Are Full Employment and Social Cohesion Possible Under Financialization?

Abstract

Financialization, Income distribution, Aggregate demand, Unemployment,

Credits, Social Policies and Consumption In Buenos Aires City

“…Consumer credit has expanded notably in Argentina, as well as worldwide (Harvey 2012;OCDE 2013), under the framework of a growing financial hegemony that began at the end of the last century as a consequence of the processes of globalisation, the financialization of capital and economic globalisation (Gowan 2000;Argitis-Michopoulou 2011). These changes in global capitalism imply structural and institutional transformations, for example, in the transition from a "society of producers" to a "society of consumers," which translates into a growing centrality of consumption (Bauman 2007;Lipovetsky 2007).…”

EMU macroeconomic policy regime

“…Seen from this perspective, the financialisation trend is considered as highly responsible for the poor income and employment performance that has marked the transition from the Golden Age to the neoliberal era (see e.g. Argitis and Michopoulou, 2011). 33 A key feature of financialisation consists of the shift in the balance of power between finance and industry.…”

“…A number of researchers have extensively discussed the adverse consequence of this distributional effect of financialisation on aggregate demand and on the rate of capital accumulation. Argitis and Michopoulou (2011) and , for instance, report that a fall in industry's current and/or expected profit rate negatively influence NFCs investment in real assets. Treating investment as a major determinant of profits, as suggested by , these authors also argue that lower current investment activity may in turn further lower NFCs profits and thus the propensity to invest.…”

“…and Onaran (2004) also stress that the ability of NFCs to compress labour costs has been increased by their threat of relocating production where labour costs are lower and labour markets less 'rigid', as well as by the successful exploitation of this threat to create a political momentum for labour market deregulation and increasing flexibility. Finally, according to Argitis and Michopoulou (2011), this distributional effect has been intensified by the higher unemployment rates and labour shrinking militancy to resist the deconstruction of the welfare state institutions. Giovannoni (2010) and Jayadev (2007) provide empirical data indicating that in many countries the labour share in national income has indeed declined.…”

“…Yet, the intensification of finance has caused the split of the banking and NFC sector, with banks and firms engaging directly in financial activities, rather than being 'merged' through bank lending. According to Argitis and Michopoulou (2011), such a tendency reduces firms' propensity to invest to long-term productive investment, impending industrial expansion. It may also be a reason behind higher private sector indebtedness that can aggravate the distribution effect of restrictive monetary policies as well as financial instability.…”