Is a Finance-led growth regime a viable alternative to Fordism? A preliminary analysis

The viability and desirability of a finance-led growth regime is first assessed against the historical evidence about the many alternative regimes that have been proposed as successors to Fordism. A purely hypothetical model is then built by assembling various hypotheses derived from the observation of current American trends. The imposition of financial norms, such as shareholder value, requires a new and coherent architecture for the mode of governance of firms, the form of competition, the wage labour nexus and the objectives of monetary policy, public budget and tax system. According to the model, any requirement for increased profit has a variable macro-economic impact on wages and economic activity according to the size of accelerator effects and the relative importance of wage and profit in income formation. The stability of an equity-based regime depends on monetary policy which controls financial bubbles and thus the diffusion of finance may push the economy into a zone of structural instability. The next major financial crisis may originate in the USA whose economy approximates most closely to the model. But, the so-called American 'new economy' combines diverse but interdependent structural transformations: diffusion of Information and Communication Technologies, search for new rules for competition, increased flexibility in wages and employment, shift from manufacturing to services. Finance is an element in, but not the whole of, this complex emerging regime.