Recent trends in financialisation and future prospects Malcolm Sawyer University of Leeds UK

Outline Remarks on financialisation Recent trends in financialisation since the GFC Financialisation and economic growth The future of financialisation ‘Peak finance’ Roles of finance and the future

What is financialisation? Introduction What is financialisation? Financialization means the increasing role of financial motives, financial markets, financial actors and financial institutions in domestic and international economies, societies, polities and the environment (adaptation of Epstein’s definition)

The forms of financialisation in recent decades Introduction The forms of financialisation in recent decades Rapid increase in scale of financial sector in almost all countries Variegated financialisation Shifts from bank/institution based to market based; some fusion between them Growth of securitisation, derivatives etc. More concentrated and internationalised banking sectors Shifts away from mutual and public ownership

Recent forms of financialisation Introduction Recent forms of financialisation De-regulation and financial liberalisation Rising inequality Occurrence and effects of financial crises

Trends in financialisation since the GFC

Poland

Trends in financialisation since the GFC

Global OTC derivatives

Financialisation and economic growth Financial deepening (scale of the financial sector) is one key element of financialisation Previous studies had generally shown positive relationship between economic growth and financial deepening: some questions on direction of causation, and on relative efficiency of bank-based vs. market based

Financialisation and economic growth Many studies have recently found relationship has become negative over some range (inverted U-shaped relationship) with many industrialised countries operating on the negative part of the curve. Why has the relationship changed?

Financialisation and economic growth Publication ‘bias’? Rise of household debt Nature of what the financial sector does (though financial deepening often refers to banks and equity markets)

The future of financialisation Within the FESSUD project foresight exercises conducted including Delphi study. Views on future scale of financial sector ranged between roughly no change and slower pace of increase. Has there been ‘peak finance’? How could the financial sector continue to expand?

The future of financialisation More finance-retarded than finance-led growth Can the financial sector continue to expand?

The future of financialisation Expansion of its role as facilitating savings and monitoring investment unlikely and may diminish Expansion of financial sector into areas of social provision, e.g. pensions

Towards de-financialisation? Role of re-structuring of the financial sector and institutions to focus on savings banks and investment banks Role of taxes on financial transactions and activities