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FESSUD project: results from detailed
studies of the financial systems of Europe
and beyond
Andrew Brown, Marco Veronese Passarella
and David Spencer
University of Leeds
FESSUD is funded by the European Union under the 7th Research Framework programme (theme SSH)
Grant agreement nr 266800. These views are only those of the author(s) and the E.C is not liable for the use of any information contained therein
Empirical analysis
• FESSUD project: ‘Financialisation, Economy,
Society and Sustainable Development’ (PI
Malcolm Sawyer)
• Work in first two years of FESSUD conducted
and synthesised around 15 country reports
– Undertaken by project partners
– Coordinated by David Spencer and I
• Each report an exhaustive secondary data
collection, presentation and analysis of the
process of ‘financialisation’ over the past 30
years in a specific country (or area)
FESSUD is funded by the European Union under the 7th Research Framework programme (theme SSH)
Grant agreement nr 266800. These views are only those of the author(s) and the E.C is not liable for the use of any information contained therein
Financialisation
• For comparability, each country study
followed Fine’s (2011) broad, multidimensional definition of financialisation
(partly descriptive, partly causalexplanatory)
• We found this definition to be an
invaluable systemic perspective
• Suitable for systemically framing policy we
would suggest
FESSUD is funded by the European Union under the 7th Research Framework programme (theme SSH)
Grant agreement nr 266800. These views are only those of the author(s) and the E.C is not liable for the use of any information contained therein
Descriptive dimensions of
financialisation
i. Large-scale expansion and proliferation of
financial markets
ii. De-regulation of the financial system itself
and the economy more generally
iii. The birth of a whole range of new financial
institutions and markets
iv. At a systemic level, the dominance of
finance over industry, with implications for
capital investment and so for productive
activity
FESSUD is funded by the European Union under the 7th Research Framework programme (theme SSH)
Grant agreement nr 266800. These views are only those of the author(s) and the E.C is not liable for the use of any information contained therein

Descriptive dimensions of
financialisation
The research leading to these results has received funding from the European Union Seventh Framework Programme (FP7/2007-2013) under grant agreement n° 266800.
Among CEE countries, Hungary is the one that recorded the
highest increase in financial assets to GDP ratio (its absolute
value is similar to that of other CEE countries though).
The bulk of financial assets are owned by banks, even in
Anglo-Saxon countries.
900.0
2,500.0
800.0
700.0
2,250.0
600.0
500.0
2,000.0
400.0
1,750.0
300.0
200.0
1,500.0
100.0
0.0
1,250.0
{a}
1,000.0
750.0
380
340500.0
300
260250.0
220
180 0.0
140
100
60
{b}
1994
1996
1998
2000
2002
2004
2006
2008
2010
Historically very high in Germany: about seven times the
German GDP since the early 2000s. However, its growth has
been slower compared to that of other major economies
(especially the UK). Low ratios in France and Italy, even
though the French one has boomed in the last two decades.
Finally, very high and/or increasing level in Spain, Portugal.
Source: Elaboration on Eurostat Statistics
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Astronomical values in Luxemburg (more than 12,000%), the
Netherlands and Ireland in the last decade. The Euro Area
(EA17) average was almost 600% in 2011.
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Gross Financial Assets
Level and trend of Financial Assets
(Gross value to GDP ratio {a} and Index:
1995=100 {b})
Euro area (17 countries)
Germany
Ireland France
UK
Netherlands
Italy
United Kingdom
Spain
CAEE Countries
Germany(average)
1
2
Descriptive dimensions of
financialisation
v. Market mechanisms, complemented or
reinforced by policies, underpinning rising
inequality
vi. Consumption tending to be sustained by the
extension of credit
vii. Not merely the expansion and proliferation
of financial instruments and markets but
also the penetration of such financing into a
widening range of both economic and social
(and environmental) reproduction
viii.A particular culture
FESSUD is funded by the European Union under the 7th Research Framework programme (theme SSH)
Grant agreement nr 266800. These views are only those of the author(s) and the E.C is not liable for the use of any information contained therein
Descriptive dimensions of
financialisation: inequality
The research leading to these results has received funding from the European Union Seventh Framework Programme (FP7/2007-2013) under grant agreement n° 266800.
Inequality increased in almost all countries considered: empirical results show
the increasing concentration of both income flows and wealth stocks at the top of
the distribution curve. Gini coefficients usually show rising trends.
