Income Dynamics, Economic Rents and the Financialization of the ...

More documents

Recommendations

Info

tional market accounts is that rent theory questions the free market assumption that actors are fairly rewarded according to their productivity under the assumption of competitive markets. It argues that markets are not neutral but subject to political, institutional, and ideological competition and dominance. Sociologists increasingly use some variant of rent theory to explain income inequality dynamics. For example, Weeden (2002) demonstrates that actors organized into occupations that through state licensing successfully close off access to those occupations (i.e. control labor supply) receive higher wages. Focusing on change since 1980 in US income inequality Morgan and colleagues document industry linked selective rent destruction to the declining fortunes of blue collar workers in general and the white working class in particular (Morgan and Tang 2007; Morgan and McKerrow 2004). We see the accumulation of both profits and higher earnings in the finance sector post- deregulation as reflecting the new institutional autonomy granted an increasingly concentrated industry by the neoliberal state. These institutional transformations in the field of market regula- tions and expectations have increased the ability of actors in the finance sector to secure economic rents (Fligstein and Goldstein 2010). In addition, the deregulation of the finance industry al- lowed the industry to both create new financial instruments and redefine market behavior (MacKenzie and Millo 2003) in an environment in which government regulation of new instruments did not occur. In the next section we outline these institutional shifts. Rent theory is explicit in stating where money rents come from. When economic rents are associated with the power of firms (or industries) to reduce competition, above market profits come from the consumers who pay higher prices than they otherwise would. Similarly, employ- ment rents (above market wages to employees) are derived from some combination of other em- 12
ployees, a lower capital share of income, or passing high labor costs on to customers. Such market power has been linked to relative power in supplier as well as consumer exchange networks (Burt 1983), in production (Tomaskovic-Devey et al 2009) or in both (Tomaskovic-Devey and Skaggs 1999). Others have referred to this income distribution process as one of exploitation in which the material conditions on one actor are dependent on the contributions of exchange part- ners (Roemer 1982; Tilly 1998; Sakamoto and Liu 2006). Rent, market power and exploitation approaches all agree that relatively powerful actors are more likely to receive and be able to defend a greater share of available income. Convention- al rent theory takes as a moral baseline that income distributions should reflect the value of actors in a perfectly competitive market (Sorenson 2000). Others are more likely to evaluate the distribution of income as just when actors’ share of contribution to production is realized in their earnings (e.g. Sakamoto and Liu 2006). Roemer (1982), in the most radical exploitation formula- tion, saw the just distribution of income as when each actor receives their national per capita share of income. All other income distributions reflect the relative power of actors in states, markets and organizations to extract income from other actors. These moral baselines are clearly analytic abstractions, unlikely to be observed in the real world. To us what matters most theoreti- cally is what they share, which is an understanding that income is intrinsically associated with the historically contingent relative power of actors in both organizations and markets, rather than simple reflections of productivity differences. Regardless of the baseline model, these approaches all share an assumption of income distributions as socially negotiated, rather than natural or inevitable. Rent destruction or creation is expected to respond to shifts in the relative power of actors in markets or production to make claims on income flows. In the most agentic version this shift will follow a political process in which organized actors secure and protect their own rents 13
Page 1 and 2: Income Dynamics, Economic Rents and
Page 3 and 4: “I think everybody a few years ag
Page 5 and 6: economic sociology and political ec
Page 7 and 8: tion but since the two trends are l
Page 9 and 10: their profits as taxable income. Th
Page 11: While we have established that the
Page 15 and 16: income dynamics, which should follo
Page 17 and 18: serve Bank, led by Paul Voker, foug
Page 19 and 20: anks profitability, the second and
Page 21 and 22: Together these shifts in the instit
Page 23 and 24: nancial engagement of non-financial
Page 25 and 26: count suggests a certain happenstan
Page 27 and 28: The other finance sector industries
Page 29 and 30: from the society overall. The emplo
Page 31 and 32: as dramatic. In the Security indust
Page 33 and 34: egulatory relaxation and a general
Page 35 and 36: occurred if finance sector actors h
Page 37 and 38: of total national profits in the fi
Page 39 and 40: swaps. Clearly, the market and poli
Page 41 and 42: Our analysis points to the federal
Page 43 and 44: ents from other actors in the econo
Page 45 and 46: Krippner, Greta. 2005. “The Finan
Page 47 and 48: Stockhammer, Engelbert. 2004. “Fi
Page 49 and 50: %GDP 10 15 20 25 30 35 Figure 1. Fi
Page 51 and 52: Ratio 1.0 1.1 1.2 1.3 1.4 1.5 1.6 1
Page 53 and 54: %Profits 0 5 10 15 20 Figure 5. Fin
Page 55 and 56: Ratio 1.0 1.5 2.0 2.5 3.0 Figure 7.
Page 57 and 58: Table 1. Summary of Institutional A
Page 59 and 60: Appendix A. Industry classification
Page 61 and 62: Appendix B. Sector and industry shi

Income Dynamics, Economic Rents and the Financialization of the ...

Create successful ePaper yourself

Delete template?

Save as template?