Domestic Bank Reform and the Contingent Nature of the Structural Power of Finance in Emerging Markets*

Florence Dafe and Lena Rethel
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Florence Dafe: Hochschule für Politik/TUM
Lena Rethel: University of Warwick

Politics & Society, 2022, vol. 50, issue 4, 571-598

Abstract: This article examines the structural power of domestic finance in developing and emerging economies (DEEs) in the context of a shift toward increasingly activist financial development planning and financial sector reform. Focusing on efforts to create large, internationally competitive banks in Malaysia and Nigeria dating to the late 1990s and early 2000s, it highlights that banks have not played their envisaged role in financing structural transformation via industrial growth and economic development. Nonetheless, (large) banks in DEEs have attained considerable structural power over financial policy, supporting their ability to shape growth and investment strategies. Therefore, the article proposes a revised model of the structural power of finance, recognizing its contingent nature. States pursue various forms of financialization both as a substitute to, or in conjunction with, industrial policy. Financialized development strategies enhance the structural power of large banks in DEEs, notwithstanding their limited role in meeting the investment/development imperative.

Keywords: structural power; financialization; development planning; sub-Saharan Africa; Southeast Asia (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:sae:polsoc:v:50:y:2022:i:4:p:571-598

DOI: 10.1177/00323292221125567

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