away from their respective roles in helping to shield people from risk.
In addition, the financial system was supposed to be able to engineer the elimination of risk for those who would be willing to pay a price. The subprime mortgage system was a perfect example. Lenders could take advantage of the opportunity to profit from what would otherwise be very risky loans by sharing some of their profits with those who were willing to shoulder the risk.
Of course, we know that many of those who assume the risk had no idea about what they were doing because, in part, the ratings agencies, which were supposed to inform the public about risk chose to increase their profits by producing disinformation.
I wonder what the economy would’ve looked like since the second half of 1990s if the public had a better idea of risk. Presumably, the dot.com bubble and the housing bubble would never have happened. But, even more interesting to me, is the question of what would be what would have sustained the economy.
Other questions present themselves. What would the distribution of income look like today? Would the government search even bigger wars to distract the public and build up demand?