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The effects of financial capital accumulation on employment and wealth distribution

Periodic Reporting for period 1 - FUSION (The effects of financial capital accumulation on employment and wealth distribution)

Reporting period: 2017-07-03 to 2018-07-02

What is the problem/issue being addressed?

The FUSION project analyses the relationship between the logic of monetary accumulation stemming from the financial sphere and declining working conditions and widening social inequality, which is affecting large segments of the European population. I have focused specifically in the relationship between non-financial corporations and the financial system. I have hypothesized that financialisation is manifested in a change in the behaviour of non-financial corporations who now shift their business model from a strategy of ‘retain and reinvest’ to one based on ‘downsize and distribute’, a shift that has been proven for the US case. I have tested this hypothesis for the UK and Spanish cases, with the aim of identifying different models of financialisation in productive firms and its consequences on employment and income inequality.

Why is it important for society?

Financialisation is the term used in the scholarly literature to name the contemporary nature of capitalism. Despite financialisation not being a new phenomena, the current expansion of the financial sector is intensifying the instability of the whole economy system and its outcomes. Importantly, the financialised orientation of non-financial corporations is affecting their capacity to create employment as they are now diverting monetary resources from investment in gross fixed capital formation to the acquisition of financial assets. Likewise, financialisation is associated with the growth of labour income inequality, seen through a negative relationship between the growth of distributed dividends and the decrease of salary expenses.

What are the overall objectives?

The objective of the FUSION project is to analyse how the growing importance of the financial sector as a source of profit is influencing the demand for employment and the working conditions in the cases of the UK and Spain. This has allowed the FUSION team to analyse financialisation models in Europe, comparing the ‘Anglo-American’ (UK) and ‘Southern European’ (Spain) ‘varieties of capitalism’, thereby making an innovative contribution to the fields of Economic Sociology and Socio-Economics. This project also aims to examine the role played by the contested nature of money in the process of capital accumulation and wealth distribution in order to evaluate the potential of new monetary forms to prevent dual stratification processes caused by the expansion of the financial sector and its consequences on the productive firms.
The work performed during the duration of the project has been structured in the following Work Packages 1- 3.
(WP1) To analyse the relationship between the concept of financialisation and the lack of employment in the UK and Spain
I have conducted a statistical analysis of secondary sources to allow for the multivariant analysis of the evolution of the accumulation of financial capital in comparison with non-financial capital. This has been compared with changes to earned income in non-financial corporations with regards to the principal elements comprising the job market in non-financial business sectors.
I have undertaken a global analysis of the whole sector of non-financial corporations using data provided by the Office of National Statistics.
I have created a unique ‘financialisation index’ in order to measure the financial orientation of the different productive industries. I have identified a negative relationship between the level of financialisation and the salary expenses and an inverse relationship between dividends paid and salary expenses.

(WP2) Analyse the relationship between financialisation and working conditions in non financial corporations.
I have elaborated a sample of the first 100 companies listed in the FTSE index for the years 2000, 2005, 2008, 2010 and 2015. This sample includes a total number of 506 non-financial corporations for the UK case and 598 for the Spanish case.
I have conducted a statistical multivariant analysis using SPSS of the portfolio income and the evolution of employment of the selected cases in order to identify the convergent and divergent trends in non-financial corporations in relation to the processes of financialisation and its relation to employment, working conditions and social inequality.

(WP3) To analyse the relationship between money, value and employment
I have carried out a theoretical analysis of the contested nature of money, its main dimensions, the different types of currencies, exchange models, and both its creation and production mechanisms.
I have conducted 16 qualitative interviews to leading actors of the FINTECH sector and the democratic/alternative financial movement.
I am working on an extensive analysis on the nature of money developed by mainstream and heterodox economics, economic and cultural sociology and via data gathered on the UK’s alternative finance movement.
The project will provide original interdisciplinary theoretical developments in the analysis of the relationship between financialisation, wealth distribution, employment and money.
It combines analytical insights from Sociology and Law in order to elaborate a new understanding of contemporary financialised capitalism, overcoming the tight research field divisions between the different social sciences.
FUSION is innovative in three fundamental aspects:
1) Studying the social consequences of financialisation within the sphere of income inequality and lack of employment will shed considerable light on the impact of this process on the principles of justice, fairness and social sustainability. New forms of money and value, already influencing the UK’s alternative/democratic finance sector, may provide innovative solutions to these challenges.
2) It is fundamentally interdisciplinary. Our detailed analysis of how the different non-financial industries develop different models of financialisation and how they are affecting employment and income can help to provide more concrete regulatory solutions applicable to the specificity of different industries.
3) It will provide theoretical advances in the analysis of the contested nature of contemporary money and its production mechanisms within the framework of the financialisation of the economy and its social consequences.
Expected results until the end of the project:

Submitting three peer-reviewed articles in international journals corresponding to Work Package 1-3, including the main results of the statistical analysis and the theoretical exploration on money.
Submitting a book proposal on the transformations of money for the prestigious publisher Routledge

Potential impact:

Results from the FUSION project will be disseminated as follows to the following intended audience:
-Business: to the UK’s alternative/democratic finance and the more mainstream financial technologies sectors.
-Policymakers & Regulators: through a deliverable in the form of ten best practices addressed to policy-markers and regulators warning from the effects of an excessive growth of the financial sector and its consequences on employment and labour income inequality.
-Civil Society: including those organisations already active in the PI and ER's alternative finance networks.
-Media: Key findings will be transferred to the next generation of academics through the ER in the Economic Sociology and Social Justice modules taught at the Universidade da Coruña.
A workshop on Inequalities in Labour Markets – international and comparative research