Redesigning finance towards job-creating long-term development: some regulatory roots

Faruk Ülgen

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Abstract: Financial development is usually assumed to play a key role in the evolution of modern capitalism. A substantial strand of the academic literature, referring to Schumpeterian Creative Destruction, points out this role in the process of technology-based growth and puts the emphasis on the contribution of new financial techniques and products to the funding of global mergers but also to the financing of small enterprises and start-ups in innovative sectors. It is argued that growth-enhancing financial development might rely on liberalized and more competitive financial markets that could generate efficient devices to fund productive activities by improving regulatory-repression-free financial innovations. The second "race to reach the moon", e.g. a new accumulation regime, mainly resting on speculation-based and finance - led growth, is therefore launched on the rule of state-supported free-market self-regulation. This new regime is also a new deindustrialisation process as it provokes an expansive financialisation of the entire economy at the expense of long-term productive activities fuelling systemic crises and resulting in a sharp increase in unemployment since the 1980's. To date, the balance of this regime seems negative as the stabilisation policies, implemented in the aftermath of the 2007-08 crisis, failed to mitigate cumulated disequilibria and to give markets relevant incentives to generate productive activities able to prevent persistent unemployment. In light of such balance, it seems to be suitable to imagine a reindustrialisation process throughout the definancialisation of economies by redesigning regulatory rules to make financial markets and institutions able to support job-creating real growth.

Keywords: financialisation and deindustrialisation; financial development and instability; financial regulation; institutional design of financial markets (search for similar items in EconPapers)
Date: 2013-11-07
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00957355v1
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Published in 25th annual conference 2013 "Beyond deindustrialization : the future of industries", European association for evolutionary political economy, University of Paris 13, Nov 2013, Paris, France

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