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Reconsidering Systemic Fear and the Stock Market: A Reply to Baines and Hager

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  • McMahon, James

Abstract

This article responds to Baines and Hager’s recent critique of the capital-as-power model of the stock market. Proposed by Bichler and Nitzan, this model seeks to explain how financial crises are tied to the concept of ‘systemic fear’. Bichler and Nitzan tested their initial model on US data, finding a strong correlation between capitalist power (as they measure it) and systemic fear. However, when Baines and Hager extended the model to four other countries, they found conflicting results. I respond to Baines and Hager, and argue that they were perhaps too quick to dismiss systemic fear as a useful concept. I re-examine systemic fear in twelve countries, and find that (with a few exceptions), it correlates with capitalist power. These results suggest that the notion of ‘systemic fear’ is useful for studying both capitalist crisis and national diversity in capitalist development.

Suggested Citation

  • 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.
    • Handle: RePEc:zbw:caprev:242972
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    File URL: https://www.econstor.eu/bitstream/10419/242972/1/20210800-mcmahon-reconsidering-systemic-feart.pdf
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    References listed on IDEAS

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    1. Nitzan, Jonathan & Bichler, Shimshon, 2001. "Going Global: Differential Accumulation and the Great U-turn in South Africa and Israel," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 33(1), pages 21-55.
    2. Bichler, Shimshon & Nitzan, Jonathan, 2016. "A CasP Model of the Stock Market," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, issue 77, pages 119-154.
    3. Nitzan, Jonathan & Bichler, Shimshon, 2009. "Capital as Power. A Study of Order and Creorder," EconStor Books, ZBW - Leibniz Information Centre for Economics, number 157973, June.
    4. 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.
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    1. Bichler, Shimshon & Nitzan, Jonathan, 2023. "The Capital As Power Approach. An Invited-then-Rejected Interview with Shimshon Bichler and Jonathan Nitzan," Review of Capital as Power, Capital As Power - Toward a New Cosmology of Capitalism, vol. 2(2), pages 96-174.

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    More about this item

    Keywords

    capitalization; capital as power; sabotage; stock market; systemic fear;
    All these keywords.

    JEL classification:

    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State
    • G1 - Financial Economics - - General Financial Markets
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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