‘Socialization of Investment’ and ‘Euthanasia of the Rentier’: the Relevance of Keynesian policy ideas for the contemporary US Economy

This paper builds from two explicit policy ideas that Keynes introduced in the General Theory, a ‘somewhat comprehensive socialization of investment’, and ‘the euthanasia of the rentier’. The paper argues that, to a significant degree, the stagnation of the contemporary US economy can be attributed to the nature of its capital-market based, or ‘exit led’ financial system, which promotes short-termism, speculation and financial fragility, as well as excessive political power for the rentier class. In combination, these factors also diminish governments' capacity to successfully implement policies that promote egalitarian growth and full employment. In making these points, I contrast the US financial system with the bank-based or ‘voice led’ systems, such as those in Japan, France or South Korea. The paper then sketches a series of policy proposals which would address these problems. These proposals include regulatory policies which would ‘level the playing field upward’ among all financial intermediaries, and credit allocation policies that give preference to projects with high social rates of return. The proposals also aim to substantially increase the degree of democratic accountability within the financial system.     

The effect of financial development on economic growth: a meta-analysis

In this article, we contribute to the current debate on the sign and size of the finance–growth relation. To this purpose, we use a meta-analysis with 551 estimates from 68 empirical studies that take private credit to GDP as a measure for financial development. We distinguish between linear and logarithmic specifications. First, we find evidence of significantly positive publication bias in both the linear and log-linear specifications. It suggests the literature has exaggerated the size of the finance–growth effect in the past. Second, we find suggestive evidence that the logarithmic specification is superior to the linear specification. In the logarithmic specification when accounting for publication bias, a 10% increase in credit to the private sector increases economic growth with 0.09 percentage points. For the linear estimates, no significant effect of credit to the private sector on economic growth is found on average. Overall, the evidence points to a positive but decreasing effect of financial development on growth and supports the ‘too much’ finance hypothesis.     

Automation and inequality with taxes and transfers

Declines in low-skill labour shares are reviewed, and a stylised model is constructed to examine their determinants and future implications. A retrospective analysis of US shocks suggests that technological change has contributed more to raising income inequality and the wealth to GDP ratio than other changes. An anticipated future twist away from low-skill labour toward the capital, combined with population growth, risks high unemployment rates. Productivity growth at twice the pace since 1990 limits this, though inequality persists. Analysis shows that a generalisation of the US ‘earned income tax credit’ system with consumption tax outperforms alternatives of the ‘universal basic income’.     

Do capital flows drive credit growth and consumption in Central and Eastern Europe?

Domestic credit expansion in CEE economies, fuelled in part by foreign capital inflows, helped increase household welfare before the 2008 financial crisis caused a contraction across the region. How strong are the linkages between the current account, domestic credit and consumer spending? This study compiles a quarterly dataset of domestic credit as a share of GDP for 11 CEE European Union members and isolates structural breaks in the series’ growth rates that often align with the 2008 crisis. Vector autoregressive methods, particularly impulse response functions, show that increased current-account deficits lead to increased consumption in six of the 11 countries and increased credit growth in three, and that shocks to credit growth increase consumption in six countries. Capital inflows significantly increase consumption through domestic credit in Slovenia, while the Baltics show a large share of significant effects.     

Does Regional Financial Development Matter for Growth? Evidence from Indian States

The paper investigates finance–growth relationship across 26 Indian states over the period 1981–2012 in a panel setting. We use four indicators of financial development: credit-GSDP ratio, deposit-GSDP ratio, credit-deposit ratio and branch density and apply panel generalized method of moments (GMM) techniques. We observe positive and significant effect of financial development on economic growth and our findings are robust across alternate indicators of financial development and model specifications. Our findings highlight pivotal role played by financial intermediaries in fostering savings mobilization and financing investment activities across states through channels of deposit mobilization, expansion of credit and greater branch expansion in unbanked locations and consequent reduction of transactions costs. These findings are consistent with observations that much of India’s superior growth performance is attributed to high level of domestic savings. The paper also takes care of issues of bias and precision of various GMM estimators arising out of small sample typically prevalent in empirical growth models like ours.     

