Finance Capitalism and Income Inequality in the Contemporary Global Economy: A Comparative Study of the USA, South Korea, Argentina and Sweden

245 Pages·2023·5.723 MB·English

by  Kuat B. Akizhanov

Kuat B. Akizhanov
Finance Capitalism
and Income
Inequality in the
Contemporary
Global Economy
A Comparative Study of
the USA, South Korea,
Argentina and Sweden
Finance Capitalism and Income Inequality in the
Contemporary Global Economy
“This book represents a breakthrough in understanding the relationship between
inequality and the dominating form of capitalism, financialization. In a compara-
tive study of the USA, South Korea, Argentina and Sweden the links that create
income inequality are systematically identified. They are not all uniform, with
national political economies mediating. In turn, this study shows how the unequal
effects of financialization may be addressed. The book should be read by all those
interested in the global economy and its impact on national economies.”
—Hugh Lauder, Professor of Education and Political Economy,
University of Bath, UK
Kuat B. Akizhanov
Finance Capitalism
and Income Inequality
in the Contemporary
Global Economy
A Comparative Study of the USA, South Korea,
Argentina and Sweden
Kuat B. Akizhanov
Institute of Applied Research
Academy of Public Administration under the President of Kazakhstan
Astana, Kazakhstan
ISBN 978-3-031-21767-8 ISBN 978-3-031-21768-5 (eBook)
https://doi.org/10.1007/978-3-031-21768-5
© The Editor(s) (if applicable) and The Author(s), under exclusive licence to Springer
Nature Switzerland AG 2023
This work is subject to copyright. All rights are solely and exclusively licensed by the
Publisher, whether the whole or part of the material is concerned, specifically the rights of
translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on
microfilms or in any other physical way, and transmission or information storage and retrieval,
electronic adaptation, computer software, or by similar or dissimilar methodology now
known or hereafter developed.
The use of general descriptive names, registered names, trademarks, service marks, etc. in this
publication does not imply, even in the absence of a specific statement, that such names are
exempt from the relevant protective laws and regulations and therefore free for general use.
The publisher, the authors, and the editors are safe to assume that the advice and information
in this book are believed to be true and accurate at the date of publication. Neither the
publisher nor the authors or the editors give a warranty, expressed or implied, with respect to
the material contained herein or for any errors or omissions that may have been made.
The publisher remains neutral with regard to jurisdictional claims in published maps and
institutional affiliations.
This Palgrave Macmillan imprint is published by the registered company Springer Nature
Switzerland AG.
The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland
To my most cherished readers, mom and dad; my daughters, Aruana
and Malika; and my son, Arnur.
F
oreword
This book offers a fascinating account of finance capitalism in the USA,
Sweden, South Korea and Argentina, revealing important lessons on the
emergence of income inequalities in these countries. Kuat Akizhanov
argues for a heterodox theoretical framework and a critical realist method-
ology to explain and analyse the rise of income inequalities in capitalist
societies. He succinctly makes the case that financialisation has been
responsible for widening inequalities, and more importantly that this has
been an outcome of political and class struggles at national and transna-
tional levels over many decades.
The book makes many points that deserve critical praise, and in this
foreword, I will give attention to four of them. First, class inequality mat-
ters. Adam Smith recognised and was critical of the effects of class on
people’s sentiments and judgements: ‘This disposition to admire, and
almost to worship, the rich and the powerful, and to despise, or, at least,
to neglect, persons of poor and mean condition, … is … the great and
most universal cause of the corruption of our moral sentiments’ (Smith,
1759, 1984, I.iii.2.III, p. 61). While social actors usually seek to legitimise
class inequality through moral discourses, rules, norms and rights, it has
damaging and harmful effects on economic, social and political relation-
ships. In recognising how economic activities affect people’s well-being,
social analysis cannot avoid normative implications (Sayer, 2007).
Akizhanov rightly makes inequality central to his analysis of contempo-
rary capitalist societies. He explores how inequality induces economic
instability and crises, undermines human flourishing and social cohesion
vii
viii FOREWORD
and weakens democratic and political rights. The adverse impact of finance
capitalism on flourishing and suffering means that any critical analysis
must be explanatory and evaluative. Akizhanov’s book points to why read-
ers cannot be indifferent to inequality.
Second, rentierism is an integral feature of finance capitalism. Akizhanov
examines how Western financial institutions promoted financial reforms
across the world, and in the process instituted, legitimised and expanded
financial rent, which refers to income extracted by virtue of owning and
controlling financial assets, such as credit money, bonds and company
shares. Crucially, financial rent has contributed to economic inequality
through interest charges, dividend payments and capital gains. It often
changes into and from other forms of rent based on controlling real estate,
natural resources, infrastructure, digital platforms, intellectual property
and radio spectrum. In contemporary economies, rent extraction has
become a significant mechanism for distributing income and wealth to the
rentier class by partly siphoning off the surplus value that others have pro-
duced (Hudson, 2021).
Classical political economists viewed rent as unearned, undeserved and
unproductive income, and argued that rent should be eliminated or at
least minimised in the economy. But mainstream economics tends to elide
the important moral economic distinction between earned income (largely
derived from useful and creative work) and unearned income (derived
from the mere ownership and control of scarce assets). Neoclassical econ-
