1. Varieties of Liberalism: Anglo-Saxon Capitalism in Crisis? Sue Konzelmann & Marc Fovargue-Davies (Gerhard Schnyder) REFGOV / DEMOGOV Brussels 26-28 May 2010

2. Market capitalization & Cost of bank bail-outs Change 1999-2009 ($bn) Bank bail-out package as a % GDP (March 2009) Canada97.5 0.0 % Australia85.6 0.1 % UK -211.4 19.8 % USA-633 6.8 % Source: Financial Times, 23 March 2009, p.9. 1999 values are as of 31 May 1999; 2009 values are as of 17 March 2009; Stewart 2009.

3. Overview The logic & rise of economic liberalism Early effects & responses to crises Industrial restructuring & the market for corporate control Financial market liberalization Regulators & the regulated Financial alchemy & the US sub-prime bubble Conclusions & implications for policy reform

4. The logic & rise of economic liberalism Classical versus Ordo Liberalism The collapse of Bretton Woods and relaxation of international money movements Globalization and the onset of de- industrialization Growing confidence in markets and the re- regulation of the real & financial sectors of the economy

5. Early effects of liberalization & responses to crises Australia & America –Australian corporate & financial scandals (1980s) –US Savings & Loan Crisis (1980s & 1990s) Canada & Britain –Bank, insurance trust & investment house failures (1980s & 1990s) All four systems had looked into the abyss …

6. Industrial re-structuring & the market for corporate control Leveraged buyouts & hostile take-overs in Britain (1960s & 70s) & America (1980s) The market for managerial control & industrial re-structuring Take-over markets in the Anglo-Saxon world The structure of the economy & opportunities for investment

7. Stock market liberalization –May Day 1975 (New York) –1986 Big Bang (London) The structure of financial markets –Domestic banks & financial institutions in Canada & Australia –A global marketplace in London & New York The structure of regulation –fragmentation versus a single regulator Financial market liberalization

8. Britain & America: light touch regulation –Increasing relative power (economic & political) of the regulated Australia & Canada: prudential regulation & high levels of own capital reserves –Banks are bastards; bigger banks are bigger bastards. (Maiden 2008) –Our job is to tell you what to do, not to make it grow. (Freeland 2010) Regulators & the regulated

9. Presence of the pre-conditions for financial instability Conditions uncomfortable for banks in London and New York Financial innovation & exploitation of the American sub-prime real estate market Loss of confidence precipitates crisis Financial market crisis has re-bound effects on the real economy & the recession deepens Financial Alchemy & the American sub-prime bubble

10. The philosophy shaping liberalization Relationship between the regulator & regulated Investment opportunities outside of finance & re- balancing a post-industrial economy National political context The role of the state & philosophy of government The direction of reform Conclusions & Implications for Policy