Conditional contraction: Globalisation and capitalist systems

The effect of globalisation on social spending is one of the most intensely studied issues in the political economy literature. Until recently, conventional wisdom held that globalisation leads governments to expand social spending to compensate workers for increasing risk exposure. The latest research shows, however, that globalisation has become strongly associated with spending cutbacks since the late 1980s. This article adds to this research by arguing that the negative impact of globalisation is conditioned on the capitalist system in different countries. In coordinated market economies (CMEs), employers are dependent on the willingness of the workforce to invest in specific skills and therefore become supportive of extensive social spending. Not so in liberal market economies (LMEs), where employers are much less dependent on social spending because the workforce in general invests less in specific skills. Employers in LMEs are therefore likely to use increasing globalisation as a means to push through retrenchment, whereas employers in CMEs are not. This argument is tested in a time‐series cross‐section regression analysis, which clearly supports it.     

Responding to the foreclosure crisis

Abstract

Regional economic downturns, speculation on skyrocketing home prices, and rampant unfair and deceptive mortgage lending practices have combined to create the perfect foreclosure storm in America. More than 2 million foreclosures are expected to occur during the next 12 to 18 months. Common to all three of these contributing factors is the reality that effective regulation of the mortgage market would have greatly limited damage from foreclosures.

This article traces the origins of the subprime market crisis and the resulting impact of foreclosures on the housing market, minority households, and the economy. The article also reviews the effectiveness of current interventions to mitigate or limit foreclosures and recommends broader solutions to help families maintain their homes.     

Sub-prime mortgage lending: a cultural economy

Abstract

Developing cultural economists’ concerns with the assembly of agency in financial markets, agency in sub-prime mortgage lending in the United States is shown to have been made up through calculative devices of risk. Credit reporting and scoring provided for the targeting, sorting, pricing and governing of customers in terms of risk. The securitization of mortgages into risk-structured financial instruments made possible extended lending. Interest-only adjustable rate mortgage products called up mortgagors who, as leveraged investors, embraced risk in a rising property market. The current sub-prime mortgage crisis is understood in critical terms as a moment when the contradictions of these risk devices and their incapacity to capture the uncertain future have come to the surface, and agency in sub-prime lending has been disassembled. Cultural economy is thus shown to make a distinctive contribution to the politicization of sub-prime that stresses the ambiguous politics of calculation.     

Innovation and the cost of mortgage credit: A historical perspective

Abstract

Since the inception of U.S. institutional mortgage lending in the 1830s there have been major changes in mortgage instruments, the delivery system, and funding sources. Some of these changes qualify as innovations that have lowered the cost of credit and increased its availability. This article divides the history of U.S. mortgage finance into three periods and identifies the source and type of major innovations.

The “Origins” period, from 1831 to 1931, included the development of many mortgage lending institutions and instruments. The second era, “A Wonderful Life,” featured a government‐supported special circuit that dominated mortgage finance from 1932 to 1981 and witnessed development of mortgage‐backed securities. The current era, “A Brave New World,” features a new system of credit delivery dominated by specialized institutions and technology. In it, application of automated underwriting and artificial intelligence may have far‐reaching effects on the market and the accessibility of low‐income households to mortgage credit.     

Evidence and Actions on Mortgage Market Disparities: Research,Fair Lending Enforcement,and Consumer Protection

ABSTRACT

In this article, we present an overview of the research on discrimination in mortgage underwriting and pricing, the experiences of minority borrowers both prior to and during the financial crisis, and federal efforts to mitigate foreclosures during the crisis. We next discuss the history of legal cases alleging disparate treatment of minority borrowers, and recent cases alleging disparate impact in the wake of the Supreme Court’s Inclusive Communities decision. Using these discussions as a background, we examine and discuss mortgage regulations issued by the Consumer Finance Protection Bureau following the financial crisis, describe recent developments in the FinTech industry and explore the implications for fair lending policy and minority borrowers more generally. Finally, we draw conclusions and make recommendations for improving the mortgage market outcomes of minority borrowers and increasing minority borrowers’ access to credit.     

The reverse mortgage as an asset management tool

Abstract

Reverse mortgages are usually seen as a vehicle for increasing the income of poor, elderly households. This perspective, coupled with the relatively slow growth of reverse mortgage programs, has led some observers to question the growth potential of the reverse mortgage market. This article presents a more expansive view of reverse mortgages as a financial tool for tapping housing equity for various purposes and at various stages in the life cycle.

