{"id":953,"date":"2025-10-02T04:00:34","date_gmt":"2025-10-02T04:00:34","guid":{"rendered":"https:\/\/www.thebrokeronline.eu\/the-gist-of-the-matter-is-in-the-interconnections\/"},"modified":"2025-10-02T04:00:34","modified_gmt":"2025-10-02T04:00:34","slug":"the-gist-of-the-matter-is-in-the-interconnections","status":"publish","type":"page","link":"https:\/\/www.thebrokeronline.eu\/blogs\/bellagio-initiative\/the-gist-of-the-matter-is-in-the-interconnections\/","title":{"rendered":"The Gist Of The Matter Is In The Interconnections"},"content":{"rendered":"<section class=\"content column wide left blog_post content view\" id=\"content\">\n<div class=\"edit image\">\n\t\t<img decoding=\"async\" src=\"https:\/\/www.thebrokeronline.eu\/files\/var\/broker\/storage\/images\/blogs\/bellagio-initiative\/the-gist-of-the-matter-is-in-the-interconnections\/167979-2-eng-gb\/the-gist-of-the-matter-is-in-the-interconnections_full_view.jpg\" alt=\"Image by Epsos.de\">\n\t<\/div>\n<article class=\"fader\">\n<header class=\"contents\">\n<div class=\"share\">\n\t\t\t<script type=\"text\/javascript\">\n    var addthis_config = {\n        ui_language = 'en'\n    }\n<\/script><\/p>\n<div class=\"addthis sharing\">\n\t<!-- AddThis Button BEGIN --><\/p>\n<div class=\"addthis_toolbox addthis_default_style addthis_32x32_style\" addthis:title=\"The gist of the matter is in the interconnections\">\n\t<a class=\"addthis_button_twitter\" tw:via=\"thebrokeronline\"><\/a><br \/>\n\t<a class=\"addthis_button_facebook\"><\/a><br \/>\n\t<a class=\"addthis_button_pinterest_share\"><\/a><br \/>\n\t<a class=\"addthis_button_preferred_4\"><\/a><br \/>\n\t<a class=\"addthis_button_compact\"><\/a><br \/>\n\t<a class=\"addthis_counter addthis_bubble_style\"><\/a>\n\t<\/div>\n<p>\t<script type=\"text\/javascript\">var addthis_config = data_track_addressbar;<\/script><br \/>\n\t<script type=\"text\/javascript\" src=\"https:\/\/www.thebrokeronline.eu\/files\/js\/300\/addthis_widget.js\"><\/script><br \/>\n\t<!-- AddThis Button END -->\n<\/div>\n<div class=\"addthis article_options\">\n\t\t<!-- \n\t\t\t\t\t\t\t\t\t<a href=\"https:\/\/www.thebrokeronline.eu\/mandrill\/subscription\/add\/18274\/18499\">Subscribe<\/a>\n\t\t\t\t -->\n    \t\t\t\t<\/div>\n<\/p><\/div>\n<h1>\n\t\t\t\t\t\t\tThe gist of the matter is in the interconnections<br \/>\n\t\t\t\t\t<\/h1>\n<div class=\"clear\"><\/div>\n<div class=\"pubDate\">\n\t\t<a href=\"https:\/\/www.thebrokeronline.eu\">Nicky Pouw<\/a>\t\t|<br \/>\n\t\t\t\t\t\t\t15 September 2025\n\t\t\t\t\t\t<\/div>\n<\/header>\n<div class=\"body contents\">\n\t<!-- body --><\/p>\n<p class=\"yunu3cvqabft7vifv\"><b><\/p>\n<p class=\"yunu3cvqabft7vifv\">How much inequality are we prepared to accept, asks Nicky Pouw. If we can&#8217;t live together, we are going to die alone.<\/p>\n<p>\t\t<\/b><\/p>\n<p class=\"yunu3cvqabft7vifv\">\n<p class=\"yunu3cvqabft7vifv\">If there is one primary reason why economists failed to predict the current financial crisis it is because of a gross underestimation of the destructive forces of what I call \u2018propelling risks\u2019. Financial risks that were taken at the lower end of the income distribution built up, led to welfare losses, and very quickly affected income groups across the board and in multiple countries. Articles addressing the underlying causes of this misconception always mention one or more of the following three reasons: (i) a foolish belief in perpetual economic growth; (ii) a wrong use of economic models; or (iii) a lack of ethics and morals, not in the least on the side of the financial sector. The gist of the matter however is in the inter-connections. Paul Krugman discusses them in a recent article in which he blames himself too, by the way\t<a href=\"#_edn1\" target=\"\">[i]<\/a>. So how exactly are these factors interconnected, what do they teach us about economic realities on the ground, and how should we study them?<\/p>\n<p class=\"yunu3cvqabft7vifv\">Economic growth is generally considered an important driver of human development. Economists disagree about whether it is just one aspect of it or the crucial ingredient. To believe that growth is perpetual is foolish though. Even the early Solow-model shows the possibility of a \u2018steady-state\u2019. At the moment, economic growth in many advanced economies is slowing down with unemployment rising. Michael Spence describes this in his latest book\t<a href=\"#_edn2\" target=\"\">[ii]<\/a>: in fifty years time, the US and Europe will earn 10% of global per capita income instead of 60% today. Alternatively, the emerging economies of China, India and Brazil will earn 60%, not in the least because of the size of their populations. Economically speaking, they will soon dominate. The benefits of globalization are swopping owners. Psychologically speaking, people in advanced economies should make sure to be prepared for that. Focusing on growth alone will not pay off. We clearly need to think about distribution and sustainability of growth, too.