SPERI Papers

Paper No.10

The Hollande Presidency, the Eurozone Crisis & the Politics of Fiscal Rectitude

Ben Clift (SPERI Honorary Research Fellow & Professor of Political Economy, University of Warwick)

Abstract

This paper analyses the political economy of the Hollande Presidency in France, evaluating the economic policies pursued by the French Socialist President since May 2012. It explains the limited coherence and success of economic policy under Hollande in terms of constraints operating at domestic and European levels, and through credibility concerns of financial markets. Domestically, it highlights difficulties managing the presidential majority, notably due to presidentialised factionalism within French Socialism. At the European level it explores disagreements within the Franco-German relationship over which economic ideas should underpin macroeconomic policies to tackle Europe’s recession and efforts to resolve the Eurozone crisis.

SPERI Paper No.10 – The Hollande Presidency, the Eurozone Crisis & the Politics of Fiscal Rectitude (PDF 335KB)

 

Paper No.9

The Social Bases of Austerity: European Tunnel Vision & the Curious Case of the Missing Left

Stephanie Mudge (SPERI Research Fellow & Assistant Professor of Sociology at the University of California Davis)

Abstract

The grip of austerity in European politics presents a double puzzle: electorally weak centre-left parties that appear unable or unwilling to formulate an alternative, and the surprising efficiency with which the EU, international institutions, and national governments have jointly pursued ‘fiscal consolidation’. This is all the more surprising in historical perspective, since many left parties emerged from the last great crisis as vehicles for building voter appeal on the basis of a marriage of ‘new’ economics with the traditional leftist theme of equality. Why are today’s centre-left parties failing to replay this historical role? This paper looks into this puzzle by considering how the relationship between professional economics and party politics changed between the late interwar years and the present, noting that this relationship has produced two kinds of authority figures in unsettled times: the national, party-based economist (NPE) of the 1930s versus the European economist-technocrat (EET) that features prominently today. I suggest that the EET expresses a historically specific European political order in which professional economics tends to exert authority over, not through, partisan politics. This shift, I argue, may help to explain the curious persistence of tunnel vision in European politics since the crisis.

SPERI Paper No.9 – The Social Bases of Austerity (PDF 579KB)

 

Paper No.8

The Crisis of the Euro:  The Problem of German Power Revisited

Helen Thompson (Reader in Politics & Director of Studies at Clare College, University of Cambridge & Honorary Research Fellow at SPERI)

Abstract

The durability of the euro appears to rest on the impossibility of abandoning it, rather than reform that would address its fundamental flaws. In practice, this makes the euro dependent on Germany’s commitment to maintain it. This paper considers whether Germany’s commitment to the euro is proven in the context of its history with European monetary arrangements since the last years of Bretton Woods and its actions during the euro zone crisis in light of German interests in the sovereign debt and banking crisis.  It argues that Germany’s support for European monetary arrangements has always been conditional on Germany’s ability to insist on monetary stability and that the conjunction of the reappearance of German structural monetary power in the bond markets and Germany’s actions during the crisis have made the euro zone a site of potentially disintegrative conflict. It concludes that Germany’s commitment to the euro is unproven.

SPERI Paper NO.8 The Crisis of the Euro: The Problem of German Power Revisited (PDF 536KB)

 

Paper No.7

Are We There Yet? Growth, rebalancing and the psuedo-recovery

Craig Berry (SPERI Research Fellow)

Abstract

In 2013, economic growth in Britain started to gather pace, after several years of under-performance. This has led to claims that the British economy is finally recovering, and moreover, that the ‘austerity’ pursued by the coalition government since 2010 has been successful. This paper offers a sustained scrutiny of such claims, and examines evidence on whether the economy is ‘rebalancing’ away from the key aspects of the pre-crisis growth model – as promised by the coalition government upon taking office. The paper argues that the resurgence of growth is, to some extent, illusory. Insofar as the economy is experiencing recovery, it is best characterised as a ‘pseudo-recovery’ in that it has been facilitated by a return to the pre-crisis growth model. Given that the flaws and contradictions of the pre-crisis growth model have not been addressed by the coalition government, the recovery is likely to prove unsustainable.