0.450
8.00%
0.400
6.00%
0.350
4.00%
0.300
2.00%
0.250
0.00%
0.200
-2.00%
0.150
-4.00%
0.100
-6.00%
0.050
-8.00%
0.000
mid-80s
around 1990
mid-90s
around 2000
late 2000s
Sweden
Finland
Germany
Japan
US
US
Netherlands
Austria
Portugal
Japan
Spain
Italy
Sweden
UK
UK
Italy
Portugal
Netherlands
Ireland
France
Greece
Austria
Spain
Belgium
Ireland
Finland
Greece
France
Belgium
Germany
mid-2000s
Change
Gini coefficient
in Gini coefficient
after taxes
after
for taxes
households'
for households'
disposabledisposable
income. Source:
incomeGerman
from mid-1980s
Report andtoHein
late (2003,
2000s.p.Source:
German
3). Data
Report
from(2013)
OECDand
(2012).
HeinNotes:
(2003,Gini
p. 3).
coefficient
Data from
is OECD
based on
(2012).
equivalised
Notes: household
Gini coefficient
income.
is based on equivalised
household income.
1
2
Descriptive dimensions of
financialisation: inequality
The research leading to these results has received funding from the European Union Seventh Framework Programme (FP7/2007-2013) under grant agreement n° 266800.
Households’ debt to disposable income grew in all countries considered, with
some national difference though.
Early
Early financialisers
EMU core
financialisers
IE = Ireland
NL = Netherlands
UK = United
Kingdom
DK = Denmark
SE = Sweden
Late comers
EMU core
DE = Germany
ES = Spain
FR = France
IT = Italy
PT = Portugal
EL = Greece
Source: Santos and Teles (2013).
Late comers
HU = Hungary
PL = Poland
RO = Romania
SK = Slovakia
BG = Bulgaria
Causal-explanatory dimensions
• Causal-explanatory theory is both diverse
and undeveloped in the financialisation
literature
– e.g. diverse theories of finance
• There are common critical conclusions
within this diversity, summarised by Fine
(2011), as follows
FESSUD is funded by the European Union under the 7th Research Framework programme (theme SSH)
Grant agreement nr 266800. These views are only those of the author(s) and the E.C is not liable for the use of any information contained therein
Causal-explanatory dimensions
Financialisation:
i. Reduces overall levels and efficacy of real investment
as financial instruments and activities expand at its
expense
ii. Prioritises shareholder value, or financial worth, over
other desirable economic, social, and environmental
values and goals
iii. Pushes policies towards acceptance of the operation
of market forces and commercialisation in all areas of
economic and social life
FESSUD is funded by the European Union under the 7th Research Framework programme (theme SSH)
Grant agreement nr 266800. These views are only those of the author(s) and the E.C is not liable for the use of any information contained therein
Causal-explanatory dimensions
iv. Extends often unwelcome influence of finance
more broadly, both directly and indirectly, over
economic and social policy
v. Places more aspects of economic and social life
at the risk of volatility from financial instability
and, conversely, places the economy and social
life at risk of crisis from triggers within particular
markets (e.g. commodity price fluctuations)
vi. Encourages particular forms of culture and
corresponding governance that adversely
shapes what policies can be formulated and
implemented
FESSUD is funded by the European Union under the 7th Research Framework programme (theme SSH)
Grant agreement nr 266800. These views are only those of the author(s) and the E.C is not liable for the use of any information contained therein
Testing and developing theory
• Empirically testing and developing causalexplanatory theory requires integrating
detailed qualitative and quantitative data
from the country reports
• A major and ongoing synthetic task
• I pick out one key process we are currently
examining through this task of synthesis:
carry trade
FESSUD is funded by the European Union under the 7th Research Framework programme (theme SSH)
Grant agreement nr 266800. These views are only those of the author(s) and the E.C is not liable for the use of any information contained therein
Process of carry trade
• Generally, we see a process where growth of
international financial and currency markets
retards investment in real economy
• Multinationals able to borrow cheap in one
currency and lend dear in another currency
– carry trade based on international interest rate
differentials
• EU ‘periphery’ starved of finance for real
investment
• Macroeconomic policy and exchange rate
determination altered by financialisation
– confirms pioneering analyses of Gabor, Powell and
Kaltenbrunner
FESSUD is funded by the European Union under the 7th Research Framework programme (theme SSH)
Grant agreement nr 266800. These views are only those of the author(s) and the E.C is not liable for the use of any information contained therein
Conclusion
• Financialisation is a complex and fundamentally
significant global process
• It is variegated across regions, nations continents:
one system and one process with complexly
variegated forms and outcomes
– not multiple financial ‘types’ of system in interaction
• Carry trade is a striking example of a significant
financialisation process with variegated forms and
outcomes
– It has deleterious outcomes for the most part
• Policy must combat the power of finance, and
must itself be variegated: one size does not fit all
FESSUD is funded by the European Union under the 7th Research Framework programme (theme SSH)
Grant agreement nr 266800. These views are only those of the author(s) and the E.C is not liable for the use of any information contained therein