Macroeconomic demand and growth regimes in finance-dominated capitalism, stagnation tendencies and the macroeconomic policy regimes

Abstract

Chapter 8 discusses macroeconomic demand and growth regimes in finance-dominated capitalism, recent stagnation tendencies and the role of macroeconomic policy regimes. First, based on the macroeconomic channels of influence of financialisation, that is, an increasing dominance of the financial sector, financial motives and financial instruments since the late 1970s/early 1980s in advanced capitalist economies, the concept of demand and growth regimes in finance-dominated capitalism is presented. Focussing on the sources of demand and the way the macroeconomic demand components are financed, the debt-led private demand boom regime, the domestic demand-led regime, the weakly export-led regime and the export-led mercantilist regime are distinguished. Second, some empirical results on demand and growth regimes before the 2007–09 Global Financial Crisis and Great Recession, the changes in regimes in the course of and after these crises and on the emanating tendency towards stagnation are presented. Third, the identified regimes, the regime changes and the related tendencies towards stagnation are integrated into a stylised Kaleckian distribution and growth model, relying on and extending the framework introduced in Chapter 7. Finally, the most recent debate on growth drivers in post-Keynesian economics and comparative political economy is addressed. The concept of a macroeconomic policy regime, integrating the post-Keynesian notion of a desirable or functional macroeconomic policy mix developed in Chapter 6, is introduced and applied. From all this it is concluded that current stagnation tendencies can be viewed to a large extent as the result of 'stagnation policy' (Steindl 1976, 1979).