The evolution of financial markets in the neoliberal era has created serious problems for large nonfinancial corporations already harmed by the slow aggregate demand growth and destructive competition of the period. Financial market pressures led to shorter planning horizons, a declining allegiance of stake-holders to long-term corporate goals, and a large increase in the percentage of cash flow paid to financial market agents. The net result is a “neoliberal paradox”: financial markets demand that corporations achieve ever higher profits, while product markets make this result impossible to achieve. The neoliberal paradox helps explain the outbreak of financial accounting fraud in the late 1990s.
Get full access to this article
View all access options for this article.
References
1.
Chandler, A. 1990. Scale and scope: The dynamics of industrial capitalism. Cambridge, MA: Harvard University Press .
2.
Council of Economic Advisers. 2002a. Economic indictors. Washington, DC: Government Printing Office .
3.
Council of Economic Advisers. 2002b. Economic report of the president. Washington, DC: Government Printing Office .
4.
Crotty, J. 2000a. Slow growth, destructive competition, and low road labor relations: A Keynes-Marx- Schumpeter analysis of neoliberal globalization. Available from http://www.umass.edu/peri/research.html#gm
5.
Crotty, J. 2000b. Structural contradictions of the global neoliberal regime . Review of Radical Political Economics32 (3): 361-368 .
6.
Crotty, J. 2002a. The effects of increased product market competition and changes in financial markets on the performance of nonfinancial corporations in the neoliberal era. Available from http://www.umass.edu/peri/research.html#gm
7.
Crotty, J. 2002b. Why is there chronic excess capacity? Challenge45 (6): 21-44 .
8.
Crotty, J. Forthcoming. Core industries, coercive competition and the structural contradictions of global neoliberalism. In The new competition for inward investment: Companies, institutions and territorial development, ed. N. Phelps and P. Raines. Northampton, MA: Edward Elgar .
9.
Crotty, J., and D. Goldstein. 1993. Do U.S. capital markets allocate capital efficiently? The case of corporate restructuring in the 1980s. In Transforming the U.S. financial system: Equity and efficiency for the 21st century, ed. G. Dymski, G. Epstein, and R. Pollin, 253-268. Armonk, NY: M.E. Sharpe .
10.
Lazonick, W., and M. O'Sullivan. 1996. Organization, finance and international competition . Industrial and Corporate Change5 (1): 1-49 .
11.
Piketty, T., and E. Saez. 2001. Income inequality in the United States: 1913-1998. NBER Working Paper 8467, Cambridge, MA: National Bureau of Economic Research .
12.
Schumpeter, J. [1943] 1976. Capitalism, socialism and democracy. London: Allen & Unwin .
