A/HRC/31/60 radical free-market stance,53 the prevalent finance-led model of growth and the accompanying deregulation of the financial sector even seem to be main factors explaining the global financial and economic crises that began in 2007, which is often labelled the “Great Recession”.54 The decline of workers’ bargaining power owing to labour market flexibility and wage moderation has possibly contributed to the demand side described above. Financial liberalization and deregulation explain, besides the growing wealth at the top, increased credit supply.55 36. Based on the theoretical considerations above, it is not surprising that an examination of 18 OECD countries over the period 1970-2007 revealed a positive link between income inequality and credit growth. 56 Moreover, over the period 1980-2010, a large majority of banking crises were preceded by persistently high levels of income inequality.57 Concerning the United States specifically, one study that investigated the period 1980-2003 found a “strong positive effect of income inequality in household debt relative to disposable income as well as the components of the household debt (mortgage debt, revolving debt, e.g. credit cards, and non-revolving debts, e.g. car loans)”.58 Although these results seem to confirm the theoretical ideas above, it should be noted that more empirical research is needed. Impact of inequalities on social and political stability and growth 37. Inequality may also reduce social and political stability. This creates disincentives for investment, disruptions in business activity, disunity, 59 threats to property and policy uncertainty and may even raise the probability of coups and mass violence. The result is a lower level of growth, which consequently provokes higher level of debt. The link between inequality, political instability and investment has been confirmed by an empirical study made on 70 countries over the period 1960-1985.60 38. Recent cross-country evidence supports the notion that inequality reduces economic growth. Based on vast data for both OECD and emerging countries, an IMF study from 53 54 55 56 57 58 59 60 12 See P. Krugman, “Inequality and Crises”, New York Times blog “The Conscience of a liberal”, (June 2010), http://krugman.blogs.nytimes.com/2010/06/28/inequality-and-crises. See Galbraith, Inequality and Instability (footnote 4343. He also identifies mainly financial forces as the source of growing inequality. See P. Tridico, “Financial crisis and global imbalances: its labor market origins and the aftermath”, Cambridge Journal of Economics, vol. 36, No. 1 (2012), pp. 17-42. See C. Perugini, J. Hölscher and S. Collie, “Inequality, credit and financial crises”, Cambridge Journal of Economics (2015), available from http://cje.oxfordjournals.org/content/early/2015/01/05/cje.beu075.full. See G. Bellettini and F. Delbono, “Persistence of high income inequality and banking crises: 19802010”, working paper No. 885 (University of Bologna, Department of Economics, 2013). By contrast, works by A.B. Atkinson and S. Morelli come to inconclusive results, both for increases and levels of inequalities; see “Income inequality and banking crisis: a first look”, report prepared for the Global Labor Forum 2011 (International Labour Organization (ILO), Turin, 2010) and “Inequality and crises revisited”, working paper No. 387 (Centre for Studies in Economics and Finance, University of Naples, 2015). They also provide for possible explanations for their outcomes, in particular the choice of inequality measures and contagion between national economies due to globalization. See M. Christen and R. Morgan, “Keeping up with the Joneses: analyzing the effect of income inequality on consumer borrowing”, Quantitative Marketing and Economics, vol. 3, No. 2 (2005), pp. 145-173, at 148. See K.H. Park, “Income inequality and economic progress: an empirical test of the institutionalist approach”, American Journal of Economics and Sociology, vol. 55 No. 1 (1996), pp. 87-97. See A. Alesina and R. Perotti, “Income distribution, political instability, and investment”, European Economic Review, vol. 40 No. 6 (1996), pp. 1203-1228.