- Centre for Advanced Studies in Finance
The Bank of England was a grand venue to announce the new findings of our Financialisation, Economy, Society and Sustainable Development (FESSUD) research project last month.
The venerable bank has hosted some of Europe’s most powerful people during the course of its 322-year history, and we were delighted to secure speakers from institutions including the European Central Bank (ECB), the Organisation for Economic Co-operation and Development (OECD), the European Investment Bank, the US Senate Budget Committee, the European Commission and several business schools and research institutions from across Europe and the US.
The common thread of the event, held on 25 May, was developing a better understanding of how financialisation – the emergence of the financial system over other aspects of the economy – has grown to exert a domination over other parts of Europe’s economy over the last 30 years and what will happen in the future.
FESSUD is an €8m European-Union funded research programme, led by the Economics division at Leeds University Business School. As part of this project, researchers from 14 business schools and research institutions in Europe and South Africa have been examining financialisation in different parts of Europe with the intention of suggesting practical reforms to support economic, social and environmental sustainability.
Since we are in receipt of considerable public funding, we have from the outset endeavoured to disseminate the findings of FESSUD research as widely as possible, and to maximise the impact of FESSUD work.
A conscious decision was therefore made that the Bank of England event should be open to the public. Around 100 tickets were snapped up in a matter of hours and attendance was very good on the day. It was great to see members of the public and students sitting alongside powerful policy makers and distinguished academics. A vigorous debate followed many of the presentations - always a sign that the research was relevant and of interest.
FESSUD partners from the Berlin School of Economics and Law sought to investigate the stability of economies in the face of the degree of debt-financed expenditures, which is particularly relevant in light of the rapid growth of debt prior to the financial crisis. Professor Jan Kregel (Levy Institute, USA and Tallin Technical University, Estonia) presented ideas on how regulation could be designed and operated to limit financial instability, with a particular emphasis on the impact of innovations in the payments and financing systems.
Vítor Constâncio, Vice-President of the ECB, offered his thoughts on the current challenges to the international monetary and financial systems. Meanwhile Stephanie Kelton, former Chief Economist of the US Senate Budget Committee and advisor to Bernie Sanders, gave a transatlantic perspective on national budgets in the European Union. We were also delighted to hear Anita Fürstenberg-Lucius, Director at the European Investment Bank, discussing the role that the bank plays in bridging the gap between public and private financing.
One of the key papers was the Delphi Study on the Future of Finance, which was delivered by FESSUD colleagues at the University of the Basque Country in Spain, and which drew together predictions about the future of finance in Europe which was made by 50 leading economists. The findings of this paper generated coverage in the national UK media, with the Guardian and the Independent reporting the findings of this research. We used social media to share our findings as widely as possible.
Certain themes were repeated throughout the day:
- the financial system is too large
- the system is not really working to the benefit of society
- the system needs reforming
- the current regulatory framework will not be enough to prevent another crisis.
In fact, previous studies have shown that there comes a point where further enlargement of the financial system can reduce real growth in the economy. Other studies have shown that the sector growth can act as a drag on productivity growth.
Despite the gloom, the Bank of England event was a great success, and the degree of consensus about the need for reform (if not how specifically to do it) was notable and should lead to warning signs in the minds of Europe’s policy makers and financial regulators.
The FESSUD project was launched in December 2011 and concludes in November this year. It is funded by an 8 million euros grant from the European Union (under Framework Programme 7). A final conference will be held in September in Brussels to disseminate the key findings of the research. We will publish a series of policy briefs which will offer recommendations about the future of the financial sector.
- Workshop programme
- "Financialisation, Economy, Society and Sustainable Development", Malcolm Sawyer
- "Key Challenges for a Foresight Analysis", Giuseppe Fontana
- "A Delphi study on the future of finance", Jesús Ferreiro, Carmen Gómez and Jon Landeta
- "EIB: A Third Way between Public and Private Finance", FinanceAnita Fürstenberg-Lucius
- "Inequality, Debt and Demand Regimes", Daniel Detzerand Eckhard Hein
- "Economic policies, financial stability and economic performance", Jérôme Creel
- "The Future of Regulation: Can Financial Regulation Prevent the Next Financial Crisis?", Jan Kregel
- "Public or Private Finance?", Stephanie Kelton
- "The international monetary and financial system – a European perspective: Moving towards a multipolar financial system", Annika Eriksgård Melander
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The views expressed in this article are those of the author and may not reflect the views of Leeds University Business School or the University of Leeds.