Is unequal distribution of wealth & income a causal factor in the Great Depression and the 2008 Wall Street collapse?

In economies where income and wealth are unevenly distributed, the supply-demand equilibrium is threatened.  In both the cases of the Great Depression and the present crisis, this factor had played a major role.  According to Paul Gusmorino, “the mal-distribution of income between the rich and the middle class grew throughout the 1920’s. While the disposable income per capita rose 9% from 1920 to 1929, those with income within the top 1% enjoyed a stupendous 75% increase in per capita disposable income.h (Gusmorino, 1996)  In this scenario, the middle and lower classes, which form the majority of the population find themselves with inadequate disposable income to buy products and commodities.  In other words, the supply overshoots the demand thereby leading to a state of economic instability.

As was the case in the 1920s, the first few years of this millennium also saw an increase in the gap between the affluent and the middle class.  During the second term of the Bush Presidency the top 1 percent of the population owned more wealth than the bottom 90 percent of the population put together – an unbelievable fact.  In the same period, the top CEOs of major financial institutions were drawing more than $39 billion in bonuses alone.  So, the situation pertaining to income distribution was very similar during the Great Depression and now.  Further, in these situations,

It is not that the surplus products of industrialized society were not wanted, but rather that those whose needs were not satiated could not afford more, whereas the wealthy were   satiated by spending only a small portion of their income. …We still pray to be given each day our daily bread. Yet there is too much bread, too much wheat and corn, meat and oil and almost every other commodity required by man for his subsistence and material happiness. We are not able to purchase the abundance that modern methods of agriculture, mining and manufacturing make available in such bountiful quantities. (Sanders, 2008)


James L. Roark, American Promise – A Compact History (Chapters 23 & 24) Third Edition

Paul A. Gusmorino, “Main Causes of the Great Depression”, retrieved from <> on 9th October, 2009

Senator Bernie Sanders, “Tax the Rich to Pay for the Bailout”, retrieved from <> on 9th October, 2009

Matthew Rothschild, “Nationalize the Banks”, retrieved from < > on  9th October, 2009