Distribution and accumulation in post-1980 advanced capitalism (original) (raw)
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The finance-dominated accumulation regime, income distribution and the present crisis
2009
The paper discusses the interactions of changes in income distribution and the accumulation dynamics in the post-Fordist accumulation regime in OECD countries, which is characterized by deregulated financial markets. The neoliberal mode of regulation came with a decisive shift in power relations at the expense of labor, which is clearly reflected in the fall of wage shares across OECD economies. The notion of a "financedominated" accumulation regime is proposed to highlight that financial developments crucially shape the pattern and the pace of accumulation. Financial globalization has relaxed balance of payment constraints and thereby allowed the build up of big international imbalances. The combination of real wage moderation and financial liberalization has led to different strategies (or at least outcomes) in different countries. While some countries (like the USA) exhibit a credit-fuelled consumption-driven growth model that comes with large current account deficits, others (like Germany and Japan) show an export-driven growth model with modest consumption growth and large current account surpluses. Overall the finance-dominated accumulation regime is characterized by a mediocre growth performance and by a high degree of fragility.
Some stylized facts on the finance-dominated accumulation regime
Competition &# 38; Change, 2008
While there is an agreement that the Fordist accumulation regime came to an end in the course of the 1970s, there is no agreement on how to characterize the post-Fordist regime (or if such is already in place). This paper seeks to put together various arguments related to financialization (in the broad sense) from a macroeconomic point of view and evaluate their relevance by confronting them with the actual development of macroeconomic variables for EU countries. The paper discusses changes in investment behaviour, consumption behaviour and government expenditures, investigating to what extent changes are related to financialization. Households experience higher debt levels. Rising profits of businesses come with only moderate investment. The notion of a 'finance-dominated' accumulation regime is proposed to highlight that financial developments crucially shape the pattern and pace of accumulation. The finance-dominated accumulation regime is characterized by mediocre growth performance and a high degree of fragility. However, so far deregulated financial markets have not lead to major financial crises in advanced capitalist economies. A possible reason for this is that the size of the state sector has not been substantially reduced despite neo-liberal attempts to do so.
2013
Born in 2008 in one of the most dynamic economies of the world as a massive financial crush and spilled over developed countries threatening growth and social stability, the global financial crisis unveiled structural problems in mitigating global risks associated with the integration of markets. While the financial crisis received a strong response from the governments facing declining aggregate demand and recession, a sovereign debt crisis to follow the banking crisis was imminent, but its likely proportion was hard to estimate. The paper approaches in a systemic way the distribution of income in developed economies, the issues associated to this process and the specific situation in CEE countries.
Income distribution and the size of the financial sector
2015
The paper deals with the influence of the size of financial industry on income distribution. In opposition to Piketty’s position, it argues that the wage share is influenced by changes in the size of the sectors of the economy, by the input composition of the productive structure and by the ability of the workers to capture the increases in productivity. The process of financialization experienced in the recent decades has affected these three elements. Among other things, it has enhanced the ability of the banking industry to affect the formation of monetary policy and legislation, which in turn can have had some bearing on the workers’ ability to appropriate the increases in productivity. After describing Piketty’s interpretation of the rise in inequality and discuss his views on the theories of distribution, the paper illustrates different representations of the financial sector proposed by the literature, underlining the relevance of considering this sector as an industry. By fo...
Income Inequality and Wealth Concentration in the Recent Crisis
Development and Change, 2016
This article shows that the increase of income inequality and global wealth concentration was an important driver for the financial and Eurozone crisis. The high levels of income inequality resulted in balance of payment imbalances and growing debt levels. Rising wealth concentration contributed to the crisis because the increasing asset demand from the rich played a key role in the growth of the structured credit market and enabled poor and middle-income households to accumulate increasing amounts of debt. This analysis thereby puts both income and wealth inequality to the epicentre of the recent crisis, and is crucial for social scientists analysing the causes of the crisis. Our findings suggest that the policy response to the crisis must not be limited to financial regulation but has to involve policies to address inequality by increasing the bargaining power of labour as well as redistributive tax policies. ________________________________________ We would like to thank Matt Vidal and three anonymous referees for their helpful comments. Moreover, we are grateful to Photis Lysandrou without whom this article would not have been possible. Engelbert Stockhammer acknowledges financial support from the INET project 'Rising inequality as a structural cause of the present financial and economic crisis' (INO13-00012).
Financialization and Income Inequality in Selected European Countries, 2004-2013
SSRN Electronic Journal, 2015
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Financialisation and the slowdown of accumulation
Cambridge Journal of Economics, 2004
Over the past decades financial investment of non-financial businesses has been rising and accumulation of capital goods has been declining. The first part of the paper offers a novel theory to explain this phenomenon. Financialization, the shareholder revolution and the development of a market for corporate control have shifted power to shareholders and thus changed management priorities, leading to a reduction in the desired growth rate. In the second part the link between accumulation and financialization is tested econometrically by means of a time series analysis of aggregate business investment for USA, UK, France, and Germany. Extensive tests of robustness are performed. For the first three countries evidence supporting the negative effect of financialization on accumulation is found.
Debt Shift, Financial Development and Income Inequality in Europe
SOM Research Reports, 2016
Does financial development increase income inequality? Ambiguous answers to this question to date may be due to over-aggregation. In data over 1990–2012 for 26 EU economies, we study the effects on income inequality of different components of financial development. We find that bank credit to real estate and financial asset markets, which increases the wage share of the Finance, Insurance and Real Estate (FIRE) sector, increases income inequality. Credit to non-financial business and for household consumption supports broader income formation, decreasing income inequality. There was a large shift of bank credit allocation since the 1990s, away from supporting investments by non-financial firms and towards financing capital gains in real estate and financial asset markets. Combined with our new findings, this ’debt shift’ helps to understand the growth of inequality.
Income Distribution, Growth and Financialization: The Italian Case
Employment, Growth and Development, 2012
The paper investigates whether the current decline of the Italian economy could be traced back to financialization. In principle financialization could not be so important for an economy in which many firms are not quoted in the stock exchange and for which shareholders' interests should not matter. The author argues that financialization may have deep effects in such an environment by changing the perceived financial norm and the target return on capital. The author draws on a model by Lavoie (1995) extending it to an open economy. She uses this model by looking at the effects of an appreciation, thus replicating the appreciation of the euro in the last years and its possible effects on the Italian economy. The results of such an appreciation would be a fall in the rate of growth, accumulation and in the realized rate of profit. This picture, however, does not fit in well with some stylized facts. In Italy, the rate of growth and the capital accumulation have slowed down while the rate of profit and the profit share have clearly increased. The increase concerns the average profit share and the average profit rate while indeed the profit rate is declining in the manufacturing sectors, but rising in the services sector. At this point a different interpretation is presented, which is no more based on the financialization hypothesis but rather on the increase in the degree of monopoly power in the Italian industrial sectors, given the increase in the markup. This process would have been favoured by the privatization process of previously public enterprises. The author shows what might have happened by using a model by Dutt (1995) with two sectors. In this model in the long-run the accumulation of capital is still governed by aggregated utilization and profitability, but the allocation of capital among sectors and their growth depends on the profit rate differential. The profit rate differential might have shifted resources to the service sectors, which would have been favoured by the privatization process. In this case, financialization would be a consequence of the increase in monopolistic competition, which in turn could be responsible for the decline.