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The revenge of the market on the rentiers

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  • José Gabriel Palma

Abstract

Starting from the perspective of heterodox Keynesian--Minskyian--Kindlebergian financial economics, this paper begins by highlighting a number of mechanisms that contributed to the current financial crisis. These include excess liquidity, income polarisation, conflicts between financial and productive capital, lack of appropriate regulation, asymmetric information, principal-agent dilemmas and bounded rationalities. However, the paper then proceeds to argue that perhaps more than ever the 'macroeconomics' that led to this crisis only makes analytical sense if examined within the framework of the political settlements and distributional outcomes in which it had operated. Taking the perspective of critical social theories the paper concludes that, ultimately, the current financial crisis is the outcome of something much more systemic, namely an attempt to use neo-liberalism (or, in US terms, neo-conservatism) as a new technology of power to help transform capitalism into a rentiers' delight. In particular, into a system without 'compulsions' on big business; i.e., one that imposes only minimal pressures on big agents to engage in competitive struggles in the real economy (while doing the opposite to workers and small firms). A key component in the effectiveness of this new technology of power was its ability to transform the state into a major facilitator of the ever-increasing rent-seeking practices of oligopolistic capital. The architects of this experiment include some capitalist groups (in particular rentiers from the financial sector as well as capitalists from the 'mature' and most polluting industries of the preceding techno-economic paradigm), some political groups, as well as intellectual networks with their allies--including many economists and the 'new' left. Although rentiers did succeed in their attempt to get rid of practically all fetters on their greed, in the end, the crisis materialised when markets took their inevitable revenge on the rentiers by calling their (blatant) bluff. Copyright The Author 2009. Published by Oxford University Press on behalf of the Cambridge Political Economy Society. All rights reserved., Oxford University Press.

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File URL: http://hdl.handle.net/10.1093/cje/bep037
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Bibliographic Info

Article provided by Oxford University Press in its journal Cambridge Journal of Economics.

Volume (Year): 33 (2009)
Issue (Month): 4 (July)
Pages: 829-869

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Handle: RePEc:oup:cambje:v:33:y:2009:i:4:p:829-869

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Cited by:
  1. Jon D. Wisman, 2013. "Government Is Whose Problem?," Working Papers 2013-01, American University, Department of Economics.
  2. Luiz Carlos Bresser-Pereira, 2010. "The Global Financial Crisis and a New Capitalism?," Economics Working Paper Archive wp_592, Levy Economics Institute, The.
  3. Dan Herman, 2012. "The missing movement: a Polanyian analysis of pre-crisis America," International Journal of Social Economics, Emerald Group Publishing, vol. 39(8), pages 624-641, July.
  4. Robert Boyer, 2012. "The four fallacies of contemporary austerity policies: the lost Keynesian legacy," Cambridge Journal of Economics, Oxford University Press, vol. 36(1), pages 283-312.
  5. Jon D. Wisman, 2012. "Wage Stagnation, Rising Inequality and the Financial Crisis of 2008," Working Papers 2012-01, American University, Department of Economics.
  6. Jon D. Wisman & Barton Baker, 2010. "Rising Inequality and the Financial Crises of 1929 and 2008," Working Papers 2010-10 JEL classificatio, American University, Department of Economics.
  7. Palma, J.G., 2013. "How to create a financial crisis by trying to avoid one: the Brazilian 1999-financial collapse as "Macho-Monetarism" can't handle "Bubble Thy Neighbour" levels of inflows," Cambridge Working Papers in Economics 1301, Faculty of Economics, University of Cambridge.

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