Pub Date : 2022-05-04DOI: 10.1080/02692171.2022.2092321
Economists former UK-regulators
We, the undersigned, are writing to express our concern about proposals for the UK’s Financial Services Future Regulatory Framework (FRF) to give regulators statutory objectives to promote “competitiveness” after Brexit. The Economic Secretary, John Glen MP, rightly called the FRF a “once-in-a-generation opportunity” to set the course for post-Brexit regulation. The FRF says the government intends “a greater focus on growth and competitiveness by introducing new, statutory secondary objectives for the PRA (Prudential Regulation Authority) and the FCA (Financial Conduct Authority).” Chancellor Sunak has said that UK finance should be “globally competitive over the long term.” We wholeheartedly support the government’s aim to stimulate long-term UK economic growth, including through financial regulation. Yet we believe that competitiveness is an inappropriate objective for regulators, for the reasons below.
{"title":"Economists’ competitiveness letter","authors":"Economists former UK-regulators","doi":"10.1080/02692171.2022.2092321","DOIUrl":"https://doi.org/10.1080/02692171.2022.2092321","url":null,"abstract":"We, the undersigned, are writing to express our concern about proposals for the UK’s Financial Services Future Regulatory Framework (FRF) to give regulators statutory objectives to promote “competitiveness” after Brexit. The Economic Secretary, John Glen MP, rightly called the FRF a “once-in-a-generation opportunity” to set the course for post-Brexit regulation. The FRF says the government intends “a greater focus on growth and competitiveness by introducing new, statutory secondary objectives for the PRA (Prudential Regulation Authority) and the FCA (Financial Conduct Authority).” Chancellor Sunak has said that UK finance should be “globally competitive over the long term.” We wholeheartedly support the government’s aim to stimulate long-term UK economic growth, including through financial regulation. Yet we believe that competitiveness is an inappropriate objective for regulators, for the reasons below.","PeriodicalId":51618,"journal":{"name":"International Review of Applied Economics","volume":"36 1","pages":"302 - 307"},"PeriodicalIF":2.2,"publicationDate":"2022-05-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"44593584","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-05-04DOI: 10.1080/02692171.2022.2093339
Mariana Mortágua, Izaura Solipa
ABSTRACT The creation of the Banking Union, set to be an integrated financial framework for the Eurozone, should be better understood as part of a larger process of governing through financial markets, where policy-makers resort to market-based instruments and policies for governance purposes, thus forming an alignment with the interests of financial elites. This paper assesses the Single Resolution Mechanism and highlights overlooked aspects of its design and decision-making process that are actively strengthening and further integrating market-based finance in the European banking system. The resolution framework and its underlying conditionalities imposed by the limited public intervention toolkit and the European State Aid regime are promoting banking capital concentration and the marketization of more traditional banking systems. Meanwhile, the discretionary decisions imposed by the European technocratic body reinforces the integration agenda, with often detrimental effects for the member states of the Southern Periphery. While the Banking Union has the overall goal of financial stability and increased convergence between member states, the outcomes of the Single Resolution Mechanism point to an increase in market-based finance and riskier business models at the expense of smaller and more traditional banking systems, fostering too-big-to-fail institutions and further deepening the already rooted intra-euro divergences.
