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Inequality and Growth: Marxian and Post-Keynesian/Kaleckian Perspectives on Distribution and Growth Regimes Before and After the Great Recession

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Abstract

The re-distribution of income from labour to capital, from workers to top-managers and from low income households to the rich has been an important feature of finance-dominated capitalism since the early 1980s. After the Great Financial Crisis and the Great Recession in 2007−9, the recovery has been sluggish so far, and this has given rise to a renewed discussion about stagnation tendencies in capitalist economies. In orthodox approaches, income distribution only has a restricted role to play, if at all, but the interaction between distribution and growth is at the centre of Marxian and post-Keynesian/Kaleckian approaches when it comes to explaining medium- to long-run trends of economic growth—and stagnation. This contribution thus provides Marxian and Kaleckian assessments of the distribution and growth regimes under finance-dominated capitalism, both before and after the recent crisis. Finally, an interpretation of stagnation tendencies in a demand-led endogenous growth model with Kaleckian, Kaldorian and Marxian features is presented.

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Notes

  1. 1.

    For more country specific information on these three debt -led private demand boom economies, before and after the crisis, see for example, Evans (2016) on the US, Lepper et al. (2016) on the UK and Ferreiro et al. (2016) on Spain.

  2. 2.

    For more country specific information on these two export-led mercantilist economies, before and after the crisis, see for example, Detzer and Hein (2016) on Germany and Stenfors (2016) on Sweden.

  3. 3.

    For more country specific information on the domestic demand-led economy of France , before and after the crisis, see, for example, Cournilleau and Creel (2016).

  4. 4.

    For a basic overview over Marxian theories of capital accumulation, see Shaikh (1978).

  5. 5.

    Marx’s theory also allows for another interpretation, in which aggregate demand, finance, credit and interest rates matter for the determination of long-run accumulation and growth , as for example Argitis (2001) and Hein (2006) have discussed.

  6. 6.

    Rising inequality in personal and household incomes, leading to higher average propensities to save out of wages and out of profits and to a higher differential between these two rates, should shift the saving rate curves in Fig. 3a, b rightwards and rotate them clockwise. Long-run equilibrium saving and accumulation rates thus rise. The effect on net exports depends on the development of domestic profit rates relative to foreign rates and on other institutional factors determining international capital movements.

  7. 7.

    “In the neoliberal era (1983–2007, EH), cheap finance became a way to expand employment through finance-related activities like real estate booms, export-led growth , foreign remittance growth , and so on. The crisis put an end to most of that” (Shaikh 2016, p. 739).

  8. 8.

    “The structural crisis of the neoliberal SSA finally arrived, not due to a falling rate of profit, but due to the collapse of unsustainable trends that were essential features of the neoliberal SSA and of its ability to promote capital accumulation” (Kotz 2013, p. 345).

  9. 9.

    “It was this underlying stagnation tendency (…) which was the reason the economy became so dependent on financialisation – or decades-long series of ever-larger speculative financial bubbles. In fact, a dangerous feedback loop between stagnation and financial bubbles has now emerged, reflecting the fact that stagnation and financialisation are increasingly interdependent phenomena: a problem which we refer to (…) as the stagnation -financialisation trap” (Foster and McChesney 2012, p. 4).

  10. 10.

    The treatment of the rate of capacity utilisation as a long-run endogenous variable has been criticised, as reviewed by Hein (2014, Chapter 11) and Lavoie (2014, Chapter 6.5).

  11. 11.

    For the inclusions of the effects of costs of imported raw materials and intermediate products on the domestic profit share see Hein (2014, Chapter 7.3).

  12. 12.

    Most of the empirical estimations of the post-Kaleckian model find only little or no significant effects of profitability variables on investment . See Hein (2014, Chapter 7), Blecker (2016) and Stockhammer (2017) for recent reviews.

  13. 13.

    Technical change is thus assumed to be ‘Harrod-neutral’, as in many post-Keynesian/Kaleckian distribution and growth models (Hein 2014, Chapter 8).

  14. 14.

    See Hein (2014, Chapter 7.3) for a more detailed open economy Kaleckian distribution and growth model.

  15. 15.

    More extensive and detailed elaborations on these regimes in Kaleckian stock-flow consistent models can be found in Hein (2014, Chapter 10) and in Detzer (2018), for example.

  16. 16.

    See Onaran and Galanis (2014) for supportive estimation results showing that globally simultaneous hikes in the profit share drastically reduce potentially positive effects on net exports and thus make overall wage-led results even more likely.

  17. 17.

    See the contributions in Teulings and Baldwin (2014). For the presentation of post-Keynesian/Kaleckian critique of the current debate on ‘secular stagnation ’ and for alternative interpretations of current stagnation tendencies, see Cynamon and Fazzari (2015, 2016), Hein (2016) and Palley (2016).

  18. 18.

    For analytical treatments see Hein (2014, Chapter 8; 2017a).

  19. 19.

    For a more detailed discussion see Hein (2016, 2017a).

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Acknowledgements

For helpful comments I would like to thank Philip Arestis, Daniel Detzer and Franz J. Prante. I am also indebted to Ryan Woodgate and Sophie Rotermund for research and editing assistance. Remaining errors are mine, of course.

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    Eckhard Hein

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  1. Department of Land Economy, University of Cambridge, Cambridge, UK

    Philip Arestis

  2. University of Leeds , Leeds, UK

    Malcolm Sawyer

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Hein, E. (2018). Inequality and Growth: Marxian and Post-Keynesian/Kaleckian Perspectives on Distribution and Growth Regimes Before and After the Great Recession. In: Arestis, P., Sawyer, M. (eds) Inequality. International Papers in Political Economy. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-91298-1_3

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