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WHAT KIND OF FINANCE SHOULD THERE BE?
In recent decades, most developed economies around the world have been increasingly exhibiting a particular structural trend popularly labeled “financialization.”1 On the most general level, this capacious term refers to the “increasing role of financial motives, financial markets, financial actors...
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Published in: | Law and contemporary problems 2020-01, Vol.83 (1), p.195 |
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Main Author: | |
Format: | Article |
Language: | English |
Subjects: | |
Online Access: | Get full text |
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Summary: | In recent decades, most developed economies around the world have been increasingly exhibiting a particular structural trend popularly labeled “financialization.”1 On the most general level, this capacious term refers to the “increasing role of financial motives, financial markets, financial actors and financial institutions in the operation of the domestic and international economies.”2 Although academics working in various disciplines began exploring the many facets of financialization well before the global financial crisis of 2008, the crisis gave these efforts a new sense of urgency.3 The crisis vividly demonstrated the far-reaching and devastating socioeconomic and political consequences of allowing the financial system to grow increasingly large, risky, and complex. In the economic literature, the crisis has revived a long-standing debate on the causal link between growth of the financial system, on the one hand, and broader economic growth, on the other. This Article takes the economic literature on the relationship between the size of the financial sector and economic growth as a starting point for broadening and deepening the inquiry into the qualitative aspects of their relationship. Adopting a deliberately law and policy oriented perspective, it shifts the discussion beyond the economists’ question “Can there be too much finance?” to the bigger and more complicated question, “What kind of finance should there be?” This Article’s purpose is to engage in a high-level exploration of an effective macro-systemic approach to financial markets and regulation, which explicitly ties together the traditionally technical issues of financial stability and innovation and the broader issues of sustainable and structurally-balanced socioeconomic development. |
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ISSN: | 0023-9186 1945-2322 |