An Empirical Investigation of the Relationship between Capital Accumulation and Economic Openness in Advanced Capitalist Economies: A French Regulation School Perspective

One defining empirical trend across the advanced capitalist macroeconomies since 1970, is a declining rate of private non-residential fixed capital accumulation (business fixed capital accumulation). Several hypotheses have been advanced to explain this decline: higher corporate dividend and interest payments; increasing share buybacks; the rising rentier behaviour of non-financial corporations, and declining corporate profit rates. Drawing on insights from the French Regulation School Literature, this thesis explores an alternative explanation centred on changes in institutional configuration.
Scholars working within the intellectual tradition of the Regulation School have argued that a sustained period of growth in the rate of accumulation presupposes the existence of a set of enabling and mutually consistent political and economic conditions. When these enabling conditions weaken or dissolve, accumulation will be adversely affected; restoring growth when a “regime of accumulation” has fallen apart, then requires that institutional coherence be re-established. Regulation School economists have emphasized the prevailing international regime (with economic openness as a principal component) one of the key conditions; in the Post-War period, they argued that restrictions on openness – in the realms of trade and finance – helped to establish a high rate of capital accumulation.
This thesis undertakes an empirical examination of the links between economic openness and the rate of national business fixed capital accumulation in advanced capitalist economies, since the 1970s (technically after the demise of Fordism). Following Glyn et al (1990), capital accumulation is defined herein as the growth rate of fixed capital stock. Statistical and econometric tests for a panel of 23 OECD countries for the period 1970-2014 are undertaken. The two fundamental components of economic openness – trade and finance , are investigated independently. In each case, we explore and test the channels through which each might influence the pace of capital accumulation. This investigation undertakes structural-break and dominance analyses, and uses panel data methods. Both static and dynamic panel data methods are undertaken, and several panel estimators adopted to minimise the impact of estimator biases on inferences made.
Generally, the investigations undertaken here support the hypothesis that the accumulation rate for business fixed capital varies inversely with economic openness. This effect operates directly and indirectly; vis-à-vis the latter channel, we found that shifts in real wage growth are a key channel through which the impact of changes in economic openness are felt. The investigations undertaken here conclude with an exploration of the problem of restoring another long wave of accumulation. A post-Fordist regime of accumulation is also identified