Hedging its Bets: The UK and the Politics of European Financial Services Regulation

Some argue that European financial services regulation is witnessing a shift from a ‘market-making’ to a ‘market-shaping’ paradigm after the global financial crisis. This so-called ‘new’ political economy explanation stresses the role of ideas to understand this change. We consider this claim by providing an in-depth examination of recent European hedge fund legislation from the perspective of two key ‘market-making’ coalition members: the UK government and the hedge fund industry. We accept that the legislation represents a set-back for the ‘market-makers’ but question whether it represents a victory for the ‘market-shapers’. Moreover, we cast doubt on the causal role of ideas, calling for a domestic politics approach.     

Racism and Far Right Imaginaries Within Neo-liberal Political Economy

ABSTRACT

This article focuses on the connections between neo-liberalism and the politics of the far right through the prism of race. Contesting the claims of neo-liberal theorists and politicians as to its ‘post-racial’ character, it seeks to both historise the significance of racism within neo-liberalism through its connections to liberal political thought and practice over the longue durée and examine the relationship between neo-liberalism and far right politics. It does this through (1) highlighting the political significance of the far right in securing the electoral–political hegemony of neo-liberalism within Britain and the United States since the early 1980s; and (2) the way in which the socio-economic insecurities produced by neo-liberalism have helped to provoke far right responses as an alternative form of racialised moral economy. Consequently, while the relationship between the far right and neo-liberalism is contradictory, racial signifiers and racism have provided an important means through which such contradictions have been eased.     

Fiscal policy and capital mobility: the construction of economic policy rectitude in Britain and France

This research examines the regulatory response of the European Union to the global financial crisis, addressing the questions of whether, how and why the global financial crisis has changed the ‘old’ politics of financial services regulation in the EU and resulted in the emergence of a ‘new’ politics. It is argued that, with a good dose of political opportunism and ‘anti-free market’ rhetoric, a continental advocacy coalition sponsoring a ‘market-shaping’ regulatory approach has capitalised on the crisis, tipping the balance of regulatory power in the EU in its favour, as compared to the pre-crisis situation.     

Opportunist politicians and the evolution of electoral competition

This paper studies a uni-dimensional model of electoral competition between two parties with two types of politicians. ‘Opportunist’ ones care only about the spoils of the office, and ‘militant’ ones have ideological preferences on the policy space. Opportunist politicians review their affiliations and may switch parties, seeking better election prospects. In this framework, we compare a winner-take-all system, where all the spoils of office go to the winner, to a proportional system, where the spoils of office are split among the two parties in proportion to their vote shares. We study the existence of short term political equilibria and the dynamics and stability of policies and of party membership decisions. In the long run, it is possible that proportional systems see opportunist politicians spread over all parties, but this situation is unstable in winner-take-all systems.     

The Legitimation of Post-crisis Capitalism in the United Kingdom: Real Wage Decline,Finance-led Growth and the State

Since the 2008 financial crisis, capitalist development in the UK has been marked by both continuity and change. Whilst the Coalition government effectively re-established the UK's ‘finance-led’ growth model, it simultaneously broke with the legitimation strategy which New Labour had advanced in the pre-crisis conjuncture. The Coalition advanced a distinctive ‘two nations’ strategy which sought to secure a limited but durable base of support in a context of fiscal consolidation. This strategy was conditional upon the deep and unprecedented period of real wage decline which took hold in the post-crisis conjuncture. However, the Coalition successfully transformed this potential liability into a political asset, constructing a series of ‘moralised antagonisms’ between wage earners and welfare recipients, on the one hand, and private and public sector workers, on the other. Whilst this strategy secured a limited base of popular support, it also re-embedded a series of structural weaknesses within post-crisis UK capitalism. These imbalances are likely to undermine the stability of the UK’s finance-led growth model in the future and will condition British politics as the country embarks upon the process of leaving of the EU.     

The performance of politicians: The effect of gender quotas

This paper investigates whether the gender of elected politicians affects political outcomes at the municipal level. Relying on Italian administrative data from 1991 to 2009, we are able to instrument the gender of elected politicians using an institutional exogenous change: a gender quota in the candidacy list enforced only in a subsample of municipalities and for a short period of time. While the gender of politicians does not affect the general ‘quality of life’, proxied by the internal migration rate, it does increase significantly both the efficacy of policies targeting women and households, proxied by the fertility rate, and the efficiency of the municipal administration, proxied by the actual size of the administrative bodies. These results, which are robust to several specifications and checks, suggest that affirmative action enhancing gender equality in political representation may be beneficial not only in terms of social justice but also from a political outcome perspective.     

False claims in politics: Evidence from the US

In this paper, we use data on 2459 public claims made by 444 politicians from the leading US fact-checking site (PolitiFact) to provide an empirical analysis of false claims in politics, shedding light on their characteristics within an advanced democracy. The frequency of falsehoods differs according to party affiliation and topic, with false claims more likely on such topics as elections, health, labor, taxes and values. For Republican politicians, falsehood pays off in the short run, as it is associated with greater political support.     

