Asymmetric Bargaining and Top Incomes Under Finance-Driven Capitalism, 1990-2010
The rise of top income shares is of immediate practical concern. Whilst Stockhammer has demonstrated the slowdown effect of financialisation on accumulation and investment, Piketty’s illustration of the long-run dynamics of capital relative to national income suggests that without political intervention to effect greater redistribution, inequality may undermine the very basis of democratic legitimacy. Others suggest that financialisation has had an overall negative impact on non-financial sector output, where the resulting falloff in employment was borne by core labour, and where senior corporate officers netted gains from compensation packages linked to capital income
The landscape of inequality research has changed drastically on foot of the public exposure generated by Piketty’s Capital in the Twenty-First Century (2014), wherein he outlines a model of income inequality which positions wealth accumulation as an inherent, rather than aberrant feature of capitalist history. In this work, Piketty provides a compelling link between regulatory regimes and the politics of wage bargaining, which he suggests played a key role in determining the capacity of top earners to leverage greater incomes. This work is readily assimilable to the financialisation literature, as wider studies suggest that top income movement correlates weakly with productivity, responding instead to lower marginal tax rates which encouraged executives to bid for higher compensation.
This paper extends the institutional scope of these works, arguing that financialisation enhanced top incomes by compounding this asymmetric bargaining capacity across three principal domains: (1) by altering the balance of bargaining power between capital and labour; (2) through state regulatory controls and redistributive mechanisms; (3) through the institutional channelling of financialisation within different worlds of capitalism. Interpreting these results within a regulation framework thus confronts certain limitations in Piketty’s treatment of class relations and power asymmetries in his account of top income growth, whilst pointing toward specific policy domains through which institutional change may effect greater equality of outcome, beyond taxation alone. By extending the scope of collective bargaining, these results emphasise the importance of class-biased power resources and underlying regulatory structures, as determinants both of income concentration and of the distribution of economic rewards beyond growth capacity alone.