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Financial Crisis, Inequality, and Capitalist Diversity: A Critique of the Capital as Power Model of the Stock Market

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  • Joseph Baines
  • Sandy Brian Hager

Abstract

The relationship between inequality and financial instability has become a thriving topic of research in heterodox political economy. This article offers the first critical engagement with one framework within this wider literature: the Capital as Power (CasP) model of the stock market developed by Shimshon Bichler and Jonathan Nitzan. Specifically, we extend the CasP model to other advanced capitalist countries, including Germany, France, the United Kingdom, and Japan. Our findings affirm the core prediction of the CasP model, showing that unequal power relations reliably predict future stock market performance. Yet when it comes to the CasP model’s explanation of why power relations predict stock market returns, our findings are more ambiguous. We find little empirical support for the claims that capitalist power is dialectically intertwined with systemic fear, and that systemic fear and capitalised power are mediated through strategic sabotage. The main lesson of our analysis is that any model of the stock market must be attentive to the geographical unevenness and continued national diversity in capitalist development.

Suggested Citation

  • Joseph Baines & Sandy Brian Hager, 2020. "Financial Crisis, Inequality, and Capitalist Diversity: A Critique of the Capital as Power Model of the Stock Market," New Political Economy, Taylor & Francis Journals, vol. 25(1), pages 122-139, January.
    • Handle: RePEc:taf:cnpexx:v:25:y:2020:i:1:p:122-139
    DOI: 10.1080/13563467.2018.1562434
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    Cited by:

    1. Tereza Matasová & Marek Vochozka & Zuzana Rowland, 2022. "Alternative costs of equity of coal mining companies taking into account a context of the Russian Invasion into Ukraine," Entrepreneurship and Sustainability Issues, VsI Entrepreneurship and Sustainability Center, vol. 10(2), pages 394-407, December.
    2. McMahon, James, 2020. "Reconsidering systemic fear and the stock market: A reply to Baines and Hager," Working Papers on Capital as Power 2020/04, Capital As Power - Toward a New Cosmology of Capitalism.
    3. McMahon, James, 2021. "Reconsidering Systemic Fear and the Stock Market: A Reply to Baines and Hager," Review of Capital as Power, Capital As Power - Toward a New Cosmology of Capitalism, vol. 2(1), pages 30-70.
    4. Bichler, Shimshon & Nitzan, Jonathan, 2020. "Growing through Sabotage: Energizing Hierarchical Power," Review of Capital as Power, Capital As Power - Toward a New Cosmology of Capitalism, vol. 1(5), pages 1-78.

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