Beyond Myths,Lies and Stereotypes: The Political Economy of a ‘New Scramble for Africa’

Commentators across the political spectrum have increasingly drawn attention to a ‘new scramble for Africa’. This ‘new scramble’ marks the latest chapter of imperialist engagement, with not only Western states and corporations but also those of ‘emerging economies’ seeking to consolidate their access to African resources and markets. The ‘new scramble for Africa’ involves therefore significant transformations related to shifts in global politico-economic power. However, as this article elaborates, much of the burgeoning literature on the ‘new scramble for Africa’ is premised upon problematic substantive, theoretical and ontological claims and debates. In particular, the article seeks to challenge two commonplace and related narratives. Firstly, the highly questionable representations of the scale and perceived threat of emerging powers' (particularly China's) involvement in Africa, in contrast to the silences, hypocrisy and paternalistic representation of the historical role of the West. Second, and relatedly, debate and analysis are framed predominantly within an ahistoric statist framework of analysis, particularly that of inter-state rivalry between China and other ‘emerging’ states vs. Western powers. Absent or neglected in such accounts are profound changes in the global political economy within which the ‘new scramble for Africa’ is to be more adequately located.     

The Regressive Recovery: Distribution,Inequality and State Power in Britain's Post-Crisis Political Economy

This article interrogates the underlying mechanisms at the heart of Britain's post-crisis political economy. We argue that the contemporary economic recovery has been characterised by a dynamic of ‘regressive redistribution’: a socially regressive dynamic of state-led economic restructuring that has worked through two axes at the centre of the recovery. The first axis, a monetary policy framework centred upon Quantitative Easing, has driven asset-price inflation to the benefit of the wealthiest asset holders. The second axis centres upon the politics of regressive labour market restructuring which has provoked widespread wage deflation. In combination, these two axes have been central to defining the contours of the Britain's post-crisis political economy paradigm: characterised by rising asset wealth for the few, and falling living standards alongside increasing economic insecurity for wage earners. The opportunity to change path from the trends of deepening inequality that defined the pre-crisis era has not been taken. Instead, the prevailing policy paradigm of the post-crisis period – discursively unified and sustained by David Cameron's government – has intensified the regressively redistributive dynamics at the core of the neo-liberal project. Ultimately, this is likely to further entrench structural weaknesses in Britain's economy in the years ahead.     

Post-2008 British Industrial Policy and Constructivist Political Economy: New Directions and New Tensions

The article serves to introduce a number of recent changes in the practices and rationale of British industrial policy since 2008. I observe a shift towards a stronger role for the government and for agencies of industrial policy in the provision of industrial finance, and towards an increasingly discretionary and strategic approach to industrial policy intervention, both of which stand in tension with the neoliberal ‘coordinative discourse’ that continues to structure macroeconomic policy in the post-2008 context. I suggest that this tension is indicative of the emergence of two competing ‘crisis diagnoses’ in government after 2008; one reflecting the neoliberal coordinative discourse that structured economic policymaking prior to 2008, the other at odds with this neoliberal crisis diagnosis. I argue that constructivist analytical frameworks on crisis and political–economic change are insufficiently developed to accommodate these findings. I therefore reflect upon some conceptual and empirical implications that the findings raise for a constructivist analysis of economic policy in the post-2008 context in Britain, before concluding that a more contingent, contested and, crucially, incomplete process of re-alignment in the ideas that structure economic policymaking is underway in Britain than is generally acknowledged.     

The ‘new economics’ and policies for financial stability

The purpose of this paper is to consider the policy implications of the ‘new economics’. The focus will be on financial stability as an objective of policy within a more general framework of policies. The theoretical framework upon which we base our policy conclusions is summarised to provide understandings of the operation of the economy and the need for policy interventions, before the main policy implications, the focus of this paper, are discussed. In doing so we argue that an important policy dimension, which has been ignored in the past, is financial stability, a new focus of monetary policy amongst other implications. The theoretical framework upon which we base our policy conclusions tries to avoid the problems encountered by the previously dominant paradigm ‘New Consensus in Macroeconomics’. It represents in this sense ‘new thinking in economics’.     

A Critique of ‘Neoliberal Autonomy’: The Rhetoric of Ownership Society

The rhetoric of the Ownership Society defined by the Cato Institute has been integral to framing the motivation behind the Social Security reform introduced by George W. Bush. This motivational frame involves a fierce advocacy of what we will call ‘neoliberal autonomy’ in a Hayekian and Friedmanite sense. For Hayek and Friedman, the social adequacy component of Social Security is problematized in the name of self-reliance and individual choice, which rejects any authoritative standards as morally indefensible. Nevertheless, the rhetoric of the Ownership Society, though it glorifies the neoliberal notion of autonomy, does not explicitly question the moral basis of Social Security. Rather, by defining the terms of debate, it frames the meaning of Social Security along neoliberal lines in an attempt to make a supposedly detached economic case for private retirement accounts. In this ‘pro-privatization’ framework, the social adequacy component of the Social Security system fades away as individual equity, or actuarial fairness, comes to the fore as the chief theme. We suggest a ‘pro-social’ rhetoric that recognizes the pursuit of social standards as providing the element of autonomy.     