Three market segments for reverse mortgages are discussed: elderly persons living alone, other elderly households, and non‐elderly households. Potential uses include turning housing equity into personal human capital investment accounts, enabling children to provide care for their disabled parents, funding elderly households’ long‐term care insurance, and sustaining consumption. Recent progress in product development and availability and political pressures to find private financing for health and long‐term care suggest that the reverse mortgage market has considerable growth potential.     

Liberalization without Retrenchment: Understanding the Consensus on Swedish Welfare State Reforms

In 1980, Sweden was a highly regulated economy with several state monopolies and low levels of economic freedom. Less than twenty years later, liberal reforms turned Sweden into one of the world's most open economies with a remarkable increase in economic freedom. While there is resilience when it comes to high levels of taxes and expenditure shares of GDP, there has been a profound restructuring of Sweden's economy in the 1980s and 1990s that previous studies have under-estimated. Furthermore, the degree of political consensus is striking, both regarding the welfare state expansions that characterized Sweden up to 1980, as well as the subsequent liberalizations. Since established theories have difficulties explaining institutional change, this article seeks to understand how the Swedish style of policy making produced this surprising political consensus on liberal reforms. It highlights the importance of three complementary factors: policy making in Sweden has always been influenced by, and intimately connected to, social science ; government commissions have functioned as 'early warning systems', pointing out future challenges and creating a common way to perceive problems; and, as a consequence, political consensus has evolved as a feature of Swedish style of policy making. The approach to policy making has been rationalistic, technocratic and pragmatic. The article concludes that the Swedish style of policy making not only explains the period of welfare state expansion – it is also applicable to the intense reform period of the 1980s and 1990s.     

West European welfare states: The old politics of retrenchment

Analysing endeavours to restructure welfare provision, Paul Pierson proposes that the 'politics of retrenchment' is very different from the politics of welfare expansion. In particular, the difficulties of welfare retrenchment are not to be explained by existing theories of welfare expansion; and the 'old' politics of welfare expansion has little to offer in explaining the 'new' politics of welfare retrenchment. This article questions these claims. First, contemporary societal developments are considered in the light of three major theories advanced to explain the emergence of welfare states in Western Europe: the logic–of–industrialism, the crisis of capitalism, and nation–building. Secondly, focusing on trade unions, mainstream left parties, and traditions of governance, the current status of the political forces regarded as vital in building welfare states is assessed. The conclusion drawn is that the resilience of the welfare state in Western Europe lies less in the 'new' politics of 'policy lock in' and 'client interest groups' than in the persistence of the 'old' forces that led to the founding and expansion of welfare states.     

West European welfare states: The old politics of retrenchment

Abstract Analysing endeavours to restructure welfare provision, Paul Pierson proposes that the 'politics of retrenchment' is very different from the politics of welfare expansion. In particular, the difficulties of welfare retrenchment are not to be explained by existing theories of welfare expansion; and the 'old' politics of welfare expansion has little to offer in explaining the 'new' politics of welfare retrenchment. This article questions these claims. First, contemporary societal developments are considered in the light of three major theories advanced to explain the emergence of welfare states in Western Europe: the logic–of–industrialism, the crisis of capitalism, and nation–building. Secondly, focusing on trade unions, mainstream left parties, and traditions of governance, the current status of the political forces regarded as vital in building welfare states is assessed. The conclusion drawn is that the resilience of the welfare state in Western Europe lies less in the 'new' politics of 'policy lock in' and 'client interest groups' than in the persistence of the 'old' forces that led to the founding and expansion of welfare states.     

What makes community reinvestment act agreements work? A study of lender responses

Abstract

One response to the incentives provided by the Community Reinvestment Act of 1977 (CRA) has been for lenders and community groups to enter into CRA agreements, which involve pledges to provide prescribed levels of service to targeted neighborhoods. This article examines whether lenders actually change their behavior after entering into these agreements.

Using data on CRA agreements and on mortgage lending, we find that institutions increase their lending activity with each year an agreement is in force and that increased lending persists after an agreement expires. Additional analysis shows that agreements that include provisions for mortgage counseling and technical assistance are associated with increased targeted lending. By contrast, agreements with provisions requiring small business counseling and technical assistance and periodic meetings by review committees are associated with somewhat depressed lending levels. Further research is needed to draw definitive implications from this second set of results.     

