Economy and Society · 2000 · 1.1K citations · 0 references
Social SciencesEconomicsPublic BudgetingEconomic PolicyMacroeconomicsMonetary EconomicsEconomic GrowthFinancial CrisesFinancial StabilityGrowth TheoryMonetary PolicyStructural AdjustmentEconomic Growth DynamicsEconomic Growth HistoryMonetary Policy HistoryNeoclassical Growth ModelNeoclassical Growth TheoryStructural InstabilityUse Of Communication TechnologiesWage Labour
Finance‑led growth is evaluated against Fordism’s successors, noting that adopting shareholder‑value norms demands new corporate governance, competition rules, wage‑labour relations, and macro‑policy frameworks, while the American “new economy” adds ICT diffusion, flexible labour, and a shift to services, making finance a component but not the entirety of this emerging regime. The authors construct a purely hypothetical model by assembling hypotheses drawn from current American trends. The model shows that higher profit demands alter wages and activity through accelerator effects, that equity‑based stability hinges on monetary policy to curb bubbles—otherwise finance diffusion can destabilize the economy—and that the U.S., whose economy best fits the model, could be the source of the next major crisis.
The viability and desirability of a finance-led growth regime is first assessed against the historical evidence about the many alternative regimes that have been proposed as successors to Fordism. A purely hypothetical model is then built by assembling various hypotheses derived from the observation of current American trends. The imposition of financial norms, such as shareholder value, requires a new and coherent architecture for the mode of governance of firms, the form of competition, the wage labour nexus and the objectives of monetary policy, public budget and tax system. According to the model, any requirement for increased profit has a variable macro-economic impact on wages and economic activity according to the size of accelerator effects and the relative importance of wage and profit in income formation. The stability of an equity-based regime depends on monetary policy which controls financial bubbles and thus the diffusion of finance may push the economy into a zone of structural instability. The next major financial crisis may originate in the USA whose economy approximates most closely to the model. But, the so-called American 'new economy' combines diverse but interdependent structural transformations: diffusion of Information and Communication Technologies, search for new rules for competition, increased flexibility in wages and employment, shift from manufacturing to services. Finance is an element in, but not the whole of, this complex emerging regime.