A portfolio approach to the optimal mix of funded and unfunded pensions

ABSTRACT

In this paper, we address the optimal funding of pensions by means of portfolio choice approach. Considering the unfunded (Paygo) pension system as a ‘quasi-asset’ with hedging and diversification properties, we derive the optimal portfolio mix of funded and Paygo systems within a mean variance and Bell linear exponential models. Our analysis involves both analytical computations and empirical estimations of optimal values using real long-term data for equity, bonds and the Paygo asset for several OECD countries and several time periods covering the time span 1897–2016. We find that in most cases a mix of both systems is desirable with a larger magnitude of Paygo system in the case of the Bell framework as we capture attitudes towards asymmetry and tail risks that are typical to equity markets.     

Exposure to corruption and political participation: Evidence from Italian municipalities

This paper aims to study the effects of exposure to corruption on all the aspects of political participation. Focusing on Italian municipalities in the period 1999–2014, we generate a daily and local measure of exposure to corruption, screening newspaper articles of the main Italian press agency. We concentrate on local elections and, in an event-study analysis, we find three main results. First, corruption exposure affects citizens' participation in election by reducing voter turnout. Second, corruption impacts on politicians’ participation: the number of candidates and electoral lists decreases after a scandal and candidates with political tenure are more likely to run. Finally, these changes affect local political outcomes as tenured politicians are more likely to be elected, while freshmen lose ground. These results suggest that exposure to corruption has general and negative effects on political participation, leading people to lose interest in politics.     

On novelty and economics: Schumpeter’s paradox

Is novelty as such an intra or extra-economic phenomenon? Must we, necessarily, treat novelty uniquely as something that, from outside of an economic system, has an influence on it and on its evolution? Is it not a paradox to say that something that has no economic meaning is able to explain economic change? If so, is this paradox present in the Schumpeterian view on development? In this paper, we present what will be called the Schumpeter paradox: denoting nominally ‘novelty’ and ‘creator personality’ as its source, and ‘norm change’ as an analytical tool, is insufficient to separate different fields such as development and growth, if previously (and as a necessary condition) one does not develop a theoretical framework that has a natural place for the elements of ‘novelty’ and ‘creator personality’ that can support such a difference. Nobody should pretend that the study of economic development processes is straightforward. There are good grounds for believing that the innovation ‘black box’ will remain partially closed to economic analysis. However, this does not mean that nothing substantial may be said about novelty and economic development. How to tackle with this topic (and so, with the above-mentioned paradox) will require a change of perspective: a heuristic task should be undertaken. The ‘action plan approach’ here proposed would provide a coherent analytical framework to tackle with this kind of paradox.     

The use of knowledge about society

Selection of efficient institutions or policies in politics requires constituents to estimate the net benefits of political reforms. Political competition fails to inform constituents of the costs of forgone political alternatives. Ignorance of ‘political opportunity costs’ prevents the adoption of welfare enhancing reforms of public institutions and policies. The empirical record supports this contention.     

The age of the universal consumer: a reconsideration of Ricardo's politics *

This paper reconsiders Ricardo's political thought, its relationship with his political economy and, more generally, Ricardo's connection with the ‘philosophical radicalism’ of Bentham and James Mill. It is arguedinter alia, that Ricardo's politics were utilitarian and individualistic; that he developed a notion of a shared, homogeneous interest; that he believed that individuals should know their ‘real’ interests as a condition for their suffrage; and that he subscribed to a doctrine of virtual representation. It is also argued that Ricardo was considerably less ‘radical’ in his political views than some previous commentators have recognized.     

On the Strong Liberal State: Beyond Berghahn and Young

The paper is a reply to Berghahn and Young's reflections on Bonefeld's ‘Freedom and the Strong State’. It argues that ordoliberalism focuses on the strong state as the political form of free economy.     

Politics as exchange: the classical liberal economics and politics of James M. Buchanan

James Buchanan advocated the market mechanism for allocating resources because it is based on voluntary exchange. People engage in market transactions only when they believe they benefit from doing so. Buchanan depicted the political process the same way. People engage in collective activities to accomplish together ends that they would be unable to accomplish individually, or through bilateral exchange. Buchanan’s vision of politics as exchange is a normative framework for evaluating the rules within which political activity takes place. Rules that meet the criterion of agreement are desirable constitutional rules, and Buchanan recognized that not all government activity satisfies that criterion. Buchanan is the father of the subdiscipline of constitutional political economy, and his “politics as exchange” approach provides the foundation for much work in that area. Buchanan has created a foundation that is rich in ideas, but leaves behind a number of unanswered questions that point the way toward a further development of the research program in constitutional political economy.