Finance capitalism: A look at the European financial accounts (original) (raw)
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Inequality and financialisation - The case of the EU
Klassen/Sozialstruktur "Inequality and Financialisation: The Case of the EU" Study by Marica Frangakis, 2014
Inequality in the distribution of income and wealth feeds the process of financialisation and is fed by it. It is a two-way relationship, which has favoured the meteoric rise of the economic, social, and political power of finance in the past thirty years. This rise has been marked by financial crises of varying intensity in different localities. The financial crisis which erupted in late 2007, however, has been both deeper and more widespread across the developed financial systems of the world than in the past, aggravating the distributional inequalities that are inherent in the process of financialisation. In the EU, the era of financialisation is associated with the introduction of the Single Market in the mid- 1980s and of the single currency in the 1990s, as well as the pursuit of financial integration from the late 1990s onwards at the expense of financial stability and consumer protection. As in other parts of the advanced capitalist world, the 2007/2008 financial crisis was succeeded by an economic crisis in the EU as well. Five years later, it is still unfolding. Certain areas are converging towards low growth, while others are deep in recession. The distributional implications of these trends are especially important. In this paper, we discuss the connections between inequality and financialisation in the EU.
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The Convergence of Financial Systems in Europe
Since the beginning of the 1990s, it has been widely expected that the implementation of the European Single Market would lead to a rapid convergence of Europe's financial systems. In the present paper we will show that at least in the period prior to the introduction of the common currency this expected convergence did not materialise. Our empirical studies on the significance of various institutions within the financial sectors, on the financing patterns of firms in various countries and on the predominant mechanisms of corporate governance, which are summarised and placed in a broader context in this paper, point to few, if any, signs of a convergence at a fundamental or structural level between the German, British and French financial systems. The German financial system continues to appear to be bank-dominated, while the British system still appears to be capital market-dominated. During the period covered by the research, i.e. 1980-1998, the French system underwent the most far-reaching changes, and today it is difficult to classify. In our opinion, these findings can be attributed to the effects of strong path dependencies, which are in turn an outgrowth of relationships of complementarity between the individual system components. Projecting what we have observed into the future, the results of our research indicate that one of two alternative paths of development is most likely to materialise: either the differences between the national financial systems will persist, or-possibly as a result of systemic crises-one financial system type will become the dominant model internationally. And if this second path emerges, the Anglo-American, capital market-dominated system could turn out to be the "winner", because it is better able to withstand and weather crises, but not necessarily because it is more efficient.
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This paper argues that the traditional dichotomous and static conceptualisations of financial systems fail explain how financial systems have changed as a result of transformative events (the 2007-2008 financial crisis in particular) and trends in recent decades. To shed light on developments in contemporary financial systems in the EU, this paper presents and analyses an index that seeks to capture the extent to which funding structures in non-financial companies subject them to financial pressures. The index reveals that the EU as a whole is distinctly “bank-based”, in the sense of private equity and bank credit matter more for funding of non-financial companies than listed equity or market-based credit. However, the EU and its Member States have become more market-based over the last decade. While this trend generally holds true, there is also increasing divergence between European financial systems. Developments in individual countries appears to be determined by competitive adv...
Revisiting attempts to connect comparative political economy and the geographies of finance, we present a balance sheet analysis of financialisation in the UK, Netherlands, and Germany from 1992-2012. We define financialisation broadly as a trend towards a greater reliance on assets and/or debt, with particular manifestations across different domains of the economy: a greater reliance on financial tools and metrics for the state and non-financial corporations, a shift to market-based banking and increasing dependence on credit or asset-based welfare for households. We use OECD time-series balance sheet data and qualitative accounts drawn from the literature to overview economic change in our case countries. Using this informal comparison we develop the concept of 'variegated financialisation' by exploring the common but not convergent financialising trajectories of our case countries and relating them to the politics of finance's institutional embedding.
