1 Introduction
The re-distribution of income from labour to capital, from workers to top-managers, and from low income households to the rich has been a main feature of finance-dominated capitalism since the early 1980s, which has led to the Great Financial Crisis and the Great Recession in 2007–9. The recovery from this crisis has been sluggish so far, and this has given rise to a renewed discussion about stagnation tendencies in capitalist economies (Summers 2014, 2015). Whereas in orthodox approaches, income distribution only has a restricted role to play, if at all, the interaction between distribution and growth is at the centre of Marxian and post-Keynesian/Kaleckian approaches when it comes to explaining medium- to long-run trends of economic growth —and stagnation . This contribution first provides Marxian and Kaleckian assessments of the distribution and growth regimes under finance-dominated capitalism, both before and after the recent crisis. Second, an interpretation of stagnation tendencies in a demand-led endogenous growth model with Kaleckian, Kaldorian and Marxian features is presented.
For this purpose, the contribution builds on the recent empirical literature on different demand and growth regimes under financialisation (Hein 2012), and on the research on the distributional effects of financialisation (Hein et al. 2017) in particular. Some stylised facts on distribution and growth regimes under financialisation before the crisis are provided in Sect. 2. In order to allow for a comparative assessment of the relationship between inequality and growth in these regimes from a Marxian and a Kaleckian perspective, the method of model closure, already used in Hein (2017a), is applied in Sect. 3. First, the two extreme growth regimes under financialisation before the crisis, the ‘debt -led private demand boom’ and the ‘export-led mercantilist’ regimes , are put forward in stylised Marxian and neo-Kaleckian models. Then the effects of a rising profit share , indicating rising inequality, are studied, holding behavioural equations constant. Finally, the changes in behavioural parameters for the two regimes in each approach are added, and the main features of the distribution and growth patterns observed before the crisis are generated. In Sect. 4, the analysis turns towards the crisis and post-crisis period. Empirically, the changes in distribution and growth regimes in this period are assessed, and these changes are interpreted in the context of the stylised neo-Kaleckian model from Sect. 3. Thereafter, this model is extended by Kaldorian and Marxian views on the determinants of technological progress and productivity growth in order to generate a demand-led endogenous growth model and to show how the effects of redistribution and current stagnation tendencies can be explained by this model. The final Sect. 5 summarises and concludes.
2 Stylised Facts: Distribution and Growth Regimes Under Financialisation Before the Crisis
From a macroeconomic perspective, finance-dominated capitalism or financialisation can be described by four characteristics, as elaborated in Hein (2012; 2014, Chapter 10), for example.
- 1.With regard to distribution, financialisation has been conducive to a rising gross profit share , including retained profits, dividends and interest payments, and thus a falling labour income share, on the one hand, and to increasing inequality of wages and top management salaries and thus of personal or household incomes, on the other hand. Hein (2015) has recently reviewed the evidence for a set of developed capitalist economies since the early 1980s and finds ample empirical support for falling labour income shares and increasing inequality in the personal/household distribution of market incomes with only a few exceptions, increasing inequality in the personal/household distribution of disposable income in most of the countries, an increase in the income share of the very top incomes not only in the USA and the UK, but also in several other countries for which data are available, with rising top management salaries as one of the major driving forces. Reviewing the empirical literature on the determinants of functional income distribution against the background of the Kaleckian theory of income distribution , it is argued that features of finance-dominated capitalism have contributed to the falling labour income share since the early 1980s through three main channels: the falling bargaining power of trade unions , rising profit claims imposed in particular by increasingly powerful rentiers and a change in the sectoral composition of the economy in favour of the financial corporate sector and at the expense of the non-financial corporate sector or the public sector with higher labour income shares. In Hein et al. (2017), the relative importance of these factors has been analysed for the six countries which are included in the current study, too.
- 2.Regarding investment in the capital stock, financialisation has meant increasing shareholder power vis-à-vis firms and workers, the demand ...