How does business power operate? A framework for its working mechanisms

The global financial crisis of 2008, its following bank bailouts, and associated corporate impunity sparked a renewed interest in the concept of the structural power of business and the question of “who rules?” in capitalist societies. This new wave of scholarship mitigated some of the problems of the original, theory-driven discussions from the 1970s and 1980s. But despite significant advancements in the empirical identification of business power, we lack a unified framework for studying its working mechanisms. So-called hybrid approaches, drawing on instrumental and structural power for their analyses, display high potential for such a unified and easily applicable framework. We build on this hybrid tradition and propose a novel model that integrates instrumental and structural power analysis into a basic framework. With this, we recalibrate the often rigid division between instrumental and structural power forms and emphasize the role of perceptions as key for understanding the dynamics of business power over time. We illustrate this parsimonious framework by an analysis of the plans of the Dutch government to abolish a dividend tax in 2018 that would have benefited a number of large multinationals but collapsed before implementation.

How does business power operate? A framework for its working mechanisms

The global financial crisis of 2008, its following bank bailouts and associated corporate impunity sparked a renewed interest in the concept of the structural power of business and the question of “who rules?” in capitalist societies. This new wave of scholarship mitigated some of the problems of the original, theory-driven discussions from the 1970s and 80s. But despite significant advancements in the empirical identification of business power, we lack a unified framework for studying its working mechanisms. So-called “hybrid approaches”, integrating instrumental and structural power into their analyses, display high potential for such a unified and easily applicable framework. We build on this hybrid tradition and propose a novel model that integrates instrumental and structural power analysis into a basic framework. With this, we go beyond the often rigid division between instrumental and structural power forms and integrate the role of perceptions as key for understanding the dynamics of business power over time. We illustrate this parsimonious framework by an analysis of the plans of the Dutch government to abolish a dividend tax in 2018 that would have benefited a number of large multinationals but collapsed before implementation.

The nature of crisis responses

The final chapter concludes by discussing the policy implications of the findings for the future management of the financial sector and banking crises. It highlights major developments in banking since the financial crisis and discusses the nature of the political responses to it. The insights from the previous chapters relate to the selective reconstruction of the crisis and its consequences for political reform, competitive concerns, competing policy aims, and a bias of contemporary capitalist democracies towards the promise of future growth. Given the limits of financial regulation and the expectation of future bank bailouts, the chapter encourages a broadening of the fora in which financial knowledge is constructed.

Book Reviews

Anjan V. Thakor of Washington University in St. Louis reviews “TARP and Other Bank Bailouts and Bail-Ins around the World: Connecting Wall Street, Main Street, and the Financial System,” by Allen N. Berger and Raluca A. Roman. The Econlit abstract of this book begins: “Analyzes theoretical and empirical research evidence on the Troubled Asset Relief Program (TARP) in the United States and other bank bailouts and bail-ins in the US and around the world, assessing the important costs and benefits of these programs in order to suggest potential policy implications for the future.”