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The Neoliberal Paradox: The Impact of Destructive Product Market Competition and Impatient Finance on Nonfinancial Corporations in the Neoliberal Era

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  • James Crotty

Abstract

The evolution of financial markets in the neoliberal era has created serious problems for large nonfinancial corporations already harmed by the slow aggregate demand growth and destructive competition of the period. Financial market pressures led to shorter planning horizons, a declining allegiance of stake-holders to long-term corporate goals, and a large increase in the percentage of cash flow paid to financial market agents. The net result is a “neoliberal paradox†: financial markets demand that corporations achieve ever higher profits, while product markets make this result impossible to achieve. The neoliberal paradox helps explain the outbreak of financial accounting fraud in the late 1990s.
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Suggested Citation

  • James Crotty, 2005. "The Neoliberal Paradox: The Impact of Destructive Product Market Competition and Impatient Finance on Nonfinancial Corporations in the Neoliberal Era," Research Briefs rb2003-5, Political Economy Research Institute, University of Massachusetts at Amherst.
    • Handle: RePEc:uma:perirb:rb2003-5
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    1. Lazonick, William & O'Sullivan, Mary, 1996. "Organization, Finance and International Competition," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 5(1), pages 1-49.
    2. James Crotty, 2002. "Why There Is Chronic Excess Capacity," Challenge, Taylor & Francis Journals, vol. 45(6), pages 21-44.
    3. James Crotty, 2002. "The Effects of Increased Product Market Competition and Changes in Financial Markets on the Performance of Nonfinancial Corporations in the Neoliberal Era," Working Papers wp44, Political Economy Research Institute, University of Massachusetts at Amherst.
    4. James Crotty, 2000. "Structural Contradictions of the Global Neoliberal Regime," Review of Radical Political Economics, Union for Radical Political Economics, vol. 32(3), pages 361-368, September.
    5. Nicholas Phelps & Philip Raines (ed.), 2003. "The New Competition for Inward Investment," Books, Edward Elgar Publishing, number 2500.
    6. James Crotty, 2000. "Slow Growth, Destructive Competition, and Low Road Labor Relations: A Keynes-Marx-Schumpeter Analysis of Neoliberal Globalization," Working Papers wp6, Political Economy Research Institute, University of Massachusetts at Amherst.
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