What do indebted employees do?:Financialisation and the decline of industrial action

While isolated episodes of work stoppages keep occurring, aggregate industrial action rates have been on the decline over the last five decades. Attempts to explain this trend centre on the short-term effects of the business cycle and the long-term impacts of labour market liberalisation, deindustrialisation and globalisation. This paper argues that household indebtedness is a missing piece of the puzzle. Since indebted employees tend to become self-disciplined at the workplace on the fear of losing their job and defaulting, this paper argues that the post-1970 rise of household financialisation is associated with the decline of strike activity. The econometric evidence reported provides strong support to this argument for the cases of Japan, Korea, Sweden, the United States and the United Kingdom over the period 1970–2018

Finance, Discipline and the Labour Share in the Long‐Run: France (1911–2010) and Sweden (1891–2000)

There is an ongoing debate within political economy on how finance affects capital–labour relations. Industrial relation scholars have demonstrated that financialization empowers capital and induces the liberalization of industrial relations. Additionally, meso and macro level studies show that finance reduced the labour share during neoliberalism. However, the literature is relatively limited and does not extend to the pre‐WWII period. Considering finance as historically integral to capitalism, this paper estimates the impact of finance on the labour shares of France (1911–2010) and Sweden (1891–2000). The results show that mortgage debt decreases the labour shares of both countries, thus, the financialization of households induces industrial discipline historically. However, the negative effect is substantially smaller in Sweden where housing finance is state‐led and bargaining coordination is centralized over the last century

Debt-GDP Cycles in Historical Perspective:The Case of the USA (1889-2014)

Since the Global Financial Crisis, interest in financial cycles has risen significantly. While much of modern macroeconomics conceives financial crises as the results of exogenous shocks, Minsky’s financial instability hypothesis posits that financial cycles are endogenous to the economic system. The main contribution of this paper is to use historical macroeconomic data for the United States (1889–2014) to econometrically test for endogenous Minsky cycles: the interaction of procyclical private debt-to-income ratios and a dampening effect of private debt on economic activity. We analyze corporate debt-gross domestic product (GDP) growth cycles, which feature in Minsky’s original writings, and mortgage debt-GDP growth cycles as in some recent Minsky-inspired models. We find robust evidence of endogenous corporate debt-GDP cycles over the last 125 years. These results are driven by the pre-World War II (WWII), and post-1973 periods, which had a more liberal economic policy orientation. We find no evidence of mortgage debt-GDP cycles

Class conflict, fiscal policy, and wage-led demand: A model of Kalecki’s Political Business Cycle

This paper provides a demand-driven growth model of Kalecki’s (1943) political business cycle. It incorporates the three fundamental assumptions that govern Kalecki’s model: wage-led demand, the “reserve army of labor” effect, and capitalists’ disproportionate power over fiscal policy. In our model, endogenous cycles are the outcome of capitalists’ changing preferences over fiscal policy. Decreasing opposition to fiscal expansion by capitalists triggers the boom phase of the cycle, lest demand deficiency lead to a slowdown in accumulation. The downturn of the cycle is induced by capitalists’ rising opposition to government spending, lest workers’ growing political power at the peak of the cycle undermine their influence. This approach is unlike that taken by Goodwin and neoclassical PBC models, where a profit squeeze and the timing of elections or political ideologies determine cycles

Essays on Financialisation, Income Distribution, and the Business Cycle

The aim of this doctoral research project is to examine the impact of financialisation on income inequality and on business cycles. More precisely, the present study seeks to answer three core research questions: (i) Were the business cycles of the USA and the UK driven endogenously by the private debt aggregates since the late 19th century as suggested by Hyman Minsky’s behavioural theory of economic fluctuations? (ii) Did the private debt aggregates and real share prices contribute to declines in labour share growth in France, Sweden, and the USA since the late 19th century? (iii) Which financial variables are linked to the rise of the top one per cent income share in the neoliberal era in the USA, Germany, and Sweden? Chapter 1 provides strong econometric evidence for corporate debt-driven cycles a la Minsky in the US economy since it is found that the corporate debt ratio has been procyclical, and GDP and investment growth have been corporate debt-burdened in the full sample period. There is also weak evidence for Minskyan mortgage debt-driven cycles in the USA. Regarding the UK, there is evidence that its corporate leverage ratio has been procyclical. Chapter 2 shows that there is robust evidence that the mortgage debt accumulation has led to decreases in the labour shares of France, Sweden, and the USA since the late 19th century. For Sweden, real share prices and stock market capitalisation also exhibit negative effects on its labour share in historical context. However, the econometric findings suggest that the effects of power resources variables like union density and government spending are stronger than those of the financial variables. Chapter 3 estimates econometrically the determinants of the top one per cent income share in the neoliberal era. The results of the estimations suggest that real share prices increase the top percentiles of the USA and Sweden, dominating the other explanatory variables in terms of magnitude. In the neo-mercantilist, export-oriented economy of Germany it is the positive effect of trade globalisation that prevails over the rest explanatory variables, with finance playing a limited role. Unlike functional income inequality, the effects of financial variables prevail over those of power resources variables on the top one per cent. The findings of this research project show that the financialisation of different sectors of the economy have different effects on the macroeconomy. Therefore, the concept of financialisation should be perceived as a dynamic, transforming process which has been historically integral to capitalism and should be studied in a comparative perspective by considering cross-country and cross-period discrepancies

Mapping modern economic rents: the good, the bad, and the grey areas

There is increasing consensus that modern capitalist economies suffer from excessive rent extraction in both financial and real economy sectors. However, scholars have yet to develop a coherent analytical framework for identifying the common characteristics of modern economic rents. In particular, there has been little attention paid to distinguishing ‘good’ rents—key to innovation and growth—from ‘bad’ forms which contribute to economic stagnation and inequalities of wealth and income. This paper takes some first steps in this direction. We first review the existing rent theory most pertinent to this distinction, including classical political economy, the early twentieth century institutionalists, neoclassical perspectives and Keynes’s analysis of financial rentiers. Secondly, we map and conceptualise some key stylised features of modern rents, drawing on descriptive empirical evidence. We then identify the key questions that these developments raise for rent theory, elaborating a new research and policy agenda

Definancialisation and Workspace Regulation as a Public Health Policy Tool

One of the most pressing issues policymakers, business groups, and academics face in the context of the post-COVID-19 recovery is how the economy can become more resilient to similar future challenges. Achieving resilience and sustainability in times of health crises requires a better understanding of social and economic conditions that shape workplace and living conditions. Even before the ongoing pandemic, it has been well-established that broader social conditions and broader economic policy choices play a key role in public health outcomes. Yet, it is relatively understudied how financial insecurity negatively impacts socio-economic conditions, which ultimately determine public health outcomes. Our research sheds light on how the financialisation of the economy and society should be considered as a key driver of public health. The purpose of this policy briefing is to summarise how the financialisation of the business (and broader economic) environment, i.e., the dominant influence of financial actors and institutions over the real economy is growing continuously, shapes workplace conditions and the production process, which, in turn, are instrumental for public health outcomes, aiming to offer practical insights for policymakers and firms