Report
Patrick Artus

Do we understand why neoliberal capitalism no longer generates growth?

It is striking to see the decline in potential growth since neoliberal capitalism was introduced in the 1980s and 1990s. Do we understand why neoliberal capitalism has coincided with this decline in long-term growth? There are various explanations: Independent of the functioning of capitalism, there has been less technological progress and less useful innovation; Neoliberal capitalism has given rise to features that are not at all liberal: corporate concentration, support for zombie firms. These features are negative for growth; Household demand has been weakened by the skewing of income distribution against wage earners. This has led to borrowing, first by the private sector and then by the public sector. Debt levels have since reduced the capacity for spending and growth; The high level of debt and the expansionary monetary policies in response to it have led to repeated financial crises, with each crisis destroying some potential growth (by destroying productive and human capital); By intervening massively in response to crises and to prevent borrower insolvency, central banks and governments have driven neoliberal capitalism out of the market economy: financial asset prices are administered; governments increasingly intervene in companies’ choices and in their investment decisions. This results in an inefficient allocation of savings and a loss of potential growth; The increase in the public debt has ended up leading to an increase in the tax burden, whereas neoliberal capitalism was initially associated with a reduction in the role of government and in the tax burden.
Provider
Natixis
Natixis

Based across the world’s leading financial centers, Natixis CIB Research offers an integrated view of the markets. The team provides support to inform Natixis clients’ investment and hedging decisions across all asset classes.

 

Analysts
Patrick Artus

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