The underlying reason for the Great Recession was that real household wages were incongruously flat or even declining, all through a boom fueled by an orgy of consumer spending (consumption and house-construction). Total social wealth grew strongly, but in the absence of a balanced sharing-out of that new wealth, it could only be financed by unsustainable consumer debt. It was really the bursting of that bubble, and not just reckless practices by banks, which caused the collapse in the financial structure.
Issuing, bundling and re-selling sub-prime mortgages was not just a moral failure by bankers, but was part of the engine that made the economic boom of the Clinton/Bush years possible. That’s what you have to resort to if you want to sell housing to people whose wages cannot sustain the cost of building it.
Generally, it’s how you get rich, in the short term, off people who you don’t pay enough money to buy your goods. You extend them credit.
A huge proportion of the economic gain was pocketed by the richest, especially corporate CEOs who became increasingly powerful autocrats within their corporations, hedge fund managers, and other parasitic groups. The bubble that burst in 2007-8 was far larger than just the U.S. housing market, but included the entire North American/European market in consumer goods and services.
A key economic recovery strategy of governments is to prod consumers to resume their former, unsustainable levels of consumption. In the medium term, that is like trying to put out a fire with gasoline. We are supposed to see rising house prices as a sign of recovery -- but all they mean is that the underlying problem is still doing its destructive work.
The only way to produce stable and sustainable growth is to adopt a strategy of redistribution to flatten out real incomes, so that people can afford to buy the stuff they purchase. Without that, the only thing that can propel spurts of strong economic growth is bubbles (which invariably collapse).
That means reversing the decades of anti-labour legislation, increasing (enormously) income taxes on the highest brackets, raising minimum wages and welfare rates, and expanding socialized access to health services, transportation and other essentials. These are the measures that capitalism itself needs: it recognized this to be the case in the decades after WWII, but has abandoned that strategy and its own long-term health.
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So in my opinion, while Canada’s growing income disparity is subjectively a moral outrage, it is also objectively a fundamental weakness of the economic system, which undermines capitalism itself. The people who run the system seem institutionally and ideologically incapable of recognizing or adopting the measures needed to make their own empire robust. Witness the gridlock in the U.S. Congress about re-regulating the financial sector, or about providing debt relief to consumers, or about socializing the cost of health services.
On the other hand, they are happy to socialize the debts held by banks and car manufacturers.
The reason for the collapse of Capitalism in 2008 was the fact that there is only one way to create wealth.
Wealth is created when someone uses their labour power.
The financial markets came down because the moneys generated in them were not based on production and eventually the roaster had to come home to roast.
Have you ever run for public office? Ever considered it?