Financialisation as Monopoly Profit: The Case of US Banking

Different economic measures afford different ways of seeing processes of financialisation. In the prototypical case of the US economy, the most compelling evidence of post‐1970s financialisation is found in corporate profits measures. This much has been clear for at least a decade. What remains much less clear, however, is the explanation for the long‐term maintenance and amplification of extreme financial‐sector profitability that financialisation in the United States has and continues to entail. With a specific focus on banking, this article turns to post‐Marxian scholarship on profit rate trends to explain this phenomenon. It argues that limited and declining levels of competition within the US banking sector during recent decades—rooted in high levels of industry concentration, collusive behaviour, and substantial entry barriers—have contributed to sustaining and boosting abnormal sectoral profitability. In doing so, the article theorises financialisation in the United States explicitly in terms of monopoly profit.     

‘Milking The Elephant’: Financial Markets as Real Markets in Kenya

Financial liberalization policies in the 1990s were intended to raise formal sector interest rates, enhance competition and expand access for users. This article investigates patterns of provision and use in a local financial market in Karatina, Kenya, at the end of the 1990s after a period of financial and economic liberalization. It takes a holistic approach, examining both formal and informal financial arrangements and microfinance interventions. This is because the role of the informal financial sector is particularly important for poor people and has received relatively little attention in the discussion of the consequences of reform. The author does this using a ‘real’ markets approach that sees markets as socially regulated and structured. Significant provision by the mutual sector (formal and informal), and poor lending performance by the banking sector is explained through an examination of the characteristics of the services on offer and their embeddedness in social relations, culture and politics.     

The Regulatory State and Turkish Banking Reforms in the Age of Post‐Washington Consensus

The new era of the Post‐Washington Consensus (PWC), promoted under the auspices of International Financial Institutions such as the International Monetary Fund and the World Bank, centres on the need to develop sound financial regulation and strong regulatory institutions, especially in the realm of banking and finance in post‐financial crisis developing countries. This article uses an examination of the Turkish banking sector experience with the PWC in the aftermath of the 2001 financial crisis to show its considerable strengths and weaknesses. The authors argue that the emergent regulatory state in the bank‐based financial system has a narrow focus on strengthening prudential regulation, whilst ignoring the increased ‘financialization’ of the Turkish economy. They identify the positive features of the new era of the PWC in terms of prudential regulation, which has become much more robust in its ability to withstand external shocks. At the same time, however, the article highlights some of the limitations of the new era which resemble the limitations of the PWC. These include the distributional impact of the regulatory reforms within the banking sector, and notably the emergence of foreign banks as the major beneficiaries of this process; weaknesses in promoting productive bank intermediation that finance the real economy and economic growth, leading to poverty reduction via growth of employment whilst stimulating financialization within the economy; and finally, the exclusive focus on prudential regulation, whilst ignoring regulatory costs, consumer protection and competition regulation.     

Setting the rules: private power,political underpinnings,and legitimacy in global monetary and financial governance

The role of private market agents in global monetary and financial governance has increased as globalization has proceeded. This shift in both markets and patterns of governance has often been encouraged by states themselves in pursuit of liberalization policies. Much of the literature views these developments in a positive light, yet there are other aspects of these developments that also merit attention. This article supports its central propositions with two cases of emerging global financial governance processes: the Basel II capital adequacy standards for international banking supervision and the International Organization of Securities Commissions‐based transnational regulatory processes underpinning the functioning of cross‐border securities markets. Based on the case findings, the article argues first that private sector self‐regulation and/or public‐private partnership in governance processes can leave public authorities vulnerable to dependence on the information and expertise provided by private agents in a fast‐moving market environment. Policy in the vital domain of financial regulation has been increasingly aligned to private sector preferences to a degree that should raise fears of bureaucratic capture. Second, the article contends that the overall outcome in terms of global financial system efficiency and stability has been mixed, bringing a range of important benefits but also instability and crisis for many societies to a degree that has led to challenges to global governance itself. The case material indicates that the input, output and accountability phases of legitimacy in global monetary and financial governance are highly problematic, and much of the problem relates to the way in which private market agents are integrated into the decision‐making process. Third, the article posits that a better consideration of these three ‘phases’ of legitimacy and their interrelationships is likely to enhance the political underpinnings and legitimacy of global financial and monetary order.     

