Channels

Abstract Whereas previously scholars advocated a positive relationship between a growing size of the financial sector and economic growth, most recent evidence has shown that this might not be the case at all times. The financialisation literature has pointed to some of the mechanisms through which the increasing size and changing structure of the financial system might weigh negatively on growth through the changing financial relations of non-financial corporations (NFCs). This paper contributes to this debate on several grounds. First, rather than interrogating the relationship between finance and firms’ tangible investments, it focuses on firms’ intangible investments, arguably a sine-qua-non for innovativeness and productivity-enhancing structural change. Drawing on an emerging literature on intangible assets, innovation, and development studies, we highlight the important role of investment into intangible assets, in the context of developing economies. Second, by bringing together the literatures on access to finance, intangible assets, and financialisation, we delineate analytically three specific channels through which finance can affect intangible assets. Third, this is the first paper that tests empirically all three channels using the population of publicly listed manufacturing companies in an Emerging Market Economy, Brazil over the period 2011–2016. Our results confirm the potentially negative impact of financialisation on intangible assets through the crowding-out channel, that is, firm’s increased tendency to hold financial assets reduces intangible assets. Our findings also confirm the shareholder-value orientation channel, that is, firm’s payments of dividends reduce intangibles assets.

Abstract This article reassesses some key aspects of Alfred Marshall’s economics of work, showing their value, limitations and enduring relevance for modern economic enquiry. It establishes that, for Marshall, work mattered not just because of the income it gave to workers, but also because of the kind of lives that it enabled workers to lead. Based on a wide conception of work, Marshall supported the reform of work, including the reduction of working hours, in order to improve workers’ quality of life. The article argues that some of Marshall’s core ideas on work and work reform can offer help in rethinking how modern economics conceptualises work and how it approaches issues of progress in workers’ well-being.

Abstract Elements of price theory from Schumpeterian, Sraffian and post-Keynesian economics are combined to analyse the impact of labour-saving technical change on prices. The resulting synthesis incorporates the realism of post-Keynesian pricing rules and the emphasis on long-period analysis by Sraffa along with Schumpeter’s insight that capitalism develops ‘from within’ in a disruptive and uneven manner through innovations. Applying elements from heterodox theories to analyse the relationship between technical change and the movement of prices demonstrates the fruitfulness of heterodox price theory in understanding the development of modern capitalist economies.

Abstract The prevailing approach to philanthropy among economists has revolved around individual giving behaviour. Although some elements for a political economy perspective to philanthropy were sketched by a few economists in the 60s and 70s, they were disjointed and such an approach never took off. This article reviews the early evolution of economic thinking on philanthropy and examines the ideas of sociologist Arthur Vidich, which provide relevant elements for the construction of a systemic, political economy framework to philanthropy. Building on Marxist analytical principles, Vidich offers some organising themes for the study of philanthropy from a sociologist’s viewpoint. However, the economic nature of this phenomenon is somewhat missing in his work and needs to be addressed. This article explores two major channels through which the contemporary economic dynamics affects philanthropy: the financialisation and the technological change, and calls for a comprehensive inclusion of philanthropy in the analysis of the economic system.

Abstract From early 1924 until his death in 1946, Keynes was actively involved in managing the assets of the Provincial Insurance Company, based in Kendal, Westmorland. From 1940, increasing responsibilities advising the UK Government meant a gradual reduction in day-to-day management activities, his replacement being Ian Macpherson, the senior partner of the London stock-broking firm, Buckmaster & Moore, who was well known to both Keynes and F. C. Scott, The Provincial’s managing director. The Provincial materials reproduced in Chapter 1 of Volume XII of The Collected Writings suggest increasing differences of opinion between them on investment policy from the late 1930s. A review of their correspondence in the Keynes Archive at King’s College, Cambridge, demonstrates that such differences were more serious than previously understood, with Scott imposing a significant change to Keynes’ policy in 1942 by creating the low-volatility Stable Fund accounting for 40% of total assets. Eventually, in mid-1944, this change presented Macpherson with a problem he described to Keynes as ‘most intractable’ and also involved him telling Keynes that Scott ‘does not understand the elementary principles and theory of investment’. In this article, we review Keynes’ relationship with The Provincial, tracing the development of this ‘most intractable problem’ by means of three Case Studies, which provide insights into not only his role at The Provincial but also the principles underlying the unconventional, oblique investment approach he practised in the 1930s and 1940s, as distinct from his credit cycling policy of the 1920s.

