Financialisation

This post was written by

The most recent issue of the Economic and Social Review has a symposium on the politics of financialisation, including papers on the US, a comparative analysis of financialisation and inequality in the OECD and my own paper on”The Crisis of Financialisation in Ireland”

The table of contents, with links to papers, is here: http://www.esr.ie/vol%2043_4/ESRTOC43_4.htm

The abstract of the Ireland paper is below:

This paper explores the intersection of national and transnational processes in shaping Ireland’s financial crisis. It uses insights from economic sociology to reconcile the analytical tension between an understanding of Ireland’s crisis in terms of the unfolding of an international process and explanations that focus on specific national features. A series of significant policy decisions in the late 1990s favoured financial markets in allocating capital and opened up significant institutional space for speculative lending. Underneath the apparently consistent expansion of the property lending bubble since the mid-1990s, there was a significant shift in investment logics from the early 2000s as both residential and commercial real estate spending became detached from underlying demand. This shift in logic was based on two significant
“translations” of investment rationalities into justifications of lending and investment that underpinned the bubble. Irish banks’ own conceptions of risk and rational investments shifted subtly over time so that property lending was translated into a rational investment, encouraged by market dynamics such as increased bank profits, rising share prices and concentration of decision making power in the banking system. At the same time, and in the context of the establishment of the euro, investing in the assets of Irish banks was translated into a rational investment for international banks, in large part through the metrics of the credit ratings agencies. The paper concludes by revisiting the question of how we should understand the specifics of particular financial crises in conjunction with the general dynamics of financialisation – pointing to the importance of “translation” processes in creating social rationalities and the significance of “market liberalism” as a social formation in enabling these translations and promoting financialisation.

9 Responses to “Financialisation”

  1. Michael Hennigan - Finfacts Says:

    Central bank governor Maurice O’Connell, told the Oireachtas Committee on Finance and the Public Service in early 1997: “There seems to be a perception that the Central Bank can exercise some legal authority in restricting credit. It has no such authority. Any restriction would be inconsistent with European Union practice.”

    So with the advent of the euro in 1999 and McCreevy hosing the fire with oil, the governor began a series of pleading letters to bankers for prudence, which must have had them laughing up their sleeves.

    http://www.finfacts.ie/irishfinancenews/article_1017822.shtml

    The biggest banks became majority foreign owned.

    In 2007, 65% of AIB’s shares were held by foreign residents. This presumably added to pressure to maintain high performance figures.

  2. Michael Hennigan - Finfacts Says:

    A chameleon’s 2004 tribute to Michael Fingleton, a star banker:

    The numbers were pedestrian. The commentary was soporific. Well then, what was on the way? Nothing much. Except a forecast of a very dull less than 10 per cent growth in profits before tax.

    There was plenty on the way down at the Irish Nationwide. The building society is on the verge of sale. The figures were sparkling. Members with adequate savings or mortgages are in for a ?7,000-plus bonanza.

    Michael F’s cost-to-income ratio at 21.4 per cent must be the envy of Michael S.

    Fingleton’s return on total average assets at 2.03 per cent was far superior to Soden’s at 1.22 per cent. He even leaves superstar Sean Fitzpatrick’s Anglo Irish standing, with only 1.54 per cent.

    All Fingleton’s figures are spectacular. Pre-tax profits are up 20 per cent. Gross lending rose by 72 per cent.

    Both Michaels’ bodies are benefiting from the mortgage and property boom. But when it is over, where will they be?

    We know where Fingleton wants to be. His ambition: to sell out to a big bank. He is priming the pump for a buyer, probably a foreigner.

    We haven’t an iota where Soden is heading. The reason: nor does he. Two failed ventures seem to have driven him into his shell, waiting for a saviour or – as he likes to put it – “well positioned for . . . “

    Fingers sidelines a sorry Soden

    http://www.independent.ie/business/irish/fingers-sidelines-a-sorry-soden-478772.html

  3. Michael Hennigan - Finfacts Says:

    German bankers talk…Irish remain dumb

    Deutsche Welle Jan 16: Playwright uncovers bankers’ darkest secrets

    “In the murky and mysterious world of finance, top bankers are reluctant to reveal their secrets. But director Andres Veiel got some of them to talk. The result is a spectacular piece of contemporary theater.”

    http://www.dw.de/playwright-uncovers-bankers-darkest-secrets/a-16524591

  4. seafóid Says:

    http://monthlyreview.org/2007/04/01/the-financialization-of-capitalism

  5. grumpy Says:

    Financialisation, at least, is under guidance of some literally fantastic risk managers.

    http://ftalphaville.ft.com/2013/01/17/1342262/footnote-74-facepalm/

  6. rf Says:

    This is the most interesting paper I’ve yet read on Irelands crisis. A firm rebuke to all the enemies of common sense. A wonderful piece of well researched, beautifully written, logically infallible brilliance.

  7. David O'Donnell Says:

    @ALL

    seafóid’s link to The Financialization of Capitalism is a MUST READ

    http://monthlyreview.org/2007/04/01/the-financialization-of-capitalism

    I hear it is now ‘required reading’ in all Irish Economics Departments!

    @SO’R

    Not just Ireland – The EZ has been thorougly financialized under the logic of the Bundesbank/ECB and German Ideological OrdoLiberalism

  8. paul quigley Says:

    Not a lot of traffic on this one Sean. Looks like you nailed it. :)

    Keep hurling. You are in good company.

    http://www.amazon.com/Call-Judgment-Sensible-Finance-Dynamic/dp/B008PH36K6

  9. seafóid Says:

    Here is a must-read on inequality

    http://www.guardian.co.uk/commentisfree/2013/jan/24/cost-cheap-burger-higher-12p

Leave a Reply