Introduction: Reconsidering Futurism

The financial crisis hit Italy harder than many other Eurozone countries. In part this was due to the fact that the crisis came upon a system that was weakened by years of sub-par economic growth. One of the several endogenous factors that explain the stagnation of the Italian economy is the weak corporate governance in the industrial sector and parts of the financial one. A framework that was designed to maintain stability in the ownership of companies and of certain types of banking institution ultimately led to an inefficient allocation of capital and to a lack of investment, which contributed to the loss of competitiveness of Italian firms in a fast globalizing marketplace.     

Too small to be of interest,too large to grasp? Histories of the Luxembourg financial centre

ABSTRACT

The importance of smaller financial centres in international capitalism has recently been highlighted by a number of ‘leaks’. Yet such public attention stands in contrast to the paucity of historiographical research on these relatively new centres. To this regard, Luxembourg provides an interesting case study. While identified as a ‘global specialist’ by the Global Financial Centres Index, the genealogy of how it came to achieve this status remains largely under-researched. This article reviews the historiography of the Luxembourg financial centre from both external perspectives – how the international social sciences and humanities have positioned the Luxembourg financial sector within the broader finance and banking context – and internal viewpoints – how scholars in Luxembourg have recounted the relevant events. The Luxembourg financial centre began to appear in international historiography only in the last fifteen years. With only rare departures from general overviews and a tendency not to consult local sources, the contributions of international historians have mostly attempted to identify time frames and contextualise the particularities of its historical development. That said, a recent geographical diversification of the literature has seen the appearance of publications that demonstrate a more detailed understanding of its internal structures and links with other nerve centres of the global financial system. While a Luxembourg historiography began to develop in the late 1970s, it has often been produced to coincide with commemorative events, funded by players in the financial centre and frequently written by these same actors. While not necessarily hagiographic in approach, a lack of distance from the subject and a failure to problematise the subject has nevertheless meant that these writings are little more than factual introductions that, while useful, are limited in their historiographical depth. Furthermore, a dearth of archival research has produced a repetitive narrative based around a selection of key events and figures.     

Revenue,finance, and the command economy under the Nationalist government during the Anti-Japanese War

The prolonged Anti-Japanese War caused unprecedented difficulties for revenue, finance, and the national economy, but the Nationalist government was still able to maintain its revenue and to reinforce its banking system. Under the rule of the Nationalist government, order in the financial market was maintained and industry, mining, and agriculture were able to continue during wartime. The main reason for all this was the government's effective implementation of financial and economic policies within a highly centralized system of command economy, which laid the economic foundation for the final victory of China against Japan.     

Bank Liquidity Creation in Russia

Two EU-based senior economists analyze the contribution of bank liquidity creation to the Russian economy, as well as changes in creation of liquidity occurring during the global financial crisis. Applying the methodology of Berger and Bouwman's (2009) study of U.S. banking to a rich panel dataset for Russian banks for the period 1999-2009, the authors compute three alternative measures of bank liquidity creation. They find evidence of increased creation of liquidity in real terms over the period and also determine that state-controlled (versus private) banks and Russia's largest banks (versus intermediate-size and small banks) contributed most to liquidity creation (lower in Russia than in the U.S.). Their findings suggest that consolidation of the Russian banking sector may prove more instrumental in increasing liquidity creation than privatization per se.     

Neither Dowlati nor Khosusi: Islam,Education and Civil Society in Contemporary Iran

Private universities are a rapidly expanding form of education in Iran, and increasingly include Islam and the social sciences alongside the hard sciences too. What implications does the privatization of religious and social scientific knowledge have for the Islamic Republic? Scholarship has so far responded by looking at the ways in which the Iranian authoritarian state has monopolized religion, repressed the social sciences and hollowed out student activism. Complicating these arguments, this article provides a historical and institutional comparison of higher education in Iran in order to look at the evolving degree of autonomy of academic institutions and the ability of actors that operate within them to contribute to critical debate, social activism and novel discourse. The article proposes that while state universities and Islamic Azad suffer from politicization and control, a small set of privately owned “Islamic” universities is using its elite connections, financial independence and socio-pedagogical ties to the seminary and modern academia to secure enhanced levels of free debate and independent thinking.     

Finance and Industrial Policy in Unsuccessful Developmental States: The Case of Pakistan

While a large body of research indicates that state‐directed finance worked for successful East Asian developers, the dominant assumption remains that countries with a weak state capacity, where corruption is rife, should not ‘try this at home’. In this article, that narrative is questioned through a case study of the role of the financial sector in Pakistan, which is widely considered to be a successful case of financial liberalization, contrasting the role of the publicly controlled financial system in the 1970s and 1980s with that of the liberalized financial system in the 2000s. Utilizing archival firm‐level and aggregate data, historic government documents, and interviews with policy makers, financial sector employees and industrialists, it is argued that in the Pakistani case, the withdrawal of state control over the financial sector led to a deterioration of outcomes. This resulted in the allocation of credit away from the productive sectors, namely industry and agriculture, towards unproductive sectors, for speculative purposes; and in the health of the financial sector not improving as expected, with non‐performing loans and corruption remaining a problem, and banks actually becoming a greater burden on government finances. This indicates that even states with weak capacity and flawed industrial policy may be better off with some degree of public control over finance.     

