The Role of Wealthy Elites in Financialisation and Escalating Inequality in Britain
London School of Economics, United Kingdom
Inequality is one of the defining issues of our times, with the wealthiest 1% owning nearly 25% of Britain’s wealth, while the poorest 50% have less than 5% of the national wealth.
Numerous causes of escalating inequality have been proposed: declining share of labour versus capital, skyrocketing executive compensation, reduced power of unions and collective bargaining resulting in increased negotiating power of owners/executives, globalization, privatization, and the rise of finance-driven capitalism, or financialisation. Finance plays an increasing role in the economy, and recent scholarly research concluded that expansion of finance has contributed significantly to rising inequality in many countries. Lin and Tomaskovic-Devey (2013) concluded that “the rise of finance is one of the driving forces behind growing income inequality and the concentration of income at the very top.” (p.1313).
Income is becoming concentrated within a small group of High Net Worth (HNW) individuals, who are deriving an increasing proportion of wealth from financialisation. HNW’s are increasingly channeling their capital into private equity (PE) investments. Of the $4 trillion in private equity assets globally, HNW’s are investing about 30% of their portfolio in PE funds, making them the highest contributors to PE investments. The bankruptcy of several major PE-owned companies in the UK has incited accusations of predatory and immoral behaviour, including asset-stripping, exorbitant management fees, aggressive tax avoidance practices, etc. This paper will review current research on the link between HNW’s and their contribution to rising inequality via investment patterns through a sociology of morality lens.
Creditworthiness seekers. The case of Swiss franc mortgage borrowers in Poland.
Adam Mickiewicz University, Poznań, Poland, Poland
Creditworthiness becomes an important category of social differentiation in modern capitalism. The extent to which it is entitled to consumers determines their positions in the economic, cultural and prestige hierarchies. Hence their striving to increase their creditworthiness becomes a measure of their success in life.
The case of Swiss franc mortgage borrowers in Poland who took out loans in 2004-2008 explicitly reveals this motive of their behavior. In Poland, they are the subject of continuous public discourse due to the persistently high CHF/PLN exchange rate and the lack of institutional solutions to the debt problem and the resulting consequences for the financial condition of some households. On the one hand, mortgage borrowers are accused of excessive greed and, on the other, of the naivety in choosing Swiss franc as the settlement currency of the loan.
I would like to analyze their credit decisions in terms of behavioral economics: bounded rationality (H. Simon), perspective theory (D. Kahneman, A.Tversky); new economic sociology: relational accounting (V.Zelizer, F. Wherry). Ultimately, I will focus on the reconstruction of their strategy to increase their creditworthiness in terms of human capital and economic capital.
Perceived Tax Burdens and Preferences for Redistribution – Evidence from a Survey Experiment
University of Vienna, Austria
Taxes are an important indicator of the redistribution potential of the welfare state. Since the 1970s, seminal theoretical models considering individual income as main determinant suggest that more inequality should lead to more redistribution. Empirical studies only find mixed support for this mechanism. However, does this mean that the majority of citizens reject more redistribution and, if so, why is this the case?
Besides considering further determinants as explanatory factors (i.e. fairness norms), the mediating factor of information becomes more prominent as studies could show that individuals are only partially informed.
Using data from an experimental survey with information treatments, conducted in Austria in 2018, the study asks how information on (i) the relative position of one’s personal income and (ii) the present structure of the tax burden influences subjectively preferred tax levels.
The research will enrich the existing literature in three ways: First, by focusing on differences between perceived and actual taxation, second, by measuring tax-preferences on various income levels and, third, by connecting the debate about the impact of information on tax perceptions with current research that stresses the importance of fairness norms for preferences over redistribution.
First results indicate that on average respondents overestimate tax differences between the poor and the rich but underestimate the actual tax burdens of all income levels. Information on the actual tax burdens leads respondents to adapt their tax preferences to the current taxation. The appreciation of different distributive justice norms affects the preferred distribution of the tax burden.
Forms of Social Capital in the Field of Economists. Between Scientific and Worldly Powers
1University of Lausanne, Switzerland; 2Copenhagen Business School, Denmark
Economists are among the main producers of discourses legitimating market-based ideologies, defending the particular interests of a capitalist class. They are involved in various networks, which lead to the detention of social capital. This presentation investigates the structure of social capital in the field of economists in Switzerland. To do so, we use an original biographical database of all university professors between 1980 and 2000 (n=200). We focus on their positions at the top of academic and scientific organisations, big corporations and the higher civil service, and as elected MPs; their inter-personal networks (scientific collaborations; PhD supervision of future economic, political and administrative “elite” members; local and international networks); and their networks of scientific recognition through citations and publications in “prestigious” scientific journals. To study these networks, we use an innovative methodology by combining multiple correspondence analysis (MCA), class-specific MCA and cluster analysis. First, we identify two main oppositions within the field, according to the volume of worldly (external and local) social capital, and to the volume of scientific (internal and international) social capital. Second, we show that scientific social capital gains in importance in the very recent period, despite the fact that worldly social capital constitutes the dominant form of resources along time. Finally, we identify seven particular uses of social capital according to various forms and combinations of network logics. We show that sub-groups that detain scientific social capital obtained through national networks are the most powerful within the “scientific” fractions, while the most influent “worldly” fractions are able to concentrate every form of social capital related to external networks. Also, concentration of both powers goes through various forms of inter-personal networks.