Work Package 2 on Comparative Perspectives on Financial Systems in the EU is now drawing towards completion, and had been the main focus of our work in the first year of the FESSUD project.
The first stage of Work Package 2 drew up ‘terms of reference’ for the reports on national financial systems. The ‘terms of reference’ were to enable a broadly common framework for those reports.
The national financial system reports have now been completed, and are available on the web-site as Studies in Financial Systems. These reports provide a wealth of information on how the structures of financial systems in recent years, how those structures have evolved over the past three decades, the processes of financialisation in the countries, the growth in scale of the financial sector and its major changes in its mode of operations.
Task 3: The work under task 3 aims to provide an examination of the European financial system as a whole, focusing on the analysis of the degree to which it could be said that an integrated European financial market has been developing. In this regard, a critical survey of the ECB’s official documents concerning the process of financial integration in the Euro Area has been provided. One of the main (although preliminary) conclusions is that what ECB’s reports regarded as a process of nominal convergence and financial integration is the other side of the real divergence between Euro Area member-states’ economies, due mainly to national differentials in both unit labour costs and income growth rates. In the absence of radical changes in the institutional framework of the Euro Area (leading to both a re-definition of the nature of the ECB and the creation of a relevant European federal budget), the survival of the Area, and even of the whole European Union, could be at risk
Task 4 is a significant task as it provides the theoretical spine of FESSUD. It reviews and systematically assesses mainstream and non-mainstream theories of money and finance, including the New Consensus Macroeconomics, behavioural finance, Post Keynesian and Marxist analyses with the purpose of drawing insights on the nature, origin and effects of financialisation in modern economic systems. The final goal of this task is to seek synergies and fundamental developments among these different theories, whether at the level of theoretical foundations, detailed policy prescriptions, or of attempted typologies of financial and capitalist systems.
Two papers respectively on interdisciplinarity and methodology have been undertaken under Task 5. The first contributes to the understanding of how economics can and should be integrated with other social sciences and provides a foundation for thinking about interdisciplinary research covered by FESSUD. The second involves examination, comparison and development of various state-of-the-art approaches to the methodology of theorising the financial, economic and social system as a whole.
The last piece of work within the Work Package, covered by Task 6, seeks to bring together the previous work: synthesising the ways in which financialisation has taken place in various countries, noting both broad trends and the variegation of the financialisation process itself.
At one level, an empirical analysis is undertaken in order to identify the nature, processes and stages of financialisation for a number of selected countries, as well as of the process of financial integration of EU economies. We have used and applied the definition of financialisation developed by Fine (2011). Using the country reports, we have found that the process of financialisation is real and has affected the economic and social structure of selected countries in profound ways. Financialisation, although a common process affecting all countries, has been variegated in its forms and effects within countries. Thus our empirical analysis is used as a basis for developing the idea of ‘variegated financialisation’.
At another level, we develop a critique of the varieties of capitalism literature and also offer a way of classifying financial systems. In addition, we analyse the notion of financialisation within a monetary circuit framework. This enables an understanding of the distinction between “initial finance” and “final finance” for investment, and of the distinction between banks as money creators, other financial institutions as acceptors of deposits, and markets which deal in existing financial assets. Thanks to this theoretical framework, a range of features of financialisation can be set out.
