Academic journal article Capital & Class

In Search of Politically Sustainable Growth Regimes

Academic journal article Capital & Class

In Search of Politically Sustainable Growth Regimes

Article excerpt

Introduction

A major issue in the analysis of the present development of our economies is to explain how the rise of the power of finance in the last two decades can be compatible with democracy. What was a rising concern at the turn of the 21st century has become a puzzling issue after the 2008 global financial crisis, when the extravagances of the financial sector that were clearly the origin of the crisis did not lead to strict policy measures to take the financial sector back to the good old 'boring finance' of the 'golden years of capitalism'-the three decades following the Second World War. Despite the fact that governments had to bail out some major financial institutions, the financial sector recovered its power within months. Projects to reform the finance sector are still on the agenda, but are clearly far from bringing finance back to its past, domesticated state. The causes for such resilience may be many. Above all, the extent of the internationalisation of economies in today's world needs to be taken into account, together with the mobility of capital allowed by the diffusion of information and communication technologies and the development of professional networks. Never has 'finance bashing' been so widespread: from left to right, from ordinary people to professionals and politicians, most blame the greedy and risky behaviour of finance as causes of the global financial crisis and the ensuing economic recession.

This paper argues that one has first to distinguish the very process of economic development from which the financial sector draws its economic power from the political sustainability of such a 'growth regime', which is doubtful. This does not imply that finance is a paper tiger, since it obviously exerts significant influence; it simply implies that one has to clearly distinguish the economic logic on which it is based from the various political ties that allow its reproduction. If we have a finance-led capitalism in the economic sense, if it does not succeed in constructing strong political support in democratic societies, it may well not be a politically viable regime. To clarify this alternative, in the first section of this paper we examine what economists tend to call 'finance-led regimes'. The second section looks at the political sustainability of such economic regimes, all of which seem to call for some kind of macro-social convention, reminiscent of the ones that were developed in the post-war period, even if conditions in the current period are not similarly dramatic. Turning to what has happened in the aftermath of the 2008 global financial crisis, the third section considers what factors could determine the resilience of this widely contested power of finance. To conclude, we attempt a tentative assessment of the conditions that could upset these ties and pave the way for a return to 'normal' finance.

Is finance-led capitalism more than a truism?

The rise in importance of finance in our developed economies over the past twenty years has led to an intensive use of the term 'finance-led capitalism'. There are different truths in this labelling, depending on what one is using the term to refer to. There is in the first place a strictly economic reading of the phenomenon, which refers to a model in which the intermediation of finance plays a central role in the reproduction of the system. As a canonical description of the working of a system, this corresponds in the terminology of the regulation school to a regime of accumulation. The term 'regime' hints at a generic property of the scheme that could fit a variety of situations. As defined in Boehm and Punzo (2001), 'a regime is a class of "dynamic" behaviors which are sufficiently similar from a qualitative point of view that they can be considered [as being generated] by variants of the same basic model.' This implies that within a regime of accumulation, underlying changes are occurring that may over time lead to major breakdowns and changes of regime depending on the general context in which the system is functioning. …

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