Abstract We propose a novel and constructive way to conceptualise the history of economic thought and appreciate its value within economics more broadly. Drawing on the work of economists spanning nearly a century, we explore the idea of the history of economic thought as a living laboratory of theorising. It is living in that it is a persistently relevant method of doing economic theory, as opposed to a separable field or even a dead branch of economics. It is a laboratory in that it provides a constrained space for examining, comparing, critiquing, combining, and developing theories. Following an initial explanation, we explore the roots of this conceptualisation in the works of some twentieth-century economists. We then illustrate it using the example of the development of neo-Wicksellian macroeconomics. We conclude with a discussion of the advantages and limitations of the living laboratory approach.

Abstract Aspects of social positioning theory and central features of Marx’s general ontological, and specifically social relational, presuppositions are compared and found to be rather similar. Furthermore, various long-standing debates and puzzles surrounding Marx’s ontological assessments and preconceptions are seen to be reasonably easily resolved if we view Marx as everywhere drawing on a social relational framework along the lines of a social positioning conception.

Abstract In South Africa, inequality has worsened over the past two decades, leading to the country being recognised as the most unequal society globally. The escalating inequality has sparked social conflicts, threatening the already fragile social cohesion. However, there is a limited understanding of public perceptions regarding these conflicts; it is crucial to comprehend their dynamics. To shed light on this issue, we used the International Social Survey Programme dataset for 2009 and 2019 to investigate the changing factors influencing perceived social conflict (PSC) in South Africa, specifically testing the role of objective class positions and stratification beliefs. Our findings reveal that objective class plays a significant and reinforced role in shaping perceptions of social conflict, aligning with the Marxist notion of a strong link between class position and conflict perceptions through class consciousness. Middle-class imagery does not affect PSC and tolerance for inequality and also exerts diminished influence on PSC. Overall, these results offer valuable insights for policymakers in their efforts to address the pressing issues of class, conflict and inequality. This is particularly true in the aftermath of the July 2021 unrest while South Africa continues to grapple with social instability caused by deep class divisions.

Abstract Both Friedrich Hayek and Carl Schmitt criticize the role played by economic interest groups in modern democracies. This paper points out that their descriptions of how such groups attempt to obtain favourable treatment from the state (‘rent seeking’) are highly similar. The paper then discusses their proposed solutions. Schmitt’s solution, referred to as ‘depoliticization’, involves the establishment of an authoritarian state together with a corporatist economic system. Hayek, by contrast, argues in favour of constitutionally limiting the ability of politicians to grant privileges to economic groups. The paper further asks whether, as claimed in the literature, Hayek’s solution is similar to Schmitt’s in that both attempt to shield the free market economy from democratic oversight. It is reasoned that Hayek’s solution is not undemocratic (unless one defines democracy as pure majoritarianism), while Schmitt’s solution is not conducive to free markets.

Abstract The purpose of this article is to discuss the combined effects of Industry 4.0 and lean production in the context of global supply chains on working conditions. Our thesis is that the changes of technique based on integrating Industry 4.0 technologies with lean production incur a substantial cost to labour, manifesting as increased work intensity. In Marxian terminology, they have increased the extraction rate of relative surplus value. Our contribution is closely related to the critical global value chain literature and proposes to contribute to this literature by emphasising the relevance of Industry 4.0 technologies in implementing lean production methods and reinforcing control by head companies over the entire chain. Additionally, it discusses how these dynamics manifest in companies and impact the world of work through surveys conducted with workers. These surveys were carried out in a set of Italian metal-mechanical companies involved in various global chains.

Abstract This article leverages the reinterpretations of Marshall emerged from the 1970s onwards to elucidate his philosophical vision, notably in relation to the application of models in economics and to his outlook on ethical progress. The literature showed how Marshall’s cognitive theory can be linked both to his method in studying market equilibria and to his view of social and industrial evolution (Dardi, 2016, 2019; Raffaelli et al., 1994b; Raffaelli, 2003). The focus of the present work is on the elements of his philosophical grounding discernible in both the logical connections mentioned above. The contribution to the literature consists of an interpretation of the lecture on American industry in Whitaker, (1975a) as an insight of a sociologist of knowledge ante litteram. Thus the paper broadens, with respect to Dardi, 2016, the field of Whewell’s influence on Alfred Marshall: from the methodology (Whewell’s idea of the dualistic nature of mathematics linked to the Cambridge mathematical intuitionism) to the causal relationship between industry and character and to Marshall’s keen eye for sociological facets. In many respects a contemporary Marshall comes to the fore, proving particularly valuable for those still grappling with epistemological issues in the social sciences.