{"title":"Reviving financial markets – a critical assessment of the single resolution mechanism","authors":"Mariana Mortágua, Izaura Solipa","doi":"10.1080/02692171.2022.2093339","DOIUrl":"https://doi.org/10.1080/02692171.2022.2093339","url":null,"abstract":"ABSTRACT The creation of the Banking Union, set to be an integrated financial framework for the Eurozone, should be better understood as part of a larger process of governing through financial markets, where policy-makers resort to market-based instruments and policies for governance purposes, thus forming an alignment with the interests of financial elites. This paper assesses the Single Resolution Mechanism and highlights overlooked aspects of its design and decision-making process that are actively strengthening and further integrating market-based finance in the European banking system. The resolution framework and its underlying conditionalities imposed by the limited public intervention toolkit and the European State Aid regime are promoting banking capital concentration and the marketization of more traditional banking systems. Meanwhile, the discretionary decisions imposed by the European technocratic body reinforces the integration agenda, with often detrimental effects for the member states of the Southern Periphery. While the Banking Union has the overall goal of financial stability and increased convergence between member states, the outcomes of the Single Resolution Mechanism point to an increase in market-based finance and riskier business models at the expense of smaller and more traditional banking systems, fostering too-big-to-fail institutions and further deepening the already rooted intra-euro divergences.","PeriodicalId":51618,"journal":{"name":"International Review of Applied Economics","volume":"36 1","pages":"403 - 423"},"PeriodicalIF":2.2,"publicationDate":"2022-05-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"46592969","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-05-04DOI: 10.1080/02692171.2022.2069688
T. Lianos, Nicholas Tsounis, Anastasia Pseiridis
ABSTRACT The relationship between population growth and economic growth is examined. Evidence is provided on the direction of causality between population and GDP in five industrialized countries (US, UK, Germany, France, and Italy) for the periods 1820–1938 and 1950–2016. Using Toda-Yamamoto Granger causality tests and Sims causality test it was found that the direction of causality during the former period was from Population to GDP or bidirectional while for the latter period, it was from GDP to population. It is also shown that during the second period per capita GDP was almost double relative to the first period. We argue that the difference may be partly explained by the direction of causality between the two variables. In the 1820–1938 period, the direction of causality is probably due to the large family model that prevailed in that period that led to rapid population growth. For the 1950–2016 period it is probably the rapid economic growth that followed the Second World War and motivated large migration flows to the developed countries we examined.
{"title":"Population and economic growth in developed countries","authors":"T. Lianos, Nicholas Tsounis, Anastasia Pseiridis","doi":"10.1080/02692171.2022.2069688","DOIUrl":"https://doi.org/10.1080/02692171.2022.2069688","url":null,"abstract":"ABSTRACT The relationship between population growth and economic growth is examined. Evidence is provided on the direction of causality between population and GDP in five industrialized countries (US, UK, Germany, France, and Italy) for the periods 1820–1938 and 1950–2016. Using Toda-Yamamoto Granger causality tests and Sims causality test it was found that the direction of causality during the former period was from Population to GDP or bidirectional while for the latter period, it was from GDP to population. It is also shown that during the second period per capita GDP was almost double relative to the first period. We argue that the difference may be partly explained by the direction of causality between the two variables. In the 1820–1938 period, the direction of causality is probably due to the large family model that prevailed in that period that led to rapid population growth. For the 1950–2016 period it is probably the rapid economic growth that followed the Second World War and motivated large migration flows to the developed countries we examined.","PeriodicalId":51618,"journal":{"name":"International Review of Applied Economics","volume":"36 1","pages":"608 - 621"},"PeriodicalIF":2.2,"publicationDate":"2022-05-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"42802295","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-05-04DOI: 10.1080/02692171.2022.2112858
J. Michie
ABSTRACT The 2007–2008 international financial crisis was the worst since the 1929 Wall Street Crash – triggering the 1930s Great Depression, the rise of fascism and Hitler in Europe, and the Second World War. In the 1930s there were reforms to tackle the causes – particularly in the US with Roosevelt’s New Deal – including splitting banks’ ‘casino’ from ‘high street’ operations, and strengthening trade union rights. Following the Second World War, there were global reforms, including exchange controls to prevent cross-border financial speculation. But in the post-1980s era of privatisation and deregulation, these reforms were lobbied against and generally abandoned. The resulting speculative orgy, accompanied inevitably by increased inequality, led to the 2007–2008 international financial crisis. Reforms were promised, including increasing the degree of corporate diversity in the financial services sector, and creating ‘resolution’ plans for banks to prevent their collapse. However, the promised reforms regarding corporate diversity were reneged upon. Resolution plans were adopted in the UK, but in Europe this is being driven in a way that will strengthen the power of finance that created the problem in the first place. And the UK Government wants the regulator to promote the ‘competitiveness’ of financial services, which was tried before, and didn’t end well.
{"title":"The coming financial crisis","authors":"J. Michie","doi":"10.1080/02692171.2022.2112858","DOIUrl":"https://doi.org/10.1080/02692171.2022.2112858","url":null,"abstract":"ABSTRACT The 2007–2008 international financial crisis was the worst since the 1929 Wall Street Crash – triggering the 1930s Great Depression, the rise of fascism and Hitler in Europe, and the Second World War. In the 1930s there were reforms to tackle the causes – particularly in the US with Roosevelt’s New Deal – including splitting banks’ ‘casino’ from ‘high street’ operations, and strengthening trade union rights. Following the Second World War, there were global reforms, including exchange controls to prevent cross-border financial speculation. But in the post-1980s era of privatisation and deregulation, these reforms were lobbied against and generally abandoned. The resulting speculative orgy, accompanied inevitably by increased inequality, led to the 2007–2008 international financial crisis. Reforms were promised, including increasing the degree of corporate diversity in the financial services sector, and creating ‘resolution’ plans for banks to prevent their collapse. However, the promised reforms regarding corporate diversity were reneged upon. Resolution plans were adopted in the UK, but in Europe this is being driven in a way that will strengthen the power of finance that created the problem in the first place. And the UK Government wants the regulator to promote the ‘competitiveness’ of financial services, which was tried before, and didn’t end well.","PeriodicalId":51618,"journal":{"name":"International Review of Applied Economics","volume":"36 1","pages":"291 - 301"},"PeriodicalIF":2.2,"publicationDate":"2022-05-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"59406507","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-05-04DOI: 10.1080/02692171.2022.2090521
B. Pisicoli
ABSTRACT In this paper, we investigate the influence of banking and financial diversity on stability. We compute an index of banking diversity for Italian provinces and, drawing on network theory, we propose a measure of the diversity and development of the overall provincial financial sector. Our results show that diversity in the banking and financial markets promotes greater stability. Such beneficial effects are particularly evident during periods of financial distress. We ascribe our findings to the better diversification achieved by more diverse financial systems, as documented by lower loan concentration and higher loan diversification in terms of economic destination and borrower category.
{"title":"Banking diversity, financial complexity and resilience to financial shocks: evidence from Italian provinces","authors":"B. Pisicoli","doi":"10.1080/02692171.2022.2090521","DOIUrl":"https://doi.org/10.1080/02692171.2022.2090521","url":null,"abstract":"ABSTRACT In this paper, we investigate the influence of banking and financial diversity on stability. We compute an index of banking diversity for Italian provinces and, drawing on network theory, we propose a measure of the diversity and development of the overall provincial financial sector. Our results show that diversity in the banking and financial markets promotes greater stability. Such beneficial effects are particularly evident during periods of financial distress. We ascribe our findings to the better diversification achieved by more diverse financial systems, as documented by lower loan concentration and higher loan diversification in terms of economic destination and borrower category.","PeriodicalId":51618,"journal":{"name":"International Review of Applied Economics","volume":"36 1","pages":"338 - 402"},"PeriodicalIF":2.2,"publicationDate":"2022-05-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"41689399","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-05-04DOI: 10.1080/02692171.2022.2106708
Article title: Economists’ competitiveness letter Authors: Economists and former UK-regulators Journal: International Review of Applied Economics DOI: http://dx.doi.org/ 10.1080/02692171.2022.2092321 Within the original letter sent to The Chancellor of the Exchequer and Economic Secretary to the Treasury, multiple sections of text linked to other documents. These links were not included when the paper was first published. In order to ensure clarity and consistency across both the print and online versions, these have been reinstated as Notes [1-4; 6-9; 11, 13-15; 17, 19]. Please note that the previously published version contained Notes [5, 10, 12, 16,18], which were included in Note form as part of the original letter/ published version, sequentially numbered 1—5. The hyperlinks within these Notes have been reinstated in parentheses after the hyperlinked text. Some minor formatting errors have also been corrected at this time. INTERNATIONAL REVIEW OF APPLIED ECONOMICS 2022, VOL. 36, NO. 3, iii https://doi.org/10.1080/02692171.2022.2106708
{"title":"Correction Notice","authors":"","doi":"10.1080/02692171.2022.2106708","DOIUrl":"https://doi.org/10.1080/02692171.2022.2106708","url":null,"abstract":"Article title: Economists’ competitiveness letter Authors: Economists and former UK-regulators Journal: International Review of Applied Economics DOI: http://dx.doi.org/ 10.1080/02692171.2022.2092321 Within the original letter sent to The Chancellor of the Exchequer and Economic Secretary to the Treasury, multiple sections of text linked to other documents. These links were not included when the paper was first published. In order to ensure clarity and consistency across both the print and online versions, these have been reinstated as Notes [1-4; 6-9; 11, 13-15; 17, 19]. Please note that the previously published version contained Notes [5, 10, 12, 16,18], which were included in Note form as part of the original letter/ published version, sequentially numbered 1—5. The hyperlinks within these Notes have been reinstated in parentheses after the hyperlinked text. Some minor formatting errors have also been corrected at this time. INTERNATIONAL REVIEW OF APPLIED ECONOMICS 2022, VOL. 36, NO. 3, iii https://doi.org/10.1080/02692171.2022.2106708","PeriodicalId":51618,"journal":{"name":"International Review of Applied Economics","volume":"36 1","pages":"iii - iii"},"PeriodicalIF":2.2,"publicationDate":"2022-05-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"41473217","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-04-08DOI: 10.1080/02692171.2022.2056155
Katherine A. Moos, Hao Qi
ABSTRACT We compare the welfare states and taxation regimes of the two largest economies in the world, China and the United States, from 1992 to 2017. We begin with a comparison of each country’s net social wage – that is, the difference between total benefits received by and taxes paid by labor – using two established methods. While the net social wage in the two countries exhibited similar trends, the increasing net social wage has distinctly different implications in the two countries due to their specific historical trajectories in the neoliberal era. In the US, the increasing net social wage reflects an ambivalent and reluctant response to workers’ social reproduction. In China, it reflects institutional changes in the welfare state, which we interpret as the Chinese state’s attempt to resolve the social-reproduction crisis caused by neoliberal reforms of the 1990s.
{"title":"The state's response to the crisis of neoliberalism: a comparison of the net social wage in China and the United States, 1992-2017","authors":"Katherine A. Moos, Hao Qi","doi":"10.1080/02692171.2022.2056155","DOIUrl":"https://doi.org/10.1080/02692171.2022.2056155","url":null,"abstract":"ABSTRACT We compare the welfare states and taxation regimes of the two largest economies in the world, China and the United States, from 1992 to 2017. We begin with a comparison of each country’s net social wage – that is, the difference between total benefits received by and taxes paid by labor – using two established methods. While the net social wage in the two countries exhibited similar trends, the increasing net social wage has distinctly different implications in the two countries due to their specific historical trajectories in the neoliberal era. In the US, the increasing net social wage reflects an ambivalent and reluctant response to workers’ social reproduction. In China, it reflects institutional changes in the welfare state, which we interpret as the Chinese state’s attempt to resolve the social-reproduction crisis caused by neoliberal reforms of the 1990s.","PeriodicalId":51618,"journal":{"name":"International Review of Applied Economics","volume":"37 1","pages":"23 - 49"},"PeriodicalIF":2.2,"publicationDate":"2022-04-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"47645367","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-03-17DOI: 10.1080/02692171.2022.2052714
C. Lapavitsas, A. Soydan
ABSTRACT Financialisation in developing countries is the subject of an expanding literature but its characteristic features and its relationship to developed countries remain unclear. Reviewing the literature, this paper shows that financialisation in developing countries should be distinguished from financial liberalisation and financial globalisation. Furthermore, its character is partly derivative from financialisation in developed countries, as is confirmed by two theoretical approaches, related but different from each other, namely ‘subordinate’ and ‘dependent’ financialisation. By further reviewing the empirical literature, the paper also shows that financialisation in developing countries is highly variable and different from that in developed countries regarding the conduct of non-financial enterprises, banks, and households. Moreover, the literature addresses several sources of vulnerability for developing countries relating to financialisation. Finally, there are significant literature gaps, above all, the connection between financialisation and the globalisation of production as well as the role of the state.
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Pub Date : 2022-03-15DOI: 10.1080/02692171.2021.2022296
William Lazonick
ABSTRACT
Edith Penrose’s The Theory of the Growth of the Firm provides an intellectual foundation for a theory of innovative enterprise, which is essential to any attempt to explain productivity growth, employment opportunity, and income distribution. Penrose’s theory of the firm is also an antidote to the absurdity that has been taught by PhD economists to millions of college students for over seven decades: the most unproductive firm is the foundation of the most efficient economy. The dissemination of this ‘neoclassical fallacy’ to a mass audience began with Paul A. Samuelson’s textbook, Economics: An Introductory Analysis, first published in 1948. Over the decades, the neoclassical fallacy has persisted through 18 revisions of Samuelson, Economics and in its countless ‘economics principles’ clones. This essay challenges the intellectual hegemony of neoclassical economics by exposing the illogic of its foundational assumptions about how a modern economy operates and performs. To get beyond the neoclassical fallacy, economists must be trained in a ‘historical transformation’ methodology that integrates history and theory. It is a methodology in which theory serves as both a distillation of what we have learned from the study of history and a guide to what we need to learn about reality as the ‘present as history’ unfolds.
彭罗斯的企业成长理论为创新型企业理论提供了理论基础，这一理论对于解释生产率增长、就业机会和收入分配的任何尝试都是必不可少的。彭罗斯的企业理论也是对70多年来经济学博士们向数百万大学生传授的谬论的一剂解药:生产率最低的企业是效率最高的经济的基础。这种“新古典主义谬误”的传播始于保罗·萨缪尔森(Paul a . Samuelson) 1948年首次出版的教科书《经济学:入门分析》(Economics: a介绍性分析)。在过去的几十年里，新古典主义谬论在萨缪尔森的《经济学》一书及其无数的“经济学原理”克隆版的18次修订中持续存在。本文通过揭露新古典经济学关于现代经济如何运行和表现的基本假设的不逻辑，挑战了新古典经济学的知识霸权。为了摆脱新古典主义谬误，经济学家必须接受“历史转型”方法论的培训，这种方法论将历史和理论结合起来。它是一种方法论，在这种方法论中，理论既是我们从历史研究中学到的东西的精华，也是我们在“作为历史的现在”展开时需要了解的现实的指南。
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Pub Date : 2022-03-07DOI: 10.1080/02692171.2022.2045911
Nicolás Águila, Juan M. Graña
ABSTRACT The ‘zombie’ literature emphasizes the financial characteristics of firms and focuses on financial channels to explain their rise. This is incomplete because it conflates together firms with very different productive characteristics. Drawing on Marx and Minsky’s insights, we build a taxonomy of firms showing both their productive and financial characteristics based on the rate of profit of enterprise and the interplay between its three determinants: the profit rate, the difference between the profit and the interest rate, and the leverage ratio. Considering the different possible combinations of these variables, we classify firms into seven types: normal and regular small capitals (hedge finance); speculative small, super small, and leveraged small capitals (speculative finance); and financially stressed small and zombie capitals (Ponzi finance). We show the composition and evolution of U.S. listed firms as well as relevant descriptive statistics by type of firm from 1950 to 2019. Our main finding is that the principal problem of U.S. firms is productive, not financial, as there is a high share of firms with increasingly negative profitability even before the payment of interest and despite having relatively low leverage.
{"title":"Not all zombies are created equal. A Marxist-Minskyan taxonomy of firms: United States, 1950-2019","authors":"Nicolás Águila, Juan M. Graña","doi":"10.1080/02692171.2022.2045911","DOIUrl":"https://doi.org/10.1080/02692171.2022.2045911","url":null,"abstract":"ABSTRACT The ‘zombie’ literature emphasizes the financial characteristics of firms and focuses on financial channels to explain their rise. This is incomplete because it conflates together firms with very different productive characteristics. Drawing on Marx and Minsky’s insights, we build a taxonomy of firms showing both their productive and financial characteristics based on the rate of profit of enterprise and the interplay between its three determinants: the profit rate, the difference between the profit and the interest rate, and the leverage ratio. Considering the different possible combinations of these variables, we classify firms into seven types: normal and regular small capitals (hedge finance); speculative small, super small, and leveraged small capitals (speculative finance); and financially stressed small and zombie capitals (Ponzi finance). We show the composition and evolution of U.S. listed firms as well as relevant descriptive statistics by type of firm from 1950 to 2019. Our main finding is that the principal problem of U.S. firms is productive, not financial, as there is a high share of firms with increasingly negative profitability even before the payment of interest and despite having relatively low leverage.","PeriodicalId":51618,"journal":{"name":"International Review of Applied Economics","volume":"37 1","pages":"3 - 22"},"PeriodicalIF":2.2,"publicationDate":"2022-03-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"44498470","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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