The Journey of Infertility from Private Sphere to Public Domain: From Cosmetic Surgery to Disability

This study explores the process by which the treatment of infertility, which has been in the hands of the private sector, has been taken over by the state as a matter of public health. It argues that this shift stems from the pro-natalist policies of the state to help increase the population. Infertility treatment, using assisted reproductive technologies and its legitimization by the Islamic jurists, is used as a lens through which to examine the state's body politic. The frequent reversals of policies, since the late nineteenth century to the present, are shown to be directly linked with the nation-building goals of the state, expecting the citizens to readjust their reproductive behavior to meet the state’s policies.     

Financial Deregulation in Japan

This article examines the process of financial deregulation in Japan and asks: what are the prospects for future reform of Japan's financial sector? In the past, reform of Japan's financial sector has been slow and incremental as various vested interests, including political interests, negotiated specific compromise outcomes rather than sweeping changes. This article argues that, in spite of recently announced reforms, change will continue to be gradual and piecemeal because the institutional structures which in the past worked against any rapid response to pressures for change are still in place.     

从银行立法看30年代国民政府与沪银行业关系

20世纪30年代,围绕<银行法>、<银行收益税法>和<兑换券发行税法>、<储蓄银行法>等有关银行法规的颁行,南京国民政府与上海银行业之间进行了一系列交涉,这不仅从一个特殊角度体现了国民政府金融统制政策的形成,揭示上海金融业与国民党政权的关系,客观上也表明这一时期金融市场的运作、金融业务的开展乃至金融体系的构架,都不能离开法制手段.     

A rentier class? Milanese nobility and the economy in post-unification Italy

ABSTRACT

The Lombard nobility’s loss of political power after the Napoleonic Wars has led economic historians to overlook the persisting role of traditional elites in social and economic life. The aim of the paper is to reassess the contribution of the Milanese aristocracy to Italian economic development, providing new insights into the business behaviour of the nobility in northern Italian areas. The article presents some new findings on noblemen’s investments and enterprises related to agriculture, manufacturing, trade and banking. The research focuses on the decades following Italian political unification, a period in which noblemen increased their interest in the financial sector and joint-stock companies (transport, banking, new sectors and industries) as a result of the transformations induced by the Industrial Revolution and the agrarian crisis of the 1870s and 1880s. Both quantitative and qualitative data will be used to assess not only the number of individuals involved and the capital they invested in new ventures, but also their role in orienting, stimulating, managing or supporting entrepreneurial activities and their openness to collaboration with the members of the middle class. The analysis combines the deeds produced by four notaries, chosen on the basis of their contiguity to the Milanese aristocracy, the foundation’s deeds of the main companies established in the city, conserved in the House of Trade, and the information provided by other local and national institutions. The cross-referencing of this data suggests that the Milanese nobility maintained a prominent economic role well beyond Italian political unification, contributing to the modernization of the national economy despite the weaknesses and contradictions that marked this process.     

Global Liquidity,the Private Sector and Debt Sustainability in Sub‐Saharan Africa

This article analyses the effect of changes in international financial markets on the debt dynamics in sub‐Saharan Africa in recent years. A key development is the rise of the private sector as both a lender and a borrower in African debt markets, a process that is associated with the growing integration of the region into global financial markets. The article argues that the Debt Sustainability Framework of the International Monetary Fund and World Bank has taken some steps to account for this growth of private sector, cross‐border debt, but such steps still fall short of what is needed. A full appreciation of the importance of private debt implies, first, that debt sustainability in sub‐Saharan Africa be understood in the context of countries’ integration in global financial markets and the global liquidity cycles that characterize those markets and, second, that the interplay between private and public debt be monitored in order to provide a fuller picture of the impact of private sector debt on fiscal sustainability.     

The Informal Financial Sector in Bangladesh: An Appraisal of its Role in Development

Informal financial markets in developing countries, and their role in the development process itself, form a relatively neglected area when it comes to research and policy planning. It seems, however, that this may be due to inaccurate perceptions of the value and effectiveness of this sector, and of its relationship to formal sector financial institutions. This paper uses data from an extensive research project on informal financial markets in Bangladesh to examine the size of the informal market, its relationship to the formal financial sector and the part it plays in the process of development. The paper concludes that, in all these aspects, the informal financial markets are more important, more efficient and more equitable than is generally supposed.     