Bank efficiency and industry growth during financial crises

Financial crises pose many problems for growth, and in this time of increasing financial instability it is important to fully understand why this happens. Many papers have analyzed the relationship between growth and a country's level of financial development using private credit, which leads to several unexpected problems. However, very few have used bank efficiency to gauge the development of the financial sector. The aim of this paper is to analyze the effect of bank efficiency on value-added growth of industries that were most dependent on external financing during the financial crisis. Specifically, it uses the data envelopment analysis (DEA) method to measure the efficiency of the banking sector across countries, according to the empirical strategy offered by Rajan and Zingales (1998). Our main result shows that bank efficiency relaxed credit constraints and increased the growth rate for financially dependent industries during the crisis. This finding shows the great but overlooked importance of bank efficiency in mitigating the negative effects of financial crises on growth for industries that are most dependent on external financing.     

Financial systems and economic growth in South Africa: a dynamic complementarity test

This study examines the relationship between banks, stock markets and economic growth in South Africa. The study attempts to answer one critical question: are stock markets and banks complementary to one another in the process of enhancing economic growth? The complementarity between the stock markets and banks is examined by including a set of interactive terms in a standard growth model, alongside bank development and stock market development proxies. In order to test the robustness of the results, three proxies of stock market development have been used, namely stock market capitalization, stock market traded value and stock market turnover – against the ratio of bank credit to the private sector, a proxy for bank-based financial development. The economic growth is, however, proxied by real GDP per capita. Using the ARDL-Bounds testing procedure, the study finds that the complementarity between stock market development and bank-based financial development is weak and sensitive to the proxy used to measure stock market development.     

Inflation and financial deepening

Financial deepening is defined as increases in the ratio of a country's financial assets to its GDP. Financial asset accumulation simultaneously provides credit to finance real asset accumulation for the development process. The equilibrium long-run ratio of financial assets to GDP may be expressed as a simple relationship of a country's financial savings ratio and its growth rate. The present paper incorporates the effects of inflation on financial deepening. Inflation necessarily entails capital losses on all existing financial asset holdings. It is shown that unless more monetary saving is forthcoming to offset such inflation-induced capital losses, inflation will operate to reduce drastically the degree of financial deepening which a country can obtain. The process is illustrated with respect to the Korean economy.     

The Shape of ‘Rising Powers’ to Come? The Antinomies of Growth and Neoliberal Development in Turkey

ABSTRACT

The short-term GDP growth-based economic success of the BRICS has spawned a trend of grouping large emerging market economies under shared monikers. The proliferation of a wide array of labels – from MINTs to VISTAs – within political and financial circles has been accompanied by a growing scholarly interest in the study of these ‘emerging markets’ and future ‘rising powers’. This paper discusses the literature on Turkey’s ‘rising power’ status to problematise the conceptual and analytical parameters that shape these wider debates. Accordingly, I argue that the established parameters are wholly based in, and in turn reproduce, a neoliberal conception of development which prioritises a narrowly construed metric of economic progress based on GDP growth, while simultaneously ignoring the associated socio-economic and environmental costs. The paper interrogates the ways in which select macroeconomic indicators have been deployed to legitimise neoliberal reform in Turkey and utilises this case study to mount a methodological challenge to the relevant IR/IPE literatures that conceptualise ‘emerging markets’ and ‘rising powers’ from growth-oriented perspectives.     

Does financialization retard growth? Time series and cross-sectional evidence

Although financial development is essential for economic development, excessive financialization of the economy is believed to exert a negative effect on output growth. In this article, empirical evidence is presented on the relation between economic growth and financialization as measured by the ratio of credit to GDP and the ratio of publicly traded shares to GDP. The empirical results are based on annual time series data for six country groups as well as cross-sectional data covering a large number of countries. The model is initially specified with unobserved components and estimated in a time-varying parametric framework to account for missing variables. Thereafter, the issue of linear versus quadratic specifications is examined. The results are robust with respect to model specification, estimation method, data type and variable definition, showing in general that financialization has a negative impact on growth. Some evidence is also presented to support the notion of the financial Kuznets curve.     