Paper No.6

The UK’s Innovation Deficit & How to Repair it

Richard Jones (Professor of Physics and Pro-Vice-Chancellor of Research and Innovation at the University of Sheffield)

Abstract

The UK’s economy is much less research and development (R&D) intensive than it was thirty years ago, and it is now significantly less R&D intensive than other developed economies.  This paper argues that this decline, primarily in applied research carried out in the private sector and in government funded strategic research, represents an important loss of the UK’s innovative capacity, is a direct consequence of recent changes in its political economy, and reflects in a highly developed form more general worldwide trends.  The need for radical innovations in the material and biological realms is highlighted, for example, by the challenges of developing competitively priced low-carbon energy sources, and in caring for ageing populations in a cost effective way.  If the UK is to play its part in meeting these challenges, and if it is to develop a new, sustainable basis for long-term economic growth, this loss of innovative capacity needs to be reversed.

SPERI Paper No.6 – The UK’s Innovation Deficit and How to Repair it (PDF 1131KB)

 

Paper No.5

The Great Uncertainty

Colin Hay & Tony Payne (Professors of Politics & Directors of SPERI, University of Sheffield)

Abstract

This paper emerges out of a series of blogs that we jointly posted on SPERI Comment between 30 January and 18 July 2013. They sought to set out and link together the different aspects of SPERI’s intellectualt agenda. The blogs attracted a certain amount of attention and discussion and are gathered up here into a single argument for ease of access.

In the paper we claim that the current era in which we are living is best labelled ‘The Great Uncertainty’ and suggest, by deliberate use of this term, that the present conjuncture is being shaped by a remarkable, and hugely challenging, coalescence of three major processes of structural change occurring simultaneously and interacting in all manner of complicated ways.

They can be distinguished analytically as follows:

• Financial crisis: a largely Western crisis brought about by neoliberal excess and now rendering the resumption of economic growth a severe conundrum for the US, Japan and nearly all major European economies and a problem at least for the rest of the global economy;

• Shifting economic power: the recent intensification of longstanding movements in the locus of economic power in the world characterised by the rise of countries like China, India, Brazil and several others too;

• Environmental threat: the eventual realisation that climate change is both real and accelerating and is now asking the most serious questions about the on-going viability of traditional notions of economic growth and indeed the good society itself.

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SPERI Paper No.5 – The Great Uncertainty (PDF 389KB)

 

Paper No.4

How to Make a Bad Problem Worse: The US Federal Reserve’s Rescue of Bear Stearns

Matthew Watson (Professor of Political Economy, University of Warwick)

Abstract

When Bear Stearns, one of Wall Street’s fabled pre-crisis ‘big five’ investment banks, faced imminent collapse in March 2008, the Federal Reserve intervened.  It blurred the boundaries of its own legal remit by using public money to help facilitate Bear’s purchase by the commercial bank, JPMorgan Chase.  It did so to prevent increasingly worthless mortgage-backed securities from creating gaping holes in the balance sheets of the entire US banking industry.  Yet the Fed’s actions also ran contrary to US regulators’ justification for their tolerance towards the complex derivatives that created the mortgage securitisation business in the first place: namely, that they provide the impetus for ‘market completeness’ by synthetically linking one financial market to another.  Full market completion has been the objective of US lawmakers since the Gramm-Leach-Bliley Act of 1999 formally dismantled the Glass-Steagall ‘wall’ between investment and commercial banking activities, and stipulating the abstract conditions of full market completion has also been one of the most highly prized goals of pure economics since the seminal theoretical writings of Léon Walras in the 1870s.  However, general equilibrium economics has never been able to provide a genuinely economic rationale for policies that push in the direction of market completion.  Moreover, the Fed’s actions in using Morgan as a conduit for rescuing Bear have in practice merely complicated the matter further.  They were presented as facilitating a market rescue that would prevent future financial crises from occurring, but they had the effect of allowing the largest banks to take the whole of the subprime securitisation cycle in-house.  This in turn makes market-based checks and balances against the future inflation of subprime securitisation bubbles much less robust.

