Global business models and labor challenges

Please cite the paper as:
Maria Alejandra Caporale Madi, (2016), Global business models and labor challenges, World Economics Association (WEA) Conferences, No. 1 2016, Capital Accumulation, Production and Employment:, 15th May to 15th July 2016

This paper has been included in the publication
“Capital and Justice”

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Abstract

Today, private equity funds express the power of centralized money to define not only investment flows but also working conditions. Indeed, private equity funds have been responsible for the employment standards of tens of millions of workers worldwide and the impacts of private equity investments on working conditions is raising growing concerns. The social impacts of the private equity business model based on “rationalization” have been less explored by academic researchers, while extensive studies have been developed by private sector companies and industry bodies that tend to report only stories of success. Taking into account that financialization enhances the redistribution and reallocation of power and wealth, this paper assesses, from a Keynesian approach, that the private equity funds’ business model foster social vulnerabilities. After presenting a brief overview of global business environment and the post-crisis evolution of private equity funds, this paper discuss the factors that shape the microeconomic and macroeconomic effects of their typical investment strategies. Rather than treating private equity funds as a financial phenomenon, the analysis rethinks the relations between private equity funds and labour as involving forms of production at the current frontier of capital.

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2 comment

  • Basudeb Sen says:

    What a great analysis ! Almost all things that goes into the process of production employing labor will have an impact on labor. This is not a discovery now. Private eqyuity funds are supposed to be collection of private savings looking for investment in shares of companies. They compete among themselves, look for high returns commensurate with the risks they make and lose money. There are success stories and there are failure stories. When the failure stories impact the private equity funds adversely and outweighs the positive effect consistently, private equity funds will lose money. So, what is the great point to study. The data gathered and analyzed reflects good reaseach work. But does not in any way indicate anything of consequence in terms of policy regarding private equity investments. in companies. We must know how the private equity funds have earned, the consistency and variability of their retunrs and relate them to wages and employment where private equity has major stake in companies.

  • Maria Alejandra Madi says:

    Many thanks for your comment. It is really an incentive for deepening the reserach on the social effects of private equity investments.

    As you suggest, we certainly need to broaden the research in terms of 1) data about private equity performance, wages and employment; 2) policy isues related to market regulation.

    Maria