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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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  • Baines, Joseph
  • Hager, Sandy Brian

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

  • Baines, Joseph & Hager, Sandy Brian, 2019. "Financial Crisis, Inequality, and Capitalist Diversity: A Critique of the Capital as Power Model of the Stock Market," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, issue Online Fi.
    • Handle: RePEc:zbw:espost:196607
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    References listed on IDEAS

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    1. Nitzan, Jonathan & Bichler, Shimshon, 2009. "Capital as Power. A Study of Order and Creorder," EconStor Books, ZBW - Leibniz Information Centre for Economics, number 157973, March.
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    5. Joseph Baines, 2014. "Food Price Inflation as Redistribution: Towards a New Analysis of Corporate Power in the World Food System," New Political Economy, Taylor & Francis Journals, vol. 19(1), pages 79-112, January.
    6. Brennan, Jordan, 2013. "The Power Underpinnings, and Some Distributional Consequences, of Trade and Investment Liberalisation in Canada (Preprint)," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 18(5), pages 715-747.
    7. Salvatore Morelli & Anthony Atkinson, 2015. "Inequality and crises revisited," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 32(1), pages 31-51, April.
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    9. Joshua K. Hausman & Johannes F. Wieland, 2015. "Overcoming the Lost Decades? Abenomics after Three Years," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 46(2 (Fall)), pages 385-431.
    10. Herman Mark Schwartz, 2016. "Banking on the FED: QE1-2-3 and the Rebalancing of the Global Economy," New Political Economy, Taylor & Francis Journals, vol. 21(1), pages 26-48, February.
    11. Till Treeck, 2014. "Did Inequality Cause The U.S. Financial Crisis?," Journal of Economic Surveys, Wiley Blackwell, vol. 28(3), pages 421-448, July.
    12. McMahon, James, 2018. "Is Hollywood a Risky Business? A Political Economic Analysis of Risk and Creativity," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, issue Online Fi, pages 1-24.
    13. Di Muzio, Tim, 2007. "The 'Art' of Colonisation: Capitalising Sovereign Power and the Ongoing Nature of Primitive Accumulation," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 12(4), pages 517-539.
    14. Bichler, Shimshon & Nitzan, Jonathan, 2012. "Capital as Power: Toward a New Cosmology of Capitalism," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, issue 61, pages 65-84.
    15. Cochrane, David Troy, 2017. "Differentiating Diamonds: Transforming Knowledge and the Accumulation of De Beers," Working Papers on Capital as Power 2017/01, Capital As Power - Toward a New Cosmology of Capitalism.
    16. Sandy Brian Hager, 2014. "What Happened to the Bondholding Class? Public Debt, Power and the Top One Per Cent," New Political Economy, Taylor & Francis Journals, vol. 19(2), pages 155-182, March.
    17. Jordan Brennan, 2013. "The Power Underpinnings, and Some Distributional Consequences, of Trade and Investment Liberalisation in Canada," New Political Economy, Taylor & Francis Journals, vol. 18(5), pages 715-747, October.
    18. Hager, Sandy Brian, 2014. "What Happened to the Bondholding Class? Public Debt, Power and the Top One Per Cent (Preprint)," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 19(2), pages 155-182.
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    Cited by:

    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.
    2. Nitzan, Jonathan & Bichler, Shimshon, 2019. "The Harder They Fall," EconStor Preprints 191311, ZBW - Leibniz Information Centre for Economics.

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    More about this item

    Keywords

    capital as power; comparative capitalisms; financial crisis; inequality; stock market;
    All these keywords.

    JEL classification:

    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State
    • G01 - Financial Economics - - General - - - Financial Crises
    • D3 - Microeconomics - - Distribution
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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