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SPERI Paper No.4 – How to Make a Bad Problem Worse – The US Federal Reserve’s Rescue of Bear Stearns (PDF 426KB)

 

Paper No.3

Power, Politics & the City of London: Before & After the Great Financial Crisis

Sukhdev Johal (Reader, Royal Holloway, University of London), Micheal Moran (Professor Emeritus of Government, University of Manchester) & Karel Williams (Professor, University of Manchester & Director of the Centre for Research on Socio-Cultural Change)

Abstract

The paper examines the power of finance in the UK in the light of debates about the meaning of power.  It distinguishes four faces of power.  Three are drawn from an established political science literature: decision, agenda control and non-decision.  The fourth is derived from the work of Foucault, capillary power.  We argue that these constitute historical strategies by finance in the UK to escape democratic control, and chart the historical evolution of these strategies.  The financial crisis of 2007-8 involved the collapse of a strategy pursued in the last generation to install a system of capillary power.  Finance has therefore been driven back to exercising power by the control over decision.

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SPERI Paper No.3 – Power, Politics & the City of London – Before & After the Great Crisis (PDF 430KB)

 

Paper No.2

Capitalist Diversity, Work & Employment Relations

Christel Lane (Professor Emeritus of Economic Sociology, University of Cambridge) & Geoffrey Wood (Professor of International Business, University of Warwick)

Abstract

The great value of the literature on comparative capitalism is its emphasis on the persistent viability of alternative models to market liberalism. Central to the viability of more heavily coordinated markets are specific production regimes, supported through cooperative work and employment relations, encompassing significant participation and involvement, strong industry and firm skills sets, and bargaining centralisation. In contrast, the liberal market model is distinguished by less strong unions, decentralised bargaining, weaker worker rights, insecure tenure and flexible labour markets. As such, this approach has considerable value as a theoretical starting point both for categorising different national industrial relations regimes and in explaining the spatial concentration of specific sets of industrial relations practices. At the same time, whilst the nation-state remains an important level of analysis, there is considerable variety in practice both within nations and capitalist archetypes. This would reflect the fact that institutions are rarely closely coupled, with distinct regional and sectoral dynamics. Moreover, supra-national forces may not only erode national distinctiveness, but also reinforce difference between nations.

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SPERI Paper No.2 – Capitalist Diversity, Work and Employment Relations (PDF 328KB)

 

Paper No.1

The British Growth Crisis: a Crisis of and for Growth

Professor Colin Hay, Director of SPERI

Abstract

The global financial crisis which first began to make itself apparent in 2007 and then broke with full force in the autumn of 2008 has generated an intense debate in academic, business, journalistic and political circles alike about what went wrong and how operational faults in the prevailing Western model of political economy might best be repaired. More importantly, it has at last also begun to stimulate a deeper, albeit slower moving, consideration of whether the Anglo-American world in particular was working with the right model of political economy in the first place. It is the view I seek to defend here that if we are to address properly the former set of concerns – with what went wrong and how we might start to put it right – it is with the latter that we must start. For it is only by acknowledging the complicity and culpability of a decidedly and distinctly Anglo-American conception of capitalism in the inflation and then bursting of the bubble, that we can begin to see the full extent of what is broken and what now must be fixed. It is to this agenda that the present paper speaks. It draws on a now substantial body of empirical research, but it seeks to do so in a rather novel way – to argue that the crisis is best seen as a crisis of and indeed for growth and not as a crisis of debt. It is, moreover, a crisis of and for an excessively liberalised Anglo-American form of capitalism and the Anglo-liberal growth model (as I will call it) to which it gave rise. This is a form of capitalism and a growth model that was inherently unstable and threatened the entire world economy – its excesses cannot be tolerated again.

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SPERI Paper No. 1 – The British Growth Crisis (PDF 740KB)