Escaping the tyranny of earned income? The failure of finance as social innovation

Before the crisis which started in 2007, the mass marketing of retail financial products in high income countries since the early 1980s was understood through rhetorics about individual emancipation as the ‘democratisation of finance’ and ‘ownership society’, where supporters and critics debated in a shared framework. From a post 2007 perspective, it is time to revalue these developments. This paper changes the frame around the debate and constructs theextension of credit and ownership as a major social innovation led by profit seeking retail banks. It then presents empirical evidence from the United States, which suggests that the extension of credit and asset ownership in an unequal society is self defeating because it does not abolish the tyranny of earned income and, indeed, it tightens the vice insofar as low income individuals and households accumulate debt but not assets. The implication is that finance as privately led social innovation has failed and it is time for fundamental rethinking of much that has been taken for granted.