The rise of Islamic finance: post‐colonial market‐building in central Asia and Russia

Islamic finance signifies more than a projection of religious affiliation. The importance of Islamic finance is increasing in central Asia, both as a source of capital and as a form of post‐colonial market‐building. In central Asia, it is an important facet of the new phenomena of ‘nation‐branding’ and a means of reinvigorating the economy. In identity politics, Islamic finance projects an attitude of religious tolerance allowing states in the region to reposition their geopolitical identity relative to the Islamic community. This creates a ‘performance’ of Islamic finance that facilitates the creation of legitimacy for the state. Adopting Islamic finance projects images of the state's religious tolerance and diversity without changing the underlying structures; it suggests an ‘Islamicness’ that is useful to the development and post‐colonial goals of the state. As such, it creates opportunities for geopolitical alliances with Muslim countries. Economically, it appeals to rising financial‐industrial elites seeking new investment‐opportunities, which reduces pressure on the state to democratize. Meanwhile, in Russia, Islamic finance is an alternative source of capital for the sanctions‐hit state and a useful identity marker with which to connect to the increasingly wary Caucuses and Commonwealth of Independent States countries, lending it a wider significance across Eurasia.     

The Impact of State-Controlled Banks on the Russian Banking Sector

A senior Russian economist examines the structure, governance, and balance sheets of state-controlled banks in Russia, which accounted for over 55 percent of the total assets in the country's banking system in early 2011. The author offers a credible estimate of the size of the country's state banking sector by including banks that are indirectly owned by public organizations. Contrary to some predictions based on the theoretical literature on economic transition, he explains the relatively high profitability and efficiency of Russian state-controlled banks by pointing to their competitive position in such functions as acquisition and disposal of assets on behalf of the government. Also suggested in the paper is a different way of looking at market concentration in Russia (by consolidating the market shares of core state-controlled banks), which produces a picture of a more concentrated market than officially reported. Lastly, one of the author's interesting conclusions is that China provides a better benchmark than the formerly centrally planned economies of Central and Eastern Europe by which to assess the viability of state ownership of banks in Russia and to evaluate the country's banking sector.     

Reasoned and Inspired Beliefs: A Study of Islamic Theology

Abstract: In most cases, Islamic theology has been examined as a sub‐field of Islamic legal studies. Ignaz Goldziher and Joseph Schacht for instance, see a link between Islamic law and theology. However, Islamic materials from the formative period of Islamic thought show that Muslim scholars distinguished between disciplines dealing with theological themes and those dealing with legal and jurisprudential topics. In this article, the author defines theology and identifies the major trends that contributed to the development of theological doctrines in Sunni and Shi‘ite Islam. He argues that, during the various historical periods, the scope and reach of Islamic theology depended on the political, social, and intellectual environment. He concludes that, in the end, Muslim theology could only be understood in a context radically different from its counterpart in Judaism and Christianity.     

Commercial conflict resolution across the religious divide in the thirteenth-century Mediterranean

Commercial conflict resolution in the medieval Mediterranean has been treated by a number of scholars in recent years, notably through the use of documents from the Cairo Geniza and the archives of the Italian port of Genoa. Recent research on this subject, and more specifically on contract enforcement, has focused on contract reinforcement within the Mediterranean Jewish community, largely because of the sources available. Parallels drawn with medieval Italian mechanisms of conflict resolution emphasize differences between public- vs. private-order responses, that is, the reliance on personalized groups in the Islamic world rather than on public institutions typical of the Italian port-cities. These studies do not, however, examine how commercial conflicts were resolved across religious and political lines, despite the growing role of Italian merchants in the trade networks of Islamic North Africa, a role that inevitably led to trade disputes and occasional uncollected payments. Through close textual analysis of 14 Latin and Arabic letters exchanged between Islamic Almohad Tunis and Christian Italian Pisa, this article explores how Almohad commercial agents and governmental authorities sought to maintain positive trade relations across the religious divide while protecting the interests of their own clients and citizens when disputes arose over commercial payments and debt collection. Rather than relying on commercial conflict resolution methods specific to one culture or the other, these documents reveal a middle ground of borrowed vocabulary and procedures. Through these letters, Almohad merchants and officials attempted to negotiate through the bonds of personal trust and reputation established with their Italian counterparts. However, they also appealed to Italian sensibilities with hybridized methods recognizable by the legal and public institutions of both cultures.