Abstract Alfred Marshall’s theory of rent was a watershed moment in economics, and his ideas on the subject continue to (positively and negatively) influence economists and social scientists well into the twenty-first century. Far less well known is the scathing critique of Marshall’s theory published by Frank A. Fetter in the Quarterly Journal of Economics in 1901. Fetter identified several concepts of rent in Marshall’s work that he attacked as contradictory, arguing that Marshall embraced classical errors while still attempting to emancipate himself from them. Marshall responded by adding a critical note on Fetter to the 5th edition of his Principles (1907), but otherwise showed little public interest in a reply. However, archival evidence reveals that both Marshall and Fetter took this dispute seriously and personally, and that they continued to debate each other at a distance for several decades. This paper brings to light previously unknown archival sources—including unpublished notes, correspondence and manuscripts—to tell the full story of their controversy. Doing so sheds new light on the work of both men and adds in several ways to our understanding of the early history of neoclassical economics, of the development of the theory of rent and of theoretical paths not taken.

Abstract Economic literature shows evidence that a competitive real exchange rate (RER), i.e., slightly undervalued, is key for development in developing countries. This paper discusses the connections between inflation targeting (IT) regimes and RER trends in economies highly open to capital flows. Following Rodrik’s (2008. The real exchange rate and economic growth, Brookings Papers on Economic Activity, Washington, 2008, vol. 39, no. 2 (Fall), 365–439), the RER trend is estimated for a sample of 31 out of the 38 developed and developing countries that, by the final year of the period covered in this study (2019), had already adopted IT. Covering the period 2000–2019, we showed that all developed and Latin American developing countries had an RER overvaluation trend, while the European, Asian and African (South Africa) developing countries registered an undervaluation trend in the same period. Through a dynamic panel data model, we tested and validated the following hypotheses, which, to the best of our knowledge, are a seminal contribution. We found in Latin American developing countries, whose ITs are centred on the main objective of pursuing price stability, the RER overvaluation trend (a by-product of this monetary policy regime) is driven by higher interest rate differentials to the USA and is harmful to their economic growth. In developed countries, this trend is not explained by their IT framework but by their high per capita income level, which reflects their high average labour productivity and development pattern. Yet, the trend of RER undervaluation in Asian and European developing countries and South Africa reflects their governments’ ability to combine a more flexible IT regime with a floating but managed exchange rate system aimed at preserving a competitive and stable RER in the long term.

Abstract This article proposes to draw on the recent experiences of many central banks of advanced economies and the evolution of their operational frameworks in the new context of increased domestic liquidity when analyzing the operations of central banks that engage in exchange rate management and increase their official foreign reserves as a result. It argues that the theoretical literature on endogenous money set within the context of an open economy with an exchange rate objective needs to be amended to account for such developments, as it would be entirely possible for a central bank that accumulates substantial foreign reserves to adopt a floor system and thus maintain a near-perfect control over its policy interest rate without the need for any compensating measure. On the grounds of the reverse causation argument, establishing a direct link between the foreign reserves and the monetary base should not entail any quantitative effect on other economic variables.

Abstract This article reviews different literature strands and performs empirical tests to identify new stylized facts on how capital ownership, particularly its nationality, relates to long-run economic development. The results indicate that low- and middle-income countries with larger foreign capital stock in 1980 had lower economic growth over the next four decades. The estimations also suggest that these economies developed a less specialized export basket, which became relatively more concentrated in low-tech goods. The results are inverted to high-income economies, for which the relationship is positive for GDP growth and export specialization and complexity. These stylized facts are in line with (and can be interpreted as a test to) the hypothesis proposed by Alice Amsden’s seminal book ‘The Rise of the Rest’ (2001) to explain different growth trajectories among developing countries. The results can also be interpreted in light of theoretical and empirical evidence that foreign capital might reinforce static comparative advantages in developing economies, particularly in middle-income ones.