Jonathan Ostry, an IMF economist with a long record of arguing that extreme income inequality harms capitalist growth, has published a new article on the theme with two IMF colleagues, Prakash Loungani and Davide Furceri.
Capitalist crises generally come through sudden shutdowns of investment and luxury spending by the rich which then snowball through the economy. The poor are less apt to go in for sudden bouts of holding on to our cash. The greater the proportion of spending controlled by the rich, the more unstable.
That is the basic idea behind Ostry's argument (bit.ly/ostry-eq). Extremely unequal capitalist economies may have rapid growth surges, he points out, but they are more likely to end in big crashes.
In the new article, Ostry criticises extreme cuts policies on the grounds that they increase inequality, and expands his reasoning to criticise over-easy flows of capital. He points to 30 financial crises since 1980 generated by inflows of "hot", speculative, money into poorer economies, quickly followed by outflows.
Shadow chancellor John McDonnell has seized on Ostry's article to indict Osborne and the Tories.
So far, so good. But not very far! Ostry's argument is for elephant-sized inequality rather than whale-sized, and for moderate neo-liberalism rather than the gung-ho, mouth-frothing, eyes-bulging sort.
He sees "much to cheer in the neo-liberal agenda". We don't. Moderate neo-liberalism has, after all, been tried. That is what Blair and Brown did.
The left should argue our own case for outright socialism, rather than deferring to the advocates of moderated capitalism.