Analyzing The Lange-Lerner Hypothesis Is a Monopolized Banking Sector a Threat to Democracy?

31 Pages Posted: 25 Apr 2023 Last revised: 3 May 2023

See all articles by Gabriel Benzecry

Gabriel Benzecry

Northwood University

Nicholas Reinarts

Jones College of Business / Political Economy Research Institute at MTSU

Daniel J. Smith

Middle Tennessee State University - Department of Economics and Finance; Middle Tennessee State University - Jennings A. Jones College of Business

Date Written: April 2, 2023

Abstract

Is a monopolized banking sector a threat to democracy? While Oskar Lange and Abba Lerner (1944) recognized that socialism was a threat to democracy, they also held that a tendency towards banking sector monopolization under capitalism would undermine democracy through the inevitable concentration of political power in the hands of banking elites. This led them to exclude the banking sector from their more general support for private ownership of the means of production. We examine whether banking monopolization under capitalism is associated with concentrated political power and the undermining of democracy using the Lerner's Index, V-Dem's Power Distributed by Socioeconomic Position, and V-Dem's Political Civil Liberty Index. We find no relationship between banking monopolization as measured by the Lerner Index and the measures of democracy. We also find no relationship between banking monopolization and the concentration of power by socioeconomic status. The evidence fails to support the Lange-Lerner Hypothesis.

Keywords: Civil liberties, Democracy, Banking, Lange, Lerner, Lerner’s Index, V-Dem, Polity Project

JEL Classification: P5, O5

Suggested Citation

Benzecry, Gabriel and Reinarts, Nicholas and Smith, Daniel J., Analyzing The Lange-Lerner Hypothesis Is a Monopolized Banking Sector a Threat to Democracy? (April 2, 2023). Available at SSRN: https://ssrn.com/abstract=4407141 or http://dx.doi.org/10.2139/ssrn.4407141

Gabriel Benzecry

Northwood University ( email )

4000 Whiting Dr
Midland, MI 48640
United States

Nicholas Reinarts

Jones College of Business / Political Economy Research Institute at MTSU ( email )

1827 MTSU BLVD
Murfreesboro, TN 37129
United States

Daniel J. Smith (Contact Author)

Middle Tennessee State University - Department of Economics and Finance ( email )

MTSU Box 190
1301 E. Main St.
Murfreesboro, TN 37132-0001
United States

HOME PAGE: http://www.danieljosephsmith.com/

Middle Tennessee State University - Jennings A. Jones College of Business ( email )

TN
United States

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