omists often see investors’ income as ‘profit’ and assume that perfect com-
petition can prevail to rid markets of economic rent. Moreover, they justify
interest, dividends and capital gains as rewards for investors’ risk-taking
and entrepreneurial skills and talents, even though unearned income arises
from property rights and market power (Sayer, 2015).
Third, civil society plays a critical role in the dynamics of finance capital-
ism. The nature of intellectual, class and political struggles affected the
process of legitimation and efficacy of neoliberal reforms and policies in
specific countries. In the book, Akizhanov explores the ascendency of neo-
liberal thought, and the tendency of neoclassical economics to minimise
class, power and politics as explanations of economic practices and institu-
tions. But it is vital to understand how neoliberalism and financialisation
have affected who owns what and why, and who gets what, from whom,
when and how? While financiers draw on neoliberal moral reasoning and
infrastructure to justify and defend their shares of national and global
income, counter-movements often emerge to contest financiers’ rights
FOREWORD ix
and claims regarding who should get and control what (Sanghera &
Satybaldieva, 2021).
Moreover, the state plays a central role in finance capitalism. It creates,
facilitates and regulates financial rent. It is a key site of social contestation
over state control. Regulation is never neutral, but an outcome of unequal
social forces over the nature of capitalism. Neoliberalism has shown how
transnational capital, domestic elites and pro-market research institutes
have formed alliances with political actors to weaken and suppress opposi-
tional forces. But people will usually resist unjust arrangements and social
suffering through open and hidden forms (Sanghera & Satybaldieva, 2022).
Fourth, critical realism offers a distinctive methodological position.
Critical realism in general is a philosophical standpoint with strong onto-
logical commitments that have major meta-theoretical implications. In
dealing with open systems, critical realism does not seek to find regulari-
ties, but rather identify abstract causal mechanisms and explain how they
work, and then discover if they were activated and under what conditions.
Critical realism in general aims to under labour for social science and does
not seek to establish the correct foundations for social science. As Jessop
(2022) notes, the challenge is to move from abstract, philosophical and
meta-theoretical reflections on critical realism in general to specific, practi-
cal and theoretically grounded research programmes regarding particular
analytical objects, generative structures, actual events and processes.
Critical realism in particular is a scientific enquiry defined by increasing
complexity and concreteness. This usually involves theoretical pluralism to
analyse concrete-complex objects. Specific theories, mechanisms and con-
cepts are always tentative, and data analysis is required to test their practi-
cal adequacy. Specific explanations focus on the contingent interactions
among causal mechanisms, tendencies and counter-tendencies, agential
forces and so on, and are better or worse than competing explanations. In
constructing his heterodox theoretical framework and analysing the four
case studies of finance capitalism, Akizhanov has successfully met the chal-
lenge to translate general meta-theoretical work into relevant research
questions, strategies, studies and conclusions.
In writing this book, Akizhanov has done a service to critical political
economy scholarship, and it deserves to be widely read!
University of Kent Balihar Sanghera
Kent, UK
x FOREWORD
reFerences
Hudson, M. (2021). Finance capitalism versus industrial capitalism: The rentier
resurgence and takeover. Review of Radical Political Economics, 53(4), 557–573.
Jessop, B. (2022). Critical realism and moral economy: Sympathetic reflections on
Andrew Sayer’s work. In B. Sanghera, & G. Calder (Eds.), Ethics, economy and
social science: Dialogues with Andrew Sayer (pp. 75–85). Routledge.
Sanghera, B., & Satybaldieva, E. (2021). Rentier capitalism and its discontents:
Power, morality and resistance in Central Asia. Palgrave Macmillan.
Sanghera, B., & Satybaldieva, E. (2022). Putting resistance back in moral econ-
omy. In B. Sanghera, & G. Calder (Eds.), Ethics, economy and social science:
Dialogues with Andrew Sayer (pp. 106–118). Routledge.
Sayer, A. (2007). Moral economy as critique. New Political Economy,
12(2), 261–270.
Sayer, A. (2015). Why we can’t afford the rich. Policy Press.
Smith, A. (1759, 1984). The theory of moral sentiments. Liberty Fund.
P
reFace
Initially, this project was set out as my doctoral thesis that investigates the
main causes of increasing income inequality in different countries over the
last thirty to forty years. My research journey then turned into the study
of contemporary finance capitalism. As I engaged with theoretical con-
cepts on finance capitalism and its distributional effects, the complexity
and multifacetedness of social reality around the topic arose. Partially, this
was an outcome of the realisation of the importance of methodological
matters viewed from an ontology-centric perspective. Accordingly, this
project was undertaken by employing the philosophy of critical realism,
which questions mainstream economics’ essential approaches to social
reality at the level of method. Critical realism, which provides an alterna-
tive ontology, helped to explain and describe in this book the mechanisms,
structures, powers and tendencies active in the financialisation and income
inequality nexus.
The conceptual framework of this study is based on the hypothesis-
proposition, which constituted a theoretical point of departure according
to which finance capitalism or financialisation, as the latest stage of neolib-
eralism, facilitates upward income distribution for the benefit of the ruling
classes, thus resulting in increased income inequality. Rather than putting
forward a single causal relationship construed with some kind of formalis-
tic mathematical modelling, income inequality is viewed in this book as a
product of the cumulative effects of different political, social and eco-
nomic factors that occurred during the period spanning the 1970s to the
2000s. Process and effects associated with financialisation were then
xi