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The market turn: from social democracy to market liberalism

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  • Avner Offer

Abstract

Social democracy and market liberalism provide different solutions to the same problem: how to provide for life‐cycle dependency. Social democracy makes lateral transfers from producers to dependents by means of progressive taxation. Market liberalism uses financial markets to transfer financial entitlement over time. Social democracy came up against the upper limits of public expenditure in the 1970s. The ‘market turn’ from social democracy to market liberalism was enabled by liberalized credit in the 1980s. Much of this was absorbed into homeownership, which attracted majorities of households (and voters) in the developed world. Early movers did well, but eventually easy credit drove house prices beyond the reach of younger cohorts. Debt service diminished effective demand, which instigated financial instability. Both social democracy and market liberalism are currently in crisis.

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  • Avner Offer, 2017. "The market turn: from social democracy to market liberalism," Economic History Review, Economic History Society, vol. 70(4), pages 1051-1071, November.
    • Handle: RePEc:bla:ehsrev:v:70:y:2017:i:4:p:1051-1071
    DOI: 10.1111/ehr.12537
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    Cited by:

    1. Monnet, Eric, 2017. "Credit controls as an escape from the trilemma. The Bretton Woods experience," CEPR Discussion Papers 12535, C.E.P.R. Discussion Papers.
    2. Avner Offer, 2018. "Patient and impatient capital: time horizons as market boundaries," Oxford Economic and Social History Working Papers _165, University of Oxford, Department of Economics.

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    More about this item

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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