Who Owns Education? Cleavage Structures in the Partisan Competition over Educational Expansion

This article addresses the issue of how to explain institutional change in national political economies. Within an actor-centred institutionalist theoretical framework, it explores the utility of a coalitional explanation for changes in the financial and corporate governance systems of Italy. Finance and corporate governance are useful foci for understanding change and the evolutionary direction of national political economies as a whole because, first, national and European reformers have focused a great deal of their energy on transforming financial market structures and corporate governance and, second, the regulation of finance and corporate governance is increasingly important as a means for states to exert influence over their economies. The paper finds considerable change in Italian capitalism as a result of successful elite reformers, party system changes, and the emergence of a reform coalition. However, change is limited and Italy retains a distinctive model of capitalism.     

Welfare-Ideological Change in Scandinavia: A Comparative Analysis of Partisan Welfare State Positions in Four Nordic Countries, 1970–2003

During the 1990s, the Nordic welfare states, notably Finland and Sweden, faced serious challenges that triggered a number of welfare restructuring processes. This article focuses on the political determinants of these processes, or, more exactly, it analyses changes in partisan welfare policy positions in Denmark, Finland, Norway and Sweden between 1970 and 2003. The main goal of the article is to chart possible changes in party positions on social policy. Has there been a decline in pro‐welfare attitudes during the period 1970–2003, and if so, how are these changes related to ideological and institutional factors? The data analysed in the article consists of election programmes, and more specifically, textual utterances concerning the welfare state. The results indicate a relatively high degree of stability in partisan support for welfare state expansion and investments in social justice, while market‐type solutions to social problems, on the other hand, have become more salient among parties, especially in the Right. The findings suggest that parties still differ from each other as to welfare‐political positions, indicating that Social Democratic and left‐wing parties remain the foremost defenders of the ‘Nordic Welfare Model’, whereas the Right has become more hesitant towards welfare state expansion.     

The potential and limitations of mortgage innovation in fostering homeownership in the United States

Abstract

This article presents an empirical analysis of mortgage innovation as a vehicle to enable renters, especially those from traditionally underserved populations, to realize home‐ownership. It examines the financial and underwriting criteria of a typology of mortgage products, from those adhering to historical standards to some of today's most liberal loans, and develops synthetic models to account for all direct purchase costs. These models are calibrated using 1995 data on renter demographic and financial characteristics from the Survey of Income and Program Participation.

Compared with historical mortgages, today's more innovative loans increase the number of renters who could hypothetically qualify for homeownership by at least a million and expand potential home‐buying capacity by $300 billion. Certain policies could greatly expand the potential gains. Nevertheless, even the most aggressive innovations can play only a limited role in efforts to deliver the material benefits of homeownership to underserved populations.     

Equity and Political Economy in Thomas Hobbes

Thomas Hobbes is often viewed as a seminal figure in the development of the homo economicus philosophical anthropology central to the acquisitive, bourgeois morality of liberal modernity. The present study challenges this interpretation of Hobbes as an antecedent to free market ideology by arguing that his political economy presupposed a complex relation between contract, law, and social networks of credit informed by prudence and robust norms of equity. The normative claims of equity permeate Hobbes's holistic account of political economy and inform his vision of liberal statecraft that gave priority to prudential judgment against economic determinism, especially as Hobbes understood trade, taxation, allocation of resources, and the provision of social welfare. I will conclude by reflecting upon how Hobbes's political economy both reveals the internal diversity within the liberal intellectual tradition and can help us to better understand and critique contemporary liberal states and democratic theory.     

Taxing work

Abstract. This article examines the development of tax regimes across OECD countries in the latter part of the twentieth century. It gives particular emphasis to taxes on labour income. Taxes on labour income represent a major drain on private households. They have become the mainstay of many of these countries' public sector finances. Taxes on labour income rather than on capital appear to be the preferred instrument of finance for those economic and political interests that advocate and support a strong (and thereby expensive) welfare state. There is little 'free lunch' to be had in these welfare states; if anything, 'socialism in one class' seems to be the rule. Coordinated market economies tend to impose higher tax rates on labour because they have higher levels of wage coordination, their governments are more likely to be oriented to the left and their executives are relatively weak in relation to their legislatures.     