Some stylized facts on the finance-dominated accumulation regime
Competition &# 38; Change, 2008
While there is an agreement that the Fordist accumulation regime came to an end in the course of the 1970s, there is no agreement on how to characterize the post-Fordist regime (or if such is already in place). This paper seeks to put together various arguments related to financialization (in the broad sense) from a macroeconomic point of view and evaluate their relevance by confronting them with the actual development of macroeconomic variables for EU countries. The paper discusses changes in investment behaviour, consumption behaviour and government expenditures, investigating to what extent changes are related to financialization. Households experience higher debt levels. Rising profits of businesses come with only moderate investment. The notion of a 'finance-dominated' accumulation regime is proposed to highlight that financial developments crucially shape the pattern and pace of accumulation. The finance-dominated accumulation regime is characterized by mediocre growth performance and a high degree of fragility. However, so far deregulated financial markets have not lead to major financial crises in advanced capitalist economies. A possible reason for this is that the size of the state sector has not been substantially reduced despite neo-liberal attempts to do so.
European Journal of Law Reform, 2014
The global financial crisis has led many regulators and lawmakers to a rethinking about current versus optimum financial market structures and activities that include a variety and even radical ideas about deleveraging and downsizing finance. This paper focuses on the flaws and shortcomings of regulatory reforms of finance and on the necessity of and scope for more radical transformative strategies. With ‘crisis economics’ back, the most developed countries, including the EU member states, are still on the edge to disaster and confronted with systemic risk. Changes in financial regulation adopted in the aftermath of the financial meltdown have not been radical enough to transform the overall system of finance-driven capitalism towards a more sustainable system with a more embedded finance. The paper discusses financialisation as a concept to understand the development trends in finance over the past decades and various theories to describe the typical trends and patterns in financia...
The Financial System of the EU 25
We present an overview of the financial structure of the enlarged European Union with 25 countries. We start by describing the financial system development in all member states since 1995, and then compare the structure between the old and new countries. Using financial measures we document the prevailing substantial differences in the financial structure between new and old member states after the enlargement in 2004. Finally, we compare the financial structures of an enlarged EU with those of the United States and Japan. In our study we do not present any empirical evidence concerning whether bank-based or market-based financial systems are better then another but use the distinction in order to underline the existing differences in financial structures. . We would like to thank Luc Laeven and Philipp Hartmann for useful comments.
The European Financial System in Limelight
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Efficient use of resources depends on better allocation through financial systems. Development of financial systems can be measured through the performance of banks, financial markets and insurance companies. This paper identifies several key attributes to measure the level of financial development in Europe using data from 1990 to 2011. First, an index is constructed by employing the method of Principal Component Analysis to measure the strength of financial systems in European countries. Second, based on relative raking a comparison is made for better interpretation of results in European countries. The top five countries include Switzerland, United Kingdom, Netherlands, Spain and Germany. The results of this study can be helpful to assess the relative strength of European economies and frame future policies to promote efficiency of financial systems.
Financialisation: continuity and change— introduction to the special issue
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, a great deal of studies have been published with a view to making sense of the many issues surrounding this topic. Admittedly, a lot of ground has been covered. We have learned that financialisation is about the 'macro', the institutional, structural and systemic processes that are associated with it, as well as the 'micro', the agencies that are affected by and shape these historical processes through financial practices and innovations that transform not only economies and societies, but also cultures, subjectivities, geographies and more (van der Zwan 2014). Today, the field of financialisation studies cuts across several disciplines and indeed challenges many disciplinary boundaries (Ertürk et al 2008, Mader et al. 2020). Therefore we should not be surprised that the concept of financialisation remains disputed and that perhaps no final agreement will ever be reached on the nature, history and significance of its phenomenon. Opinions will continue to range from viewing financialisation as a ubiquitous force, synonymous with deeply fractured capitalism, to something very specific, linked, but not confined to, a central role of the financial system and risk calculations in everyday life. At this point, a devil's advocate might ask: whither financialisation? This special issue is organised around the themes of continuity and change in financialisation, and it showcases new research on the frontiers of financialisation and the broader debates surrounding its evolution. It also illustrates the vitality of the debate and the usefulness of concept. In this introduction, we highlight some of the most interesting findings from this special issue, contextualise their contribution and comment on the state of the financialisation debate-its shifting boundaries, (in)coherencies and (dis)continuities in the twenty-first century.