macroeconomy as a whole, nor will the financial and economic crisis and the recovery in Germany be discussed. For these issues, the interested reader is referred to Detzer et al. (2013) and Detzer/Hein (2014), for example. Trends of re-distribution in Germany The period of finance-dominated capitalism has been associated with a massive redistribution of income. First, functional income distribution has changed at the expense of labour and in favour of broad capital income in several countries (Table 1). The labour income share, as a measure taken from the national accounts and corrected for the changes in the composition of employment regarding employees and self-employed, shows a falling trend in the developed capitalist economies considered here, from the early 1980s until the Great Recession, if we look at cyclical averages in order to eliminate cyclical fluctuations due to the well-known counter-cyclical properties of the labour income share. As can be seen, the fall in Germany was considerable, in particular from the cycle of the 1990s to the cycle of the early 2000s. However, redistribution was even more pronounced in several other countries, as for example Austria, France, Greece, Ireland, Italy, Spain and Japan.
Table 4: Financialisation and the gross profit share – a Kaleckian perspective Determinants of the gross profit share (including (top) management salaries) 1) Mark-up 2) Price of imported raw materials and products 3) Sector of the Stylized facts of (1.-7.) and neo- liberalism (8.-9.) 1.a) Degree of price in the goods market 1.b) power and activity of trade union 1.c) Overhead costs and gross profit targets 1. Increasing shareholder value orientation and short-termism of management … + + … … 2. Rising dividend payments … … + … … 3. Increasing interest rates or interest payments … … + … … 4. Increasing top management salaries … … + … … 5. Increasing relevance of financial to non- financial sector (investment) … + … ... + 6. Mergers and acquisitions + ... … ... ... 7. Liberalisation and globalisation of international finance and trade – + … +/– +/– 8. Deregulation of the labour market … + … … … 9. Downsizing of government … + ... … + Notes: + positive effect on the gross profit share, – negative effect on the gross profit share, … no direct effect on the gross profit share Source: Hein (2014a, p. 15) Second, the increase in management salaries as a part of overhead costs, together with rising profit claims of the rentiers, i.e. rising interest and dividend payments of the
corporate sector, have in sum been associated with a falling labour income share. Since management salaries are part of compensation of employees in the national accounts and thus of the labour income share, the wage share excluding (top) management salaries has fallen even more pronounced than the wage share taken from the national accounts. Third, financialisation and neo-liberalism have weakened trade union bargaining power through several channels: increasing shareholder value and short-term profitability orientation of management, sectoral shifts away from the public sector and the non- financial business sector with stronger trade unions in many countries to the financial sector with weaker unions, abandonment of government demand management and full employment policies, deregulation of the labour market, and liberalisation and globalisation of international trade and finance. These channels should not only have triggered falling labour income shares, but should also have been conducive to the observed increases in inequality of personal/household incomes. The major reason for this is the (even more) unequal distribution of wealth, generating capital income, which then feeds back on the household distribution of income when it comes to between labour and capital incomes. The effect of financialisation on functional income distribution – evidence for Germany Checking the relevance of these channels for the German case, with respect to the first channel we find that neither the profit share of the financial corporate sector was higher than the profit share in the non-financial corporate sector in the period of the increasing dominance of finance starting in the early/mid 1990s (Figure 3), nor was there a shift of the sectoral shares in gross value added towards the financial sector (Figure 4). However, the share of the government sector in value added has seen a tendency to decline, from 12 per