The power of finance has shaped a new world order
Mar 11, 2013 22:51:01 GMT -5
Post by PrisonerOfHope on Mar 11, 2013 22:51:01 GMT -5
The power of finance has shaped a new world order
Published on Tuesday 12 March 2013 00:01
Six years since it erupted, the global financial crisis still casts a long shadow over Europe. The need to understand how to make finance serve our economic, social and environmental needs has never been so important.
The Financialisation, Economy Society and Sustainable Development (FESSUD) project, a 10m euro international research consortium led by the University of Leeds, aims to do this.
Funded by the European Commission, we are working with 13 other leading universities and organisations from across Europe, the US, and South Africa to analyse the processes of ‘financialisation’ – the increasing dominance of finance, financial activities, and financial interests over other parts of the economy and society.
Work began in December 2011, and the preliminary findings are exciting. The first stage of the project involved generating a vast historical and comparative data base and carrying out a preliminary analysis of finance across the globe. Leading academics carried out detailed studies of finance in 20 countries in order to produce evidence of the unprecedented depth and breadth of the changes in financial systems over the past 30 years. This evidence base is being used by us at Leeds University Business School to analyse and synthesis the trends in financialisation across Europe and the globe.
It’s a considerable logistical task, but the ongoing economic problems in Greece, Spain and Italy – not to mention the UK – are stark reminders of its importance.
It is still early days but the raw evidence we now have confirms that the power of finance has been a remarkable force driving and feeding upon the deregulation of economic and financial systems. At every scale – global, EU-wide, national, regional, individual – deregulation has had major if complex impacts which have often benefitted financial interests – but largely at the expense of the real economy.
These studies have been carefully coordinated to enable us to empirically examine and assess different dimensions of financialisation in a way that is comparable across very different countries, from relatively small economies such as Estonia to giants such as the US.
Despite the differences between these nations, it is striking that initial findings show that common processes of financialisation link these very different economies.
For example, we see the growth in consumer debt fuelling a bubble that eventually burst in transition economies as well as in Southern Europe and also in large economies such as the US and the UK. We have also observed investment increasingly being sucked into short-term financial assets, attracted by speculative opportunities in international financial markets, rather than long-term real investment and growth.
The evidence points towards a truly global financial system, bound together by global financial markets and not merely by a set of national financial systems.
This global system increasingly serves the interests of multinational banks and firms. The unprecedented ability of multinationals to move capital swiftly across the globe in international financial and currency markets in search of speculative gains can starve national industry of the finance it needs. This fact poses a particular challenge for transition economies that need long-term finance in order to build up their own capacity to grow.
However, while there are common processes of financialisation occurring, we also find notable differences between the countries we have looked at. The banking systems in different countries vary considerably and this can mean the countries are affected by and affect the general processes of financialisation in very different ways. Culture too can differ markedly across EU countries.
For example, in Germany the culture of personal credit and borrowing has not expanded as it has in many other countries. In the UK, many people would think nothing of paying for a new item on their credit card, while in Germany it is far less common.
Understanding these differences is important in learning how different countries have fared during the crisis and how well they will recover in the future.
There remains a great deal of work to be done on the raw data. We need to know what can be done to make the financial system work for society, the economy and environment and not – as has sometimes been the case – the other way round.
www.yorkshirepost.co.uk/business/business-news/the-power-of-finance-has-shaped-a-new-world-order-1-5488152
Published on Tuesday 12 March 2013 00:01
Six years since it erupted, the global financial crisis still casts a long shadow over Europe. The need to understand how to make finance serve our economic, social and environmental needs has never been so important.
The Financialisation, Economy Society and Sustainable Development (FESSUD) project, a 10m euro international research consortium led by the University of Leeds, aims to do this.
Funded by the European Commission, we are working with 13 other leading universities and organisations from across Europe, the US, and South Africa to analyse the processes of ‘financialisation’ – the increasing dominance of finance, financial activities, and financial interests over other parts of the economy and society.
Work began in December 2011, and the preliminary findings are exciting. The first stage of the project involved generating a vast historical and comparative data base and carrying out a preliminary analysis of finance across the globe. Leading academics carried out detailed studies of finance in 20 countries in order to produce evidence of the unprecedented depth and breadth of the changes in financial systems over the past 30 years. This evidence base is being used by us at Leeds University Business School to analyse and synthesis the trends in financialisation across Europe and the globe.
It’s a considerable logistical task, but the ongoing economic problems in Greece, Spain and Italy – not to mention the UK – are stark reminders of its importance.
It is still early days but the raw evidence we now have confirms that the power of finance has been a remarkable force driving and feeding upon the deregulation of economic and financial systems. At every scale – global, EU-wide, national, regional, individual – deregulation has had major if complex impacts which have often benefitted financial interests – but largely at the expense of the real economy.
These studies have been carefully coordinated to enable us to empirically examine and assess different dimensions of financialisation in a way that is comparable across very different countries, from relatively small economies such as Estonia to giants such as the US.
Despite the differences between these nations, it is striking that initial findings show that common processes of financialisation link these very different economies.
For example, we see the growth in consumer debt fuelling a bubble that eventually burst in transition economies as well as in Southern Europe and also in large economies such as the US and the UK. We have also observed investment increasingly being sucked into short-term financial assets, attracted by speculative opportunities in international financial markets, rather than long-term real investment and growth.
The evidence points towards a truly global financial system, bound together by global financial markets and not merely by a set of national financial systems.
This global system increasingly serves the interests of multinational banks and firms. The unprecedented ability of multinationals to move capital swiftly across the globe in international financial and currency markets in search of speculative gains can starve national industry of the finance it needs. This fact poses a particular challenge for transition economies that need long-term finance in order to build up their own capacity to grow.
However, while there are common processes of financialisation occurring, we also find notable differences between the countries we have looked at. The banking systems in different countries vary considerably and this can mean the countries are affected by and affect the general processes of financialisation in very different ways. Culture too can differ markedly across EU countries.
For example, in Germany the culture of personal credit and borrowing has not expanded as it has in many other countries. In the UK, many people would think nothing of paying for a new item on their credit card, while in Germany it is far less common.
Understanding these differences is important in learning how different countries have fared during the crisis and how well they will recover in the future.
There remains a great deal of work to be done on the raw data. We need to know what can be done to make the financial system work for society, the economy and environment and not – as has sometimes been the case – the other way round.
www.yorkshirepost.co.uk/business/business-news/the-power-of-finance-has-shaped-a-new-world-order-1-5488152