Utopias Re-imagined: A Reply to Panizza

This article is a reply to Panizza's recent article, 'Unarmed Utopia Revisited: The Resurgence of Left-of-Centre Politics in Latin America'. It contests the claims that there are no alternatives to market economies and liberal democracy in contemporary Latin America. It does this by disentangling the conceptual assumptions that underlie the analysis presented, which, it argues, construct a loaded dice that makes the conclusions of the arguments seemingly inevitable and objective. It also explores the internal contradictions within the alternative presented. This analysis is developed through the use of critical social theory and with reference to the 'movements from below' engaged in the struggle to re-imagine and reconstruct utopias. This involves bringing to the heart of analysis a theoretical orientation in which structures become a series of concrete social relations, not objects, and power is mediated at a variety of spatial levels. It necessitates a conceptualisation of politics, structure and the agents and nature of structural change that expand the boundaries of traditional political science categories. Such conceptual expansion and theoretical repositioning make visible, and politically central, the movements from below normally categorised as marginal in political analysis.     

Political impediments to the resumption of labour migration to Western Europe

This article argues that traditional, labour migration flows to Western Europe are unlikely to resume in the near future and the commitment of the European Community to the free movement of labour is likely to erode as a consequence of anti‐immigrant illiberalism in Western Europe. Anti‐immigrant illiberalism in several, major labour‐importing states is evident in: the semipermanent politicisation of state immigration policy; increasing popular support for xenophobic political forces; the appropriation of anti‐immigrant votes by established political parties of the right; and the abandonment by left‐wing parties of liberal immigration and immigrant‐welfare policies.     

Where Do We Go from Here?

The left needs a fundamental rethinking of its politics for a new era. The first task is to understand the contemporary conjuncture: the dynamic combination of events and circumstances which structure a political settlement. Two such conjunctures have occurred in recent history. The first produced the postwar welfare settlement of 1945, which broke down in the economic crisis of the 1970s. The second took shape in the 1980s around the revival of liberal market economics and what became known as Thatcherism. It failed following the 2008 financial crash, and has begun to break apart with the vote to leave the EU. New political and cultural faultlines are confounding the orthodoxies of the governing class and cutting across the partisan loyalties of the main political parties. They herald the renewal of politics. But Labour is on the edge of an abyss. This article considers what the left can learn from Labour's previous periods of defeat and revisionism, and suggests where—if it survives—it should go next.     

Economic Crisis and Institutional Resilience: The Political Economy of Migrant Incorporation

This article focuses on the situation of migrants and their descendants in European labour markets. This important socioeconomic dimension of the current crisis illuminates the role of pre-existing policies and institutions and points the way to political solutions. The article begins with a comparative puzzle: how can one account for cross-national, cross-local, and cross-sectoral variation in the labour market outcomes of migrant-origin minority groups and explain migrant-origin and gender differences. This is followed by a critical examination of debates on the ‘integration’ of migrants and the ‘second generation’ reflecting political diatribes on the across-the-board poor performance of minorities and the role of ethnic or religious factors. An alternative explanation underscores the importance of policy paradigms and institutional hurdles focusing on three aspects of European political economies: welfare state arrangements, education, and sub-national labour market policies. The arguments put forth rely on comparative aggregate data and surveys in countries representative of ideal types according to the original version of the varieties of capitalism, worlds of welfare, and integration models literature, in particular France, Germany, Sweden, and the Netherlands.     

Meso‐discourses,state forms and the gendering of liberal‐democratic citizenship

This article builds upon Michel Foucault's fleeting observation that ‘the state consists in the codification of a whole number of power relations’ and that ‘a revolution is a different type of codification of these same relations’ (Held et al., 1983, pp. 312–3). Specifically, the article uses the case of Canada to argue that distinct state forms rest on particular meso‐discourses which inform a logic of governance, historical configurations of the public and private and gendered citizenships. The meso‐discourses of separate spheres, liberal progressivism and performativity (the logics of governance for the laissez‐faire state, the Keynesian welfare state and the neo‐liberal state, respectively) have coded and recoded gendered citizenships, thereby providing women and men with differential access to the public sphere and to citizenship claims. The neo‐liberal state's meso‐discourse of performativity is especially challenging for women and all equity‐seeking groups because it prescribes the ascendency of market relations over political negotiation or ethical considerations, as well as the attrition of social and political citizenship rights. Social citizenship is being eclipsed by market citizenship.