Does More Consumption Promote Real GDP Growth?

This paper employs Hansen's (1999) panel threshold regression model [Journal of Econometrics 39 (1999) 345–68] based on a time series dataset of 109 countries from 1960 to 2007 to investigate the threshold relationship between the change in real GDP per capita and the consumption size (consumption‐income ratio, APC). The results show that the consumption level should not exceed the 49.68% threshold of real GDP per capita for each country regardless of the income level. Also, the relationship between the change in real GDP per capita and the consumption size seems to have ‘Armey curve’ or ‘inverted‐U shape’ characteristic. In order to promote real GDP growth, our results suggest that the high‐income, low‐APC countries should encourage more consumption while the low‐income, high‐APC countries should encourage more saving.     

浅议中国中小企业信贷融资困境与对策

在中小企业的发展过程中,资金匮乏是一个普遍存在的现象。分别从中小企业信用文化的缺失、抵押式担保能力的不足、盈利能力差及经营风险高等内部原因,以及融资体制缺陷、信用担保机制的实施力度不够、信息不对称等外部原因,深入分析导致中国中小企业信贷融资困境的因素,并从自身建设、政府政策、融资环境和金融机构服务等方面提出相应对策,对于中国中小企业健康可持续地发展壮大具有很大的意义和作用。     

Schumpeter and the end of Western Capitalism

Schumpeter’s forecast in his Capitalism, Socialism and Democracy (1942) that ‘a socialist form of society will inevitably emerge from an equally inevitable decomposition of capitalist society’ did great damage to his reputation. This was especially so after the fall of the Berlin wall, when the spectre of Communism seemed to have been finally exorcised. The current financial crisis, however, has vindicated him. For Schumpeter, capitalism rightly meant, not just individual property rights, but the ability to ‘create money from nothing.’ This is such an enormous and dangerous power that it obviously has to be subject to the strictest constraint, which was traditionally provided, however imperfectly, by denial of incorporation with limited liability to those who dealt in money. The decline of capitalism began when financiers were released from this discipline, and it ended with the catastrophe caused by belief that bureaucratic control could replace it. The cause of the change was the progressive capture of democratically elected politicians by interests. On this, Schumpeter’s The Crisis of the Tax State (1918) was almost as insightful as his later book. When Governments could not allow banks to fail, they signalled the definitive arrival of centralized financing, which is a fundamental characteristic of a socialist economy.     

Financial deepening and income inequality: Is there any financial Kuznets curve in China? The political economy analysis

The interconnectedness of financial deepening and income inequality has been a highly controversial discussion which has not been concluded despite many empirical and theoretical studies up to date. One of the basic building blocks for many research designs is the reliance upon the Kuznets inverted U-shaped curve which postulates that in the first phase of economic growth income inequality increases, peaks and then decreases to a tolerable level in the later phase after a certain income level had been attained. The role of financial deepening in financing economic growth is an indispensable and necessary condition enabling us to easily draw an analogy between financial deepening and income inequality in a financial version of the Kuznets curve. In spite of 30 years of economic and financial reforms in China, which represents a fairly young history of economic growth and development, there are many indicators that Chinese experience significantly deviates from the presupposed inverted U-shaped curve trajectory and its final equalizing effect. This paper relies on financial deepening data measured by monetary aggregate M2/GDP and domestic banking credit/GDP ratios in its claim that they significantly correlate with rising income inequality. The author’s intention consists not in claiming that financial deepening per se causes income inequality, but provides a political economy analysis of the specific institutional and power configuration which leads to their positive relationship. This configuration is determined by the prevailing banking model, the hukou system, financial repression and the decentralized authoritarian system. On the other hand, the absence of inequality-narrowing institutitons further aggravate the problem. All the aforementioned factors are geared at avoiding mechanical and spurious claims that financial deepening increases or decreases income inequality across countries. A historical institutionalism approach to explain China’s path related to the Kuznets curve prediction shows the central validity of open and inclusive institutions in generating inequality-narrowing benefits of financial deepening.     

