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Stephen Gandel

How to Stop Rising Inequality in the Next Recession

Policies that help Main Street more than Wall Street would be a start.

Just remember the next time.

Just remember the next time.

Photographer: Joe Sohm/Visions of America/Universal Images Group Editorial

Almost 10 years after the Great Recession ended, the growing threat of a new economic slowdown raises a troubling question: When the next recession strikes, what can the world’s central banks do? With interest rates low and their balance sheets still loaded with assets bought to fight the 2008 crisis, do they have the tools to respond? This column is one of five looking at that question.

The Great Recession was supposed to be a great reset, an end to an economic boom that had made the rich richer and left almost everyone else behind. The conventional wisdom at the time was that Wall Street bankers and those in the upper-income brackets would be hurt the most -- more or less a repeat of the Great Depression, which wiped out much of the vast inequality of the 1920s.

But that’s not what happened -- if anything, the exact opposite occurred. Insurance firm Allianz in a study last year found that from 2010-2017 the wealth gap in the U.S. between rich and poor had grown the fourth fastest out of the more than 50 countries they had looked at, behind only Bulgaria, Slovenia and New Zealand. As if more evidence were needed, the U.S. Gini co-efficient, a popular though flawed gauge of inequality, now stands at 0.48, up from 0.46 before the financial crisis. (A reading of 0 means total equality, while 1 indicates one person holds all the wealth.)