Europe's Mea Culpa: A Global Economy Gone Mad or a Crisis of Our Own Making?
| Published date | 01 May 2017 |
| DOI | http://doi.org/10.1111/1758-5899.12410 |
| Date | 01 May 2017 |
| Author | Or Raviv |
Europe’s Mea Culpa: A Global Economy Gone
Mad or a Crisis of Our Own Making?
Or Raviv
Durham University
Abstract
Much of the existing literature on the current financialized era of capitalism is guilty of essentializing the US experience. The
methodological implication of this conceptual starting point has been that financialization in Europe was, and still is, generally
assessed in comparative terms against the yardstick of US developments. This limitation obscures from view the unique trajec-
tory of European finance-led innovation, and consequently, the extent to which European economies have become vulnerable
to financial instability and crisis. To remedy this, the present article investigates the micro-foundations of European financial-
ization in the lead-up to the 2007–2008 global financial crisis to uncover the reasons for the surprising severity and persis-
tence of financial instability in Europe. The article argues that while the institutions, actors and practices underpinning
European financialization may differ markedly from those in the US, the former were nevertheless at once reconstituted by,
and constitutive of, the continuous global process of finance-led restructuring. This work offers insights that go beyond the
specificities of European financial capitalism. It facilitates a more nuanced approach to banking and macroprudential policy
reform in Europe as well as encourages further research into the financialization of accumulation in other national and regio-
nal contexts.
Policy Implications
•Proactive risk management strategies deployed by European financial institutions have rendered the risk weighted
approach to capital requirements as enshrined in the Basel II accord and in the European Capital Requirement Directive
(CRD) ineffective. Regulators should develop sharper policy instruments to monitor and regulate the solvency and liquidity
of financial institutions.
•Regulatory arbitrage, whether between national regulatory frameworks, or between different sectors (and by extension,
regulatