Showing papers in "Socio-economic Review in 2014"

Making sense of financialization

Abstract: Since the early 2000s, scholars from a variety of disciplines have used the concept of financialization to describe a host of structural changes in the advanced political economies. Studies of financialization interrogate how an increasingly autonomous realm of global finance has altered the underlying logics of the industrial economy and the inner workings of democratic society. This paper evaluates the insights of more than a decade of scholarship on financialization. Three approaches will be discussed: the emergence of a new regime of accumulation, the ascendency of the shareholder value orientation and the financialization of everyday life. It is argued that a deeper understanding of financialization will lead to a better understanding of organized interests, the politics of the welfare state, and processes of institutional change.

What is missing? Cultural processes and causal pathways to inequality

Abstract: Thispaperprovidesaframeworkforunderstandingthewaysinwhichsocialprocesses produce social inequality. Specifically, we focus on a particular type of social process that has received limited attention in the literature and in which inter-subjective meaning-making is central: cultural processes. Much of the literature on inequality has focused on the actions of dominant actors and institutions in gaining access to material and non-material resources, or on how ecological effects cause unequal access to material resources. In contrast, we focus on processes that contribute to the production (and reproduction) of inequality through the routine and takenfor-granted actions of both dominant and subordinate actors. We highlight two types of cultural processes: identification and rationalization. We describe and illustrate four processes that we consider to be significant analytical exemplars of these two types of cultural processes: racialization and stigmatization (for identification) and standardization and evaluation (for rationalization). We argue that attention to such cultural processes is critical and complementary to current explanations of social inequality.

Do economists make policies? On the political effects of economics

Abstract: Economics is often described as the most politically influential social science and yet economic advice is often largely irrelevant to prominent policy debates. We draw on literatures in political science, sociology and science and technology studies to explain this apparent contradiction. Existing research suggests that the influence of economics is mediated by local circumstances and meso-level social structures, and thatmuchof it flows through indirect channels.Weelaborate three sitesofanalysis useful for unpacking these influences: the broad professional authority of economics, the institutional position of economists in government, and the role of economics in the cognitive infrastructure of policymaking, including the diffusion of economic styles of reasoning and the establishment of economic policy devices for seeing and deciding.

Income inequality and redistribution in post-industrial democracies: demographic, economic and political determinants

Abstract: This article analyses the determinants of market income distribution and governmental redistribution. The dependent variables are Luxembourg Income Study data on market income inequality (measured by the Gini index) for households with a head aged 25–59 years and the per cent reduction in the Gini index by taxes and transfers. We test the generalizability of the Goldin–Katz hypothesis that inequality has increased in the USA because the country failed to invest sufficiently in education. The main determinants of market income inequality are (in order of size of the effect) family structure (single mother households), union density, deindustrialization, unemployment, employment levels and education spending. The main determinants of redistribution are (in order of magnitude) left government, family structure, welfare state generosity, unemployment and employment levels. Redistribution rises mainly because needs rise (that is, unemployment and single mother households increase), not because social policy becomes more redistributive.

Why don't governments need trade unions anymore? The death of social pacts in Ireland and Italy

Abstract: During the 1990s, a prominent strategy of economic adjustment to the challenges ofcompetitivenessandbudgetary retrenchmentamongthenon-corporatist countries of Europe was the negotiation of social pacts. Since the onset of the great recession and the Eurozone crisis, social pacts have been conspicuous by their absence. Why have unions not been invited into government buildings to negotiate paths of economic adjustment in the countries hardest hit by the crisis? Drawing on empirical experiences from Ireland and Italy—two cases on which much of the social pact literature concentrated—this article attributes the exclusion of unions to their declining legitimacy. Unions in the new European periphery have lost the capacity either to threaten governments with the stick of protest or to seduce policymakers with the carrot ofproblem-solving.Theyarenowseenasanarrow interest group likeanyother.

Dualization, crisis and the welfare state

Abstract: Labour market dualization (an increasing separation between insiders and outsiders) has become an influential feature of many OECD economies since 1980s. This paper argues that dualization mitigates the generosity of the welfare state in a significant way. It also investigates the relationship between dualization and policies that protect and insure against unemployment. The compensating role of social policy is shown to be limited in cases where dualization is more significant. The paper then focuses on the relationship between dualization and the welfare state during the present crisis. It emphasizes the influence of insider–outsiderdifferences on both the nature of unemployment and the responsiveness of social policy during the Great Recession.

Macroeconomic and institutional determinants of financialisation of non-financial firms: Case study of Turkey

Abstract: We observe that industrial firms in Turkey have shifted substantial amounts of working capital from production activities to the purchase of high-yield interest-bearing assets, most notably public bonds, to ensure immediate short-term interest revenues. Introducing the new and historical institutional literatures to the financialisation research, this article empirically examines the influences of macroeconomic and institutional factors on non-financial firms’ financialisation behaviour for the period 1990–2002. The findings from panel regression analyses using data from 41 firms listed on the Istanbul Stock Exchange indicate that both macroeconomic and institutional factors influence financialisation behaviour to different degrees. Turkish non-financial firms particularly engage in financialisation as a response to highly uncertain macroeconomic conditions. The findings indicate that the key characteristics of state-organised business system in Turkey, such as firms’ ties with the government and family ownership, are not conducive to financialisation behaviour.

Education, economic inequality and the promises of the social investment state

Abstract: Since the mid-nineties, social policy orientation in advanced societies has moved towards the social investment state model. This transformation of social policy towards preventive (“early”) investment in education rather than (“later”) economic redistribution, or towards social investment rather than “passive” social spending, raises the question of whether, and if so, what kind of associations exist between educational and economic inequalities. This question is addressed in this paper using an international comparison of 20 advanced economies. The results of the analyses suggest that education as an “equalizer” should not be overestimated, and that social investment policy should not be narrowly understood as “education only politics”. Direct redistribution is much more likely than education to combat poverty in advanced societies. Yet, the analyses also show that reducing educational deprivation (as one dimension of inequality of educational outcomes) positively influences the degree of economic inequality. In addition, reducing economic inequalities in the parent’s generation enhances equality in educational outcomes in the children’s generation.

The politics of opting out: explaining educational financing and popular support for public spending

Abstract: In this paper, we address two empirical puzzles: Why are cross-country differences inthedivisionoflabourbetweenpublicandprivateeducationfundingsolargeand whyaretheypoliticallysustainableinthelongterm?Wearguethatelectoralinstitutions play a crucial role in shaping politico-economic distributive coalitions that affected the original division of labour in education financing. In proportional representationsystems,thelowerandmiddleclassesformedacoalitionsupportingthe establishment of a system with a large share of public funding. In majoritarian systems, in contrast, the middle class voters aligned with the upper income class and supported private education spending instead. Once established, institutional arrangements create feedback effects on the micro-level of attitudes, reinforcing politicalsupportevenamonguppermiddleclassesinpublicsystems.Thesehypotheses are tested empirically both on the micro level of preferences as well as on the macrolevelwith aggregatedataandsurveydatafromtheISSPfor20Organization for Economic Co-operation and Development countries.

Sucker Punched by the Invisible Hand: the World Financial Markets and the Globalization of the U.S. Mortgage Crisis*

Abstract: The worldwide financial crisis that began in 2007 was set off by the collapse of the subprime mortgage market in the USA The crisis simultaneously reverberated to banks around the world, and event

Explaining corporate short-termism: self-reinforcing processes and biases among investors, the media and corporate managers

Abstract: Based on the related literature in economics, organizational sociology and the sociology of finance, this article constructs a novel conceptual explanation for corporate short-termism, that is, the ...

Introducing grey areas: the unexpectedly weak link between corporate irresponsibility and reputation

Abstract: At the 2013 Annual Symposium of the OxfordUniversity Centreof Corporate Reputation, a roundtable was convened to discuss the reputational dynamics surrounding corporations engaged in ethical ‘grey areas’, where actions are likely to be deemed as being socially irresponsible and often later result in public scandal. The presenters wrote up their comments in the form of short essays which are collected together in this forum. The introductory piece by Jackson and Brammer challenges the conventional wisdom that irresponsible behaviour by corporations is associated with strong reputational penalties. In various ways, the Discussion Forum contributors explore why this link may be weak or highly contingent, focusing on dynamics at different levels of analysis. Karpoff identifies grey areas of firm behaviour characterized by market failures around both negative and positive externalities, and reviews evidence showing prospects and limits of reputation in this context. The next two contributions by Lange and Zavyalova address problems with the social attribution of irresponsible behaviour at a micro level of analysis. Harrington shows further how micro-level attributions are shaped by wider historical and institutional contexts bypresentingevidenceon how individual investors responded to thewidespreadfraud inwakeoffinancial crises in theUSA.PartnoyandKingstress the roleof public and private forms of regulation, stressing the role of macro-level institutions in defining legitimate behaviour and framing expectations about what is responsible or irresponsible. Applying these various concepts, Deephouse reconstructs the history of Apple’s encounters with grey areas and the reputational consequences thereof.

Analysing the uneven development of private equity in Europe: legal origins and diversity of capitalism

Abstract: Based on the literature on the Diversity of Capitalism (DoC) and Legal Origin (LO), this paper examines the role of institutional configurations in the uneven development of Private Equity (PE) in 18 European countries. The paper shows that developed stock markets, the ability of limited partners (insurance companies) to invest in LBO funds and low employment protection are more important determinants than investor protection in the case of LBO investments. However, VC investments are found to be positively associated with investor protection but also with developed stock markets and favourable tax rates for managers. R&D tax incentives for investee companies are found to have a negative impact on VC investments, which are nonetheless promoted by public R&D expenditures. Even if national institutional configurations matter in explaining differences, as emphasised by LO and DoC, we observe a common trend in PE development and financialisation.

Is it the income distribution or redistribution that affects growth

Abstract: *Thisstudyaddressesthecentralquestioninpoliticaleconomyhowtheobjectivesof attaining economic growth and restricting income inequality are related. Thus far few studies explicitly distinguish between effects of income inequality as such and effects of redistributing public interventions to equalize incomes on economic growth.Infact, most studiesrelyondatathatdonot makethis distinctionproperly and in which top-coding is applied so that enrichment at the top end of the distribution is not adequately captured. This study aims to contribute using a pooled time-series cross-section design covering 29 countries, using OECD, LIS, and World Top Income data. No robust association between inequality and growth or redistribution and growth is found. Yet there are signs for a positive association between top incomes and growth, although the coefficient is small and a causal interpretation does not seem to be warranted.

Polarizers or landscape groomers? An empirical analysis of party donations by the 100 largest German companies in 1984–2005

Abstract: =1490698. Becht, M., Bolton, P. and Roell, A. (2005) Corporate Governance and Control. ECGI Working Paper 02/2002, updated 2005, Brussels, European Corporate Governance

Filling the Meso-Level Gap in Stratification Theory.

Abstract: The first chapter of my book Categorically Unequal, which Lamont, Beljean, and Clair specifically cite in their article, was entitled “How Stratification Works” and in it I sought to sketch out a simple theoretical framework to explain how inequality was produced, one that bridged the micro- and macro-levels of analysis. At the micro-level I drew heavily on the work of Susan Fiske (2003) and her stereotype content model (Fiske et al. 2002) whereas at the macro-level I drew heavily on the work of Charles Tilly (1998) and his theory of durable inequality. At the time I was writing in 2006, I was acutely aware that my synthesis elided a sizeable conceptual gap by failing to elucidate how categorical processes of stratification at the micro-level translated into categorical processes of inequality at the macro-level. At that time, I was not aware of any systematic body of thought that clearly elaborated on processes of stratification at the meso-level, and I was not in a position to invent one myself as I was writing under a deadline (the book was commissioned to commemorate the centennial of the Russell Sage Foundation in 2007). To fill the void, I briefly mentioned Tilly’s (1998) concepts of adaptation and emulation as mechanisms by which stratification diffused throughout a society and included some vague language about framing (Kahneman and Tversky 2000) and boundary work (Lamont and Molnar 2002), noting that “boundary work involves defining categories in the social structure, and framing involves defining them in human cognition,” but I was silent on the specifics” (Massey 2007, p. 15). After the book’s publication (on-time!), the meso-level gap in my thinking kept gnawing at me so you can imagine the interest and appreciation I felt when I read Lamont et al.’s essay on cultural processes and their role in the production of inequality, for in it the authors provide just the sort of theoretical framing and conceptual language that I lacked in 2006 to connect micro- and macro-levels of the American stratification system. In retrospect, it seems obvious to me now that the conceptual bridge I sought would somehow involve culture, given that it is the quintessential tool that human beings rely upon to adapt to whatever environment they inhabit, using shared meanings and commonly understood scripts to cohere socially and act collectively to deal with problems as they arise. For whatever reason, however, I didn’t go down that path in my conceptualization of the stratification process. Perhaps it is unsurprising that I did not follow the cultural path, for culture had long disappeared from sociological discussions of poverty and inequality. Unfortunately, in my view, sociology did itself a grave disservice when it demonized and ostracized Oscar Lewis following the 1966 publication of his book, La Vida: A Puerto Rican Family in the Culture of Poverty, for which he was vilified and accused of “blaming the victim.” For decades it was not possible to use culture and poverty in the same sentence in polite sociological company. A careful reading of his original work, however, reveals that Lewis grounded his cultural argument firmly within social structure. Rather that viewing culture as an exogenous entity that autonomously generates and reproduces poverty, he argued that people living under conditions of prolonged material deprivation and social isolation—what we would now refer to as concentrated poverty—adapt by assuming attitudes and behaviors that facilitate survival within the impoverished structural niche they occupy, but which are counterproductive in the wider society, thereby exacerbating their disadvantage. Culture only began to creep slowly back into the sociological analysis of stratification with the publication of William Julius Wilson’s celebrated book The Truly Disadvantaged in 1987. In it, Wilson noted that the structural transformation of the urban economy had isolated urban black communities economically and disconnected them socially from the mainstream world of work, thereby rendering joblessness, welfare dependency, unwed childbearing, and shadowy ways of making a living normative rather than aberrant in ghetto neighborhoods. In 1993 Nancy Denton and I complemented Wilson’s argument in American Apartheid by pointing out that it was the unparalleled residential segregation of African Americans in the United States that caused the structural transformation of the urban economy to produce a uniquely high spatial concentration of black poverty in cities, which in turn generated the maladies that Wilson had noted and contributed to what we called a “culture of segregation.” Over the ensuing decades culture has steadily come to play a more central role in discussions of poverty and stratification, with its full emergence from the sociological closet signaled by the publication in 2010 of the volume Reconsidering Culture and Poverty, a special issue of the Annals of the American Academy of Political and Social Science edited by David Harding, Michele Lamont, and Mario Small. In many ways, the current article offers a conceptual synthesis of points made by authors in that volume as well as earlier works by the editors themselves and researchers such as Kathryn Edin (Edin and Kefalas 2005; Edin and Nelson 2013), Annette Lareau (200, 2003), Katherine Newman (2000), and many others. In the present article, Lamont et al. argue that two general cultural processes—identification and rationalization—act to connect social schemas embedded within individual cognition to mechanisms of stratification institutionalized in the social structure, thereby bridging the micro and the macro levels. Identification refers to cultural processes that generate individual and group identities and confers meaning upon those identities, and rationalization refers to processes that generate and apply universal, impersonal rules to individuals and groups according to rational principles generally intended to maximize efficiency. Each of these broad categories subsumes a large set of sub-processes, four of which the authors specifically discuss. Under the rubric of identification they discuss racialization, processes whereby social meaning becomes attached to phenotypic characteristics of group members, and stigmatization, whereby some achieved or ascribed attribute is discredited and individuals possessing it are socially rejected. Under the heading of rationalization, they discuss standardization, which is the process by which individuals, groups, and institutions construct uniform beliefs and practices according to agreed-upon rules, and evaluation, a cultural process that assesses group members in terms of measurable attributes to make judgments about worth and value. The opening chapter of Categorically Unequal was followed by successive chapters that discussed stratification on the basis of race, class, and gender, and how they intersect to produce inequality. It is clear to me now that what I was doing in these chapters was describing how the cultural processes of racialization, stigmatization, standardization, and evaluation operate within the United States to stratify American society. Were I to write the book now my first chapter would include a summary of the cultural process theory elaborated by Lamont et al. to foreshadow the narratives that would follow in later chapters. The various cultural processes they discuss are not mutually exclusive, of course. In the case of racial stratification, for example, African Americans have historically been oppressed through a vicious combination of racialization, stigmatization, standardization, and evaluation. Since the publication of Categorically Unequal I have worked to elucidate the ongoing racialization of Latinos in the United States (see Massey 2013b). In in successive publications I have traced the racialization of Latinos from past to present (Massey 2009); connected the current era of racialization to specific shifts in U.S. immigration and border policy in the 1960s (Massey and Pren 2012a); and identified the U.S. immigration system as a new and powerful race-making institution in the United States (Massey 2013a). I have shown how discrimination and exclusion associated with racialization s affected Latino identity formation (Massey and Sanchez 2010) while undermining their economic status (Massey and Gentsch 2011, 2014) and health (Ullmann, Goldman, and Massey 2011), ultimately creating a new underclass characterized by unprecedented mass illegality (Massey and Pren 2012b). Unfortunately, racialization remains a powerful cultural process in American society, even in the Age of Obama, and perhaps because the election of the nation’s first black president coincided with a demographic transformation will make white European-origin Americans a minority by mid-century, owing largely to the rapid growth of the Latino population.

Watching foreigners: how counterparties enable herds, crowds, and generate liquidity in financial markets

Abstract: This article provides a new view on the old problem of herding in the global south by foreign portfolio investors. It advocates a liquidity perspective that problematizes the capacity for a herd to form because of the absence of sufficient counterparties willing to trade. Drawing on ethnographic interviews with local professional investors in Malaysia (a substantively and theoretically important stock market) the findings are non-intuitive relative to the common-sense expectations of the information asymmetry and identity-based herding literatures. Although locals watch their foreign competitors closely, and therefore could imitate their trades, these small, local finance firms find few reasons to imitate these powerful international actors. Instead, locals enable crowds of foreigners because they are willing to be counterparties even when they perceive the foreigner’s trade as savvy, highly skilled, or informed. The conclusion explores implications for herding, global capital flows, and social structures that may generate liquidity in business-to-business markets. This article can also be downloaded from the Oxford Journals website.

The political economy of skills and inequality

Abstract: Rising socio-economic inequality is a common trend across advanced industrial democracies and its causes and consequences are still poorly understood.Certainly, the recent economic crisis has exacerbated the trend, in particular in countries most affected by the crisis, but the increase set in much earlier in the 1980s and even before. Furthermore, the trend cannot simply be explained by a return to markets because there has not been large-scale retrenchment of established welfare states. A very prominent explanation in economics is that new technology shifts the demand away from low-skilled and towards high-educated workers, stretching the income distribution as a result. Yet, these shifts in the demand have to be compared with shifts in the supply of skills. In the influential 2010 book by Goldin and Katz on ‘The Race between Education and Technology’, they estimate this relationship empirically over long periods of time in the case of the USA. Their results are revealing.While the rate of skill-biased technological change after 1980s was virtually identical to the previous two decades, the rise in the supply of college educated slowed markedly. Decelerating supply of skills, not accelerating demand, is therefore the main factor behind the rise in inequality. Goldin and Katz reject the notion that the USA has reached an upper limit for educational attainment, and they cite the success of other advanced democracies in expanding educational opportunities well beyond the levels in the USA. At the same time they do not offer a comparative analysis, and they stay strictly within the economic supply– demand framework that dominates the economic literature on inequality. The purpose of this special issue is to move beyond and ‘contextualize’ this narrow economic perspective by bringing together cutting-edge research on the causes and consequences of inequality in the fields of comparative political economy and economic sociology. The contributions do so in several ways. First, they document differences in the rate of change in the supply of skills, and the effect these differences have on the wage distribution. This helps account for at least some of the cross-national variance in the rise of income inequality since the 1980s. Second, the contributions explain the role of socio-economic institutions, in particular skill formation and collective bargaining, influencing the quantity andqualityof skill supply, aswell as thedemand for skilledworkers. Bydoing so,

Extra-representational types of political participation and models of trade unionism: a cross-country comparison

Abstract: Applying multi-level modelling to the four rounds of the European Social Survey currently available (2002, 2004, 2006 and 2008), our paper provides evidence of crosscountry divergence in the empirical association between extra-representational types of political participation and trade union membership. Cross-national differences in union members’ political participation of this kind, we argue, can be explained by the existence of models of unionism that differ with respect to the institutionalization of trade union activity and the opportunities for left-wing parties to gain access to executive power.