Mattias Vermeiren - Crisis and Inequality

1 Cover

2 Dedication Dedication For Saul

3 Title Page Crisis and Inequality The Political Economy of Advanced Capitalism Mattias Vermeiren polity

4 Copyright Page Copyright Page Copyright © Mattias Vermeiren 2021 The right of Mattias Vermeiren to be identified as Author of this Work has been asserted in accordance with the UK Copyright, Designs and Patents Act 1988. First published in 2021 by Polity Press Polity Press 65 Bridge Street Cambridge CB2 1UR, UK Polity Press 101 Station Landing Suite 300 Medford, MA 02155, USA All rights reserved. Except for the quotation of short passages for the purpose of criticism and review, no part of this publication may be reproduced, stored in a retrieval system or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the publisher. ISBN-13: 978-1-5095-3768-6 ISBN-13: 978-1-5095-3769-3 (pb) A catalogue record for this book is available from the British Library. by Fakenham Prepress Solutions, Fakenham, Norfolk, NR21 8NL The publisher has used its best endeavours to ensure that the URLs for external websites referred to in this book are correct and active at the time of going to press. However, the publisher has no responsibility for the websites and can make no guarantee that a site will remain live or that the content is or will remain appropriate. Every effort has been made to trace all copyright holders, but if any have been overlooked the publisher will be pleased to include any necessary credits in any subsequent reprint or edition. For further information on Polity, visit our website: politybooks.com

5 Figures, Tables and Boxes Figures, Tables and Boxes All figures and tables were created by the author for the book. Credit lines refer to the source of the underlying data. Figures Tables Boxes

6 Abbreviations

7 Introduction Notes

8 1 Rising Inequality in Advanced Capitalism Measures of economic inequalityPersonal income distribution Functional income distribution Distribution of wealth Neoclassical interpretations of rising inequality in advanced capitalism Towards a political economy perspective on rising inequalityPower and institutions as determinants of inequality Rising inequality as a structural cause of the global financial crisis Notes

9 2 The Rise and Fall of Egalitarian Capitalism The rise of the Keynesian welfare stateThe Great Depression: from laissez-faire to state intervention Embedded liberalism: the Keynesian welfare state after World War II Fordist wage-led growth: interests, ideas and institutions The fall of egalitarian capitalismEconomic globalization Varieties of capitalism: towards neoliberal convergence? Neoliberalism and varieties of growth models Notes

10 3 Macroeconomic Policy: From ‘Full Employment’ to ‘Sound Money’ Macroeconomic policy during the Keynesian era Neoliberal macroeconomic policy: towards ‘sound money’From the stagflation crisis of the 1970s to the fiscal crisis of the welfare state Depoliticization of macroeconomic policy Financial globalization and ‘market discipline’ Low inflation and distributive conflictUnsound macroeconomics of sound money Rising unemployment and the weakening of labour power Anti-inflation and rentier interests Macroeconomic policy and growth models Notes

11 4 Social Policy: Globalization, Deindustrialization and Liberalization Industrial relations and social policy during the Keynesian era Neoliberalism, labour markets and social policy Deindustrialization, social policy and varieties of capitalismSocial policy and sectoral conflict Deindustrialization, liberalization and social investment Globalization, social policy and power resourcesSocial policy and class conflict Globalization, social policy and the weakening of labour power Social policy and growth models Notes

12 5 Corporate Governance: The Rise of Shareholder Capitalism Corporate business strategies during the Keynesian era The rise of the shareholder model in the US economyFrom retain-and-reinvest to downsize-and-distribute Agency theory: neoliberalism and corporate governance Rent-seeking and managerial power Shareholder vs stakeholder models in varieties of capitalismMarket-based vs bank-based corporate finance Corporate governance and institutional complementarities Varieties of innovation and business strategies Financialization of non-financial corporations Corporate governance and growth models Notes

13 6 Financial Policy: Market-Based Banking and the Global Financial Crisis Banks and financial intermediation during the Keynesian eraA primer on banks, financial intermediation and bailouts Banking regulation and ‘3-6-3 banking’ during the Keynesian era Financial liberalization and the rise of market-based banking Market-based banking and transatlantic financial instabilitySecuritization, the democratization of credit and the US subprime crisis From the subprime crisis to the Eurozone crisis Market-based banking, regulatory capture and financialization Financial policy and growth models Notes

14 7 Macroeconomic Imbalances Before and After the Crisis Widening macroeconomic imbalances before the crises: empirics Macroeconomic imbalances and growth models before the crisis Growth models and macroeconomic adjustment after the crisis Macroeconomic adjustment in finance-led LMEs Macroeconomic adjustment in the Eurozone: export-led CMEs vs debt-led MMEs Macroeconomic imbalances and secular stagnation Notes

15 8 The Future of Egalitarian CapitalismRising inequality, growth models and crisis Secular stagnation and macroeconomic policy reform The rise of populism and the decline of social democracy Climate change and the decarbonization of the economy The coronavirus crisis and the future of egalitarian capitalism Notes

16 References

17 Index

18 End User License Agreement

1 Chapter 1 Table 1.1 Total income growth and inequality, 1980–2016 Table 1.2 Distribution of net wealth in the OECD world, 2015 or latest available year

2 Chapter 2 Table 2.1 Union membership as a percentage of non-agricultural workers, pre-World War I to... Table 2.2 Left percentage of valid votes, pre-World War I to 1980Table 2.3 Indicators of growth models, 1995–2007, and income inequality, 1980...

3 Chapter 3Table 3.1 How inflation influences the tax treatment of interest incomeTable 3.2 Real rentier fraction of national income, selected countries, 1970s–1990sTable 3.3 Keynesian and neoliberal macroeconomic regimes compared

4 Chapter 4Table 4.1 Three worlds of welfare capitalismTable 4.2 Unemployment rate and contribution of exports to GDP growth (in percentages), 19...

5 Chapter 5Table 5.1 Average CEO compensation in the US economy, 1973–2013Table 5.2 CEO-to-worker compensation ratio in selected countries: actual vs ideal, 2012Table 5.3 Selected measures of corporate finance ownership, 1990–2010

6 Chapter 6Table 6.1 Increasing banking concentration in the OECD: C5 ratio, 1985–99Table 6.2 Government support measures of financial institutions (in billion euros unless s...Table 6.3 National index of approach to credit, 2000s

7 Chapter 7Table 7.1 Sectoral financial balances in selected OECD countries (in percentage of GDP), 1...Table 7.2 Average annual change in nominal exchange rate and inflation, 1980s and 1990...

1 Chapter 1 Figure 1.1The Lorenz curve and the Gini index Figure 1.2Gini indices of selected OECD countries, 1985 and 2017 Figure 1.3Share of the top percentile in total income in Anglo-Saxon countries, 1920... Figure 1.4Share of the top percentile in total income in continental Europe and Japan, 192... Figure 1.5Average labour income share, 1970s and 2000s Figure 1.6The productivity–pay gap in the US economy, 1948–2014 Figure 1.7Wealth shares of top 10 per cent in Europe and the United States, 1810–20... Figure 1.8The market price mechanism Figure 1.9Skill-biased technological change and the price mechanism in labour markets Figure 1.10Average annual contribution of private consumption and net exports to GDP growth...