The notion of financialisation as the exploitation or expropriation of workers' wages in the sphere of exchange is taken as a critical point of departure. In this way, financialisation is more deeply rooted in contemporary developments, including the slowdown preceding the current global crisis, and in Marx's own theory of finance. Financialisation is seen to represent the increasing penetration of interest-bearing capital across economic and social reproduction and to be a key defining moment of neoliberalism.
Ecological modernisation (EM) scholarship has suggested that different national-level socio-economic institutions may provide more or less supportive environments for EM. Here, the varieties of capitalism (VoC) analysis is extended, but with an emphasis on corporate governance as the central institutional complex that characterises VoC. The liberalisation of international and domestic finance (securitised capital) in the 1970s inaugurated transformative processes in all capitalist countries. This occurred first in the liberal United States and UK, but is now proceeding in the 'stakeholder corporate governance' countries that provided the most supportive institutional context for EM. The reorientation of productive corporations towards financial market performance in the United States and UK has adversely affected their innovative capacity, helping to explain these countries' relatively laggard EM performance. Adapted from the source document.
Despite the growing literature on financial development-economic growth nexus, there exists a paucity of empirical studies that explore the impact of financialisation on economic growth while focusing on the competitiveness of the financial sector. This study examines the revealed comparative advantages of 34 developing African countries from the period 2008 to 2017 and goes further to determine the impact of the revealed comparative advantage indices on economic growth. Revealed comparative advantage is used as an alternative proxy to financialisation, while economic growth is measured in terms of GDP per capita. In order to determine the impact, a panel study approach was followed, using a multiple linear regression model. The study produces two findings. Firstly, we find that the majority of African countries do not reveal a comparative advantage in financial services. This finding confirms our expectation. Secondly, we find that there exists a negative and significant relationship between financialisation and economic growth. The findings suggest that as developing countries in Africa gain comparative advantages in financial services, those gains have a detrimental impact on their economic growth. Informed by the findings of this study, which have implications for financial market development in Africa, the main recommendations are firstly that regulators need to play their part in reducing the cost of business for financial services institutions—particularly compliance costs, so as to encourage competition and development in the financial services sector, without compromising their responsibility to protect consumers. Secondly, better insights regarding cross-border trading and its impact on economic growth, profitability and the accumulation of foreign currency reserves need to be gained, in order to come up with more conducive regulatory frameworks that do not result in penalties for local firms, rendering them uncompetitive relative to foreign firms. Additionally, management at financial institutions have the responsibility of ensuring that benefits derived from their cross-border business go beyond shareholder value, but that reinvestment into the real economy takes place either through increased lending or equity investments and should also ensure that sufficient investments are made into the infrastructure required to increase the institution's competitiveness. Finally, Government and regulators needs to pay attention to how cross-border financial transactions are taxed, especially considering the new era of FinTech's, cryptocurrencies, and deepening regional integration, while at the same time ensuring that there is greater depth, bread and liquidity of their local financial markets.
Drawing on European Union data, this paper assesses the long-standing mainstream view that financialisationimproves growth. We measure financialisation with private credit to GDP and capture characteristics of banking sectorfragility with the ratio of credit to deposits and the ratio of bank capital to assets. We test the impact of these variableson four measures of economic performance: the growth rates of GDP per capita, consumption per capita, investmentand inequality. We observe that credit has no effect on economic performance. However, the potential riskiness of thebanking sector measured by the ratio of credit to deposits decreases GDP per capita and contributes to increasinginequality whereas the ratio of capital to assets has a negative impact on GDP per capita growth through its negativeeffect on investment. This effect is driven by countries with low GDP per capita. We also find that the potential sideeffects of excessive financialisation have a negative effect on growth.
Drawing on European Union data, this paper assesses the long-standing mainstream view that financialisationimproves growth. We measure financialisation with private credit to GDP and capture characteristics of banking sectorfragility with the ratio of credit to deposits and the ratio of bank capital to assets. We test the impact of these variableson four measures of economic performance: the growth rates of GDP per capita, consumption per capita, investmentand inequality. We observe that credit has no effect on economic performance. However, the potential riskiness of thebanking sector measured by the ratio of credit to deposits decreases GDP per capita and contributes to increasinginequality whereas the ratio of capital to assets has a negative impact on GDP per capita growth through its negativeeffect on investment. This effect is driven by countries with low GDP per capita. We also find that the potential sideeffects of excessive financialisation have a negative effect on growth.
This article aims to extend our understanding of the role of capital markets in present day capitalism. It starts from a critical examination of established terms, shareholder value, corporate governance and financialisation, before suggesting a new generic term, coupon pool capitalism. The second half aims to demonstrate that, unlike the other terms, the coupon pool concept distinctively emphasises the generation of contradictions and instabilities. Empirical evidence is used to support the concept and explore dynamics.
