Engelbert Stockhammer

Some Stylized Facts on the Finance-Dominated Accumulation Regime

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.

Shareholder value orientation and the investment-profit puzzle

Shareholders have increased their ability to influence management decisions significantly over the past two decades. This paper proposes an extension of the Post Keynesian theory of the firm proposed by Lavoie (1992) to analyze the effects of this change in shareholder power on investment decisions. This microeconomic analysis is complemented by a Kaleckian macroeconomic model. Shareholder power is found to reduce investment and output, while increasing profits, which is consistent with the stylized facts of the neoliberal era.

Explaining European Unemployment: Testing the NAIRU Hypothesis and a Keynesian Approach

The aim of the paper is to compare the NAIRU hypothesis regarding European unemployment and a Keynesian approach to the issue and to evaluate them econometrically. For the NAIRU explanation, wage push variables are key in explaining the rise of European unemployment, for a Keynesian approach it is capital accumulation that is key. The theories are tested using time series data for Germany, France, Italy, the UK and the USA, using the seemingly unrelated regression method (SUR). Unemployment benefits, union density and the tax wedge are used as wage push variables, and the growth of business capital stock as the accumulation variable. The NAIRU specification performs poorly, with only the tax wedge having a positive effect on unemployment as predicted and only unemployment benefits having a negative effect on employment growth. However the results are not robust to changes in the specification. The Keynesian approach is more successful, with capital accumulation being statistically significant in all countries and robust to changes in the specification. Moreover, it can be pooled across countries.

Financialization, income distribution and the crisis

The paper argues that the process of financialization has profoundly changed how capitalist economies operate. The financial sector has grown relative to the real economy and become more fragile. Non-financial businesses have adopted shareholder value orientation, which had negative effects on investment. Working class households became squeezed because of rising inequality and have become more indebted, in particular in countries with real estate bubbles. Financial globalization has given rise to growing international imbalances, which have allowed two growth models to emerge: a debt-led consumption growth model and an export-led growth model. Both should be understood as reactions to the lack of effective demand due to the polarization of income distribution. The resulting finance-dominated accumulation regime is characterized by slow and fragile growth. The crisis is best understood as the outcome of the interaction of financialization and changes in income distribution.

Macroeconomic Policy Mix, Employment and Inflation in a Post-Keynesian Alternative to the New Consensus Model

New Consensus Models (NCMs) have been criticised by Post-Keynesians for a variety of reasons, and amendments or alternatives have been presented. The present paper attempts to provide a Post-Keynesian alternative model to the NCM. The model consists of three classes: rentiers, firms and workers. It has a short-run inflation barrier derived from distribution conflict between these classes, which is endogenous in the medium run. Distribution conflict affects not only inflation but also income shares. On the demand side, the income classes have different saving propensities. We apply a Kaleckian investment function with expected sales and internal funds as major determinants. The paper analyses short-run stability and includes medium-run endogeneity channels for the Non-Accelerating-Inflation-Rate-of-Unemployment, or NAIRU: persistence mechanisms in the labour market, adaptive wage and profit aspirations, investment in capital stock and cost effects of interest rate changes. From the model, Post-Keynesian policy rules are derived. We argue that improved employment without increasing inflation will be possible if macroeconomic policies are coordinated along the following lines: the central bank targets distribution, wage bargaining parties target inflation and fiscal policies are applied for short- and medium-run real stabilisation purposes.

Globalization and the effects of changes in functional income distribution on aggregate demand in Germany

Germany has experienced a period of extreme nominal and real wage moderation since the mid‐1990s. Contrary to the expectations of liberal economists, this has failed to improve Germany’s mediocre economic performance. However, Germany is now running substantial current account surpluses. One possible explanation for Germany’s disappointing performance is found in Kaleckian theory, which highlights that the domestic demand effect of a decline in the wage share will typically be contractionary, whereas net exports will increase (Blecker 1989). The size of the foreign demand effect will critically depend on the degree of openness of the economy. This paper aims at estimating empirically the demand side of a Bhaduri and Marglin (1990) type model for Germany. The paper builds on the estimation strategy of Stockhammer, Onaran, and Ederer (2009) and Hein and Vogel (2008, 2009). The main contribution lies in a careful analysis of the effects of globalization. Since Germany is a large open economy by now it is a particularly interesting case study.

Wage-led growth : concepts, theories and policies

The subprime financial crisis that started in 2007 and which became the global financial crisis challenges economists and policy-makers to reconsider the theories and policies that had gradually been accepted as conventional wisdom over the last thirty years. It is widely recognized that the global financial crisis has called into question the efficiency and stability of unregulated financial markets. This chapter argues that it has also demonstrated the limitations and even falsehood of the claim that wage moderation, accompanied by more flexible labour markets as well as labour institutions and laws more favourable to employers, will ultimately make for a more stable economy and a more productive and dynamic economic system.

IS THE NAIRU THEORY A MONETARIST, NEW KEYNESIAN, POST KEYNESIAN OR A MARXIST THEORY?

The NAIRU (non-accelerating inflation rate of unemployment) theory has become the mainstream theory in explaining unemployment in Europe and is often used to justify demands for a cutback of the welfare state, such as reducing unemployment benefits. Close inspection reveals that it, perhaps surprisingly, shares some arguments with Post Keynesian and even Marxist theory. The paper proposes an underdetermined, encompassing NAIRU model, which is consistent with several theoretical traditions. Depending on the closure with respect to demand formation and determination of the NAIRU itself, the model allows for New Keynesian, Post Keynesian and Marxist results.

Peripheral Europe's debt and German wages: the role of wage policy in the Euro area

The paper argues that the Greek debt crisis, as well as those of other Southern European countries and Ireland, has to be seen in macroeconomic context. The sum of the public sector balance, the (domestic) private sector balance and the current account deficit (or equivalently: the capital inflows) has to add up to zero. By implication in a country that has a current account deficit either the private sector or the public sector has to run a deficit. Therefore, the peripheral countries can only solve their public debt problems if there is a change in German current account surpluses. The paper explores the implications of this for wage policy in the Euro zone.

Goodwin or Kalecki in Demand? Functional Income Distribution and Aggregate Demand in the Short Run

In a seminal paper on Marxian business cycle theory, Goodwin (1967) presented a model which assumed that a higher wage share leads to lower investment and thus a general economic slowdown. In contrast Kalecki (1971) was arguing that a higher wage share would have an expansionary effect because the consumption propensity out of wage income is higher than that out of profit income. Based on a general model that allows for wage-led as well as profit-led demand regimes, this paper estimates the effects of a change in the wage share on aggregate private domestic demand with quarterly data for 12 OECD countries. JEL classification: E11, E12, E20, E22, E25