A Post-Keynesian Approach
New Directions in Modern Economics series
Edited by Claude Gnos, Louis-Philippe Rochon and Domenica Tropeano
Chapter 4: Income Distribution, Growth and Financialization: The Italian Case
Domenica Tropeano INTRODUCTION The recent performance of the Italian economy has been very weak. The main stylized facts are the slow growth of output and investment, the fall in the export share, the worsening in the distribution of income and the fall in labour productivity. Many explanations have been proposed, though mainly on the microeconomic level. In what follows I shall deal with the issue of whether Italy’s bad economic performance is related to financialization, the country having entered into a phase of deep structural changes involving both trade and financial liberalization. In the first section I shall briefly review the recent literature on financialization, from the macroeconomic side, to see whether this approach could be applied to the Italian case. In the second section I shall show the main trends in macroeconomic aggregates and distribution of income in Italy and discuss the debate on these themes. In the third section I shall propose a very simple model of financialization, which could eventually apply to the Italian case. In that model, financialization would work through an increase in the target rate of return. The conclusions of that model, however, do not fit the Italian case well. In the last section I shall examine another story, mainly dealing with monopoly power and classical competition among capital. According to the last story, financialization, interpreted as the changed attitude of firms towards investment, share issues and dividends, might be a consequence rather the origin of the problem. Conclusions will follow. 1. FINANCIALIZATION IN...