小微企业融资难问题之对策

小微企业是我国国民经济和社会发展的重要组成部分,是经济发展和社会稳定的支柱,关系中国经济平稳增长大局。随着金融脱媒效应的影响,呈现信贷业务零售化的趋势,大型客户逐步脱离信贷依赖,小微企业在银行信贷业务中的重要性逐步显现和提升。但"融资难、难融资"已经成为我国小微企业发展的最大制约瓶颈,在国际金融危机的背景下,这一矛盾更加突出,已受到社会各界的普遍关注。     

存量视角下的中国金融中介比率测度:1992-2006年

对1992-2006年中国金融中介存量比率的实证分析发现,尽管非金融部门外部融资中银行信贷的高度垄断地位被逐渐削弱,但仍表现出高度依赖银行体系的贷款状况;而政府外部融资的来源则发生了结构性改变,市场中介融资已经成为政府融资最主要的来源,并由此导致金融中介在政府外部融资中的地位不降反升。此外,尽管非银行金融中介机构有了长足发展,但从相对资金融通的视角着眼,它还远远无法和银行抗衡。制约变迁约束下各部门经济行为的变化对融资机制有着重要影响。     

Schumpeterian patterns of innovation and the sources of breakthrough inventions: evidence from a data-set of R&D awards

This paper examines the relationship between Schumpeterian patterns of innovation and the generation of breakthrough inventions. Our data source for breakthrough inventions is the “R&D 100 awards” competition organized each year by the magazine Research & Development. Since 1963, this magazine has been awarding this prize to 100 most technologically significant new products available for sale or licensing in the year preceding the judgment. We use USPTO patent data to measure the relevant dimensions of the technological regime prevailing in each sector and, on this basis, we provide a characterization of each sector in terms of the Schumpeter Mark I/Schumpeter Mark II archetypes. Our main finding is that breakthrough inventions are more likely to emerge in ‘turbulent’ Schumpeter Mark I type of contexts.     

The myth of China’s monetization

This article develops a simple model of M2/GDP based on the money demand function of Milton Friedman. This model proves that M2/GDP is positively related to the expected wealth and negatively related to the opportunity costs of holding money. China’s extremely high monetization ratio as measured by M2/GDP is the result of a decades-long rapid economic growth and a depressed financial system. Fast economic growth leads to high expected wealth. A depressed financial system leads to low opportunity costs of holding money. The combination of those two factors increases money demand and leads to very high M2/GDP. The model is verified indirectly by testing two implied testable hypothesizes. The study of this article raises questions on the accuracy of M2/GDP as a measure of monetization.     

Financing of innovation: national development banks in newly industrialized countries of East Asia

Abstract

Contemporary literature on innovation tends to overlook the issue of financing, whereas financial history suggests that banks have been essential to financing of new industries. Emerging literature ondevelopment banking, although inspiring, remains focused on financing policies. The article aims to rearticulate a coevolutionary nature of industrial and financial interests, following the works of Schumpeter and Minsky, by looking at the 4 cases of national development banks, tasked with long-term financing of industries, from newly industrialized countries of East Asia—South Korea, Taiwan, Singapore, and Malaysia. The study suggests that innovation in finance, as well as organizational innovation in financial institutions, represent essential elements of financing of innovative activities. Further, organizational innovation in financial institutions, such as development banks, might signify a disposition to face uncertainty, which characterizes economic and technological unknowns inherent in financing of innovation.     

经济发展对信贷增长促进作用的实证分析

对信贷增长与经济增长的关系进行研究,对于探索经济金融协调发展之路有着重要的政策含义.本文选取反映经济发展水平最具代表性的GDP和货币政策决策的重要信息变量之一的信贷规模,建立东、中、西部地区相关回归模型,分区域对经济发展促进信贷增长的作用进行了比较分析.结果显示:经济发展水平决定了金融发展水平,区域经济发展的差异会导致区域金融发展也存在差异.