<\/p>\n<p class=\"yunu3cvqabft7vifv\">Different economic models are needed to capture the increased interconnectedness of uncertainties and risks across borders. The \u2018New Growth Models\u2019 and Markowitz-type capital asset pricing model have gone out of fashion. Their underlying assumptions no longer resonate with reality. For example, it is a fallacy of financial models to average out risks and to assume invariance across incomes: we all know that an unemployed family runs a much higher risk of losing their home as compared to an affluent family, let alone the impact of that loss on their lives. &nbsp;<\/p>\n<p class=\"yunu3cvqabft7vifv\">This brings me to my last point: the lack of ethics and morals in economics. In terms of financial practices, bankers have lost sight of it altogether. In terms of discourse, economists should not be so reluctant to take an ethical or moral stance. In the end, it is only a small step from advocating \u2018good governance\u2019. How much inequality are we prepared to accept? To the extent that people and countries grow disconnected forever? This is an ethical point that should steer our development policies nationally and globally. If we can\u2019t live together, we are going to die alone.<\/p>\n<p class=\"yunu3cvqabft7vifv\">\t<a href=\"#_ednref\" target=\"\">[i]<\/a> Paul Krugman. (2011) \u2018The Profession and the Crisis\u2019: <a href=\"https:\/\/www.thebrokeronline.eu\/files\/eej\/journal\/v37\/n3\/pdf\/eej20118a.pdf\" target=\"_blank\">http:\/\/www.palgrave-journals.com\/eej\/journal\/v37\/n3\/pdf\/eej20118a.pdf<\/a><\/p>\n<p class=\"yunu3cvqabft7vifv\">\t<a href=\"#_ednref\" target=\"\">[ii]<\/a> Michael Spence. (2011) <i>The Next Convergence. The future of economic growth in a multi-speed world<\/i><\/p>\n<\/p>\n<p class=\"yunu3cvqabft7vifv\">\n<p class=\"credit\">Photo credit main picture: Image by Epsos.de<\/p>\n<p>\t\t<!-- body -->\n\t<\/div>\n<\/article>\n<div class=\"clear\"><\/div>\n<section class=\"commentform content column wide left\">\n<div class=\"disqus_content\">\n\t\t\t<a name=\"comments\" id=\"comments\"><\/a><\/p>\n<div id=\"disqus_thread\"><\/div>\n<p>\t\t\t<script type=\"text\/javascript\">\n\t\t\t\t\/* * * CONFIGURATION VARIABLES: EDIT BEFORE PASTING INTO YOUR WEBPAGE * * *\/\n\t\t\t\tvar disqus_shortname = 'broker'; \/\/ required: replace example with your forum shortname\n\t\t\t\tvar disqus_identifier = '7605';\n\t\t\t\t\/* * * DON'T EDIT BELOW THIS LINE * * *\/\n\t\t\t\tfunction trackComment(comment)\n\t\t\t\t{\n\t\t\t\t\tconsole.log(comment);\n\t\t\t\t}\n\t\t\t\tfunction disqus_config() {\n\t\t\t\t\tthis.callbacks.onNewComment = [function() { \n\t\t\t\t\tconsole.log(comment);\n\t\t\t\t\t}];\n\t\t\t\t}\n\t\t\t\t(function() {\n\t\t\t\t\tvar dsq = document.createElement('script'); dsq.type = 'text\/javascript'; dsq.async = true;\n\t\t\t\t\tdsq.src = '\/\/' + disqus_shortname + 'https:\/\/www.thebrokeronline.eu\/files\/blogs\/bellagio-initiative\/.disqus.com\/embed.js';\n\t\t\t\t\t(document.getElementsByTagName('head')[0] || document.getElementsByTagName('body')[0]).appendChild(dsq);\n\t\t\t\t})();\n\t\t\t<\/script><br \/>\n\t\t\t<!--\n\t\t\t<noscript>Please enable JavaScript to view the <a href=\"http:\/\/disqus.com\/?ref_noscript\">comments powered by Disqus.<\/a><\/noscript>\n\t\t\t<a href=\"http:\/\/disqus.com\" class=\"dsq-brlink\">comments powered by <span class=\"logo-disqus\">Disqus<\/span><\/a>\n\t\t\t-->\n\t\t<\/div>\n<\/section>\n<\/section>\n","protected":false,"raw":""},"excerpt":{"rendered":"<p>The gist of the matter is in the interconnections [&hellip;]<\/p>\n","protected":false},"author":0,"featured_media":0,"parent":0,"menu_order":0,"comment_status":"closed","ping_status":"closed","template":"template_2.php","meta":{"footnotes":""},"class_list":["post-953","page","type-page","status-publish","hentry"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v24.2 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>The gist of the matter is in the interconnections \/ Bellagio Initiative \/ Blogs - The Broker<\/title>\n<meta name=\"description\" content=\"How much inequality are we prepared to accept, asks Nicky Pouw. 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