Deregulation, austerity and the polarization of the labour markets

The huge growth of deregulated finance has been associated to a new financial regime and great transformations in the pattern of economic growth. Looking back, there has been  a narrow relationship between the crisis of the post-war accumulation pattern, the evolution of the international monetary system and the process of financial deregulation. In fact, as Bello (2006) warned, in the 1980s, Reaganism and structural adjustment were not successful attempts to overcome the post-war accumulation crisis. One decade later, the Clinton administration embraced globalization as an American strategy. First, this strategy aimed to accelerate the integration of production and markets by transnational corporations. Secondly, it aimed to create a multilateral system of global governance centred on the World Trade Organization, the International Monetary Fund and the World Bank.

In the last decades,  financial capital  exercised control over the structural forms necessary for the continuing cycles of valorisation of productive capital, thanks to the centralized money at  disposal. Different growth models overwhelmed this global scenario: while some countries have presented a consumption-driven growth model fuelled by credit, generally followed by current account deficits, other countries have shown an export-driven growth model, mainly characterized by modest consumption growth and large current account surpluses (Stockhammer, 2009). The growth of financial assets, generated by the new debt cycle, included growing and sophisticated risk management practices. Besides, the financial expansion also proved to subordinate the pace of investment to financial commitments. The overall changes strengthened private and public debt and further social inequalities.

 The idea of autonomous monetary management has collapsed under the 2008 global financial crisis and the tensions that emerged within the markets have been shifted to the political sphere. In truth, the financial crisis and the erratic movements of key-currencies have shown that central banks do not have control on the complexity of global, innovative and speculative markets. Otherwise, central banks´ actions are not independent from private and public pressures.

 In addition, macroeconomic policies that currently privilege fiscal austerity and further labour market  flexibility can be socially costly.  Considering the labour markets, employability  seems to be conditioned to private strategies that aim cost reductions, labour flexibility and efficiency targets. Longer working hours, job destruction, turnover, outsourcing, workforce displacement and loss of rights have also been part of the spectrum of management alternatives aimed at cost reduction. Indeed, the current dynamics of labour markets favoured  the vulnerability of workers, mainly young people, and precarious jobs.

The apprehension of this political and social reality is decisive in the attempt to reformulate the economics curriculum in order to include a deep reflection on current labor challenges that coudl take into account the changing employment relationship.  Students must be increasingly aware that, considering the current investment scenario and its outcomes in  terms of labour challenges, that in the near future workers will be increasingly polarized into two forces: on one side, an elite that controls and manages the high-tech and financial global economy; and on the other side, a growing number of displaced workers who have few prospects for meaningful job opportunities.





Bello, W.  (2006) “The capitalist conjuncture: over-accumulation, financial crises, and the retreat from Globalization”’,Third World Quarterly, 27:8, pp. 1345 — 1367.


Minsky, H.P (1986),  Stabilizing an Unstable Economy. New Haven, Connecticut: Yale University Press.


Stockhammer, E. (2009), “The finance-dominated accumulation regime, income distribution and the present crisis”, Department of Economics Working Paper Series, Vienna: Vienna University of Economics & B.A.


  1. Two questions. 1) What kind of insanity would cause anyone to believe such a world as you describe is necessary or beneficial for humanity. 2) How can human welfare, democracy, and equality survive the world you describe?

  2. Maria Alejandra Madi said:

    I) Please read Karl Polanyi’s The Great Transformation where he develops the idea of capitalism as a “satanic mill”. In his view, the survival of society depends on a counter-movement. It is also worth remebering Fullbrook’s words

    “So long as the country’s university economics departments are allowed to be operated as political propaganda centres and one-paradigm closed-shops, successive generations of citizens, including journalists and politicians, will be indoctrinated in the Neoclassical-Neoliberal creed. This situation is not compatible with normal ideas of democracy. Alas, I do not sense within Labour circles a willingness to confront the problem. But not until it is can the madness of Neoliberalism, like Soviet Marxism, be laid to rest.”

    2) This is the main concern because in current times the proliferation of financial assets, with economic growth limited and sporadic, has given way to widespread unemployment, income gaps and weaker welfare programs. The same policies that have obliterated social services and kept labour cheap have supported the expansion of new global business models and financial deepening. Besides, the onset of the new millennium represents a new political age where the social, economic and political setting significantly violates democratic ideals of political equality and social peace. Indeed, politicians and policy makers have given priority to their sponsors instead of to society challenges and political decisions have been influenced by the top 1% who favours policies of increasing inequality. A counter-movement is urgently required to restate the ideals of democracy. The forthcoming WEA Book Conference Capital and Justice is aimed to address these challenges

  3. Thanks for your responses. I worked in the TX legislature from 1974 to 1980, and then on Capitol Hill from 1980 to 1988. I can’t agree with your answers, based on those experiences. First, most Senators and Representative have never heard of Karl Polanyi, and would likely find his ideas unappealing if explained to them. In the view of most of them Polanyi would be just another crazy socialist. The only difference here between so called American conservatives and liberals about Polanyi is liberals would at least be willing to listen to you explain Polanyi’s views. Most members of government and their constituents believe in free markets and every person his own boss. History shows that was different before the Civil War. A counter movement would I believe also be looked upon as a socialist movement. Socialism has a long and proud history in the US. It stumbled after the Civil War when it promised too much and delivered too little. But it didn’t die. In many ways FDR, Truman, and even Eisenhower were socialists. Even Nixon spoke socialist ideas at times (remember wage and price freezes). But as a guide for national policy Reagan put the nails in socialism’s coffin. But strangely a form of socialism lives on in the millennials. Which Sanders in this election tapped into. But socialism must change if its going to counter neo-capitalism. It has to be democratic, flexible in working with all groups and political persuasions, and above all accommodate an open business setting that allows price setting via markets that are well designed and regulated. Polling shows most Americans (65%) support such a government, economic, and social structure. Now, to get their a lot of obstacles must be removed. Not all removals will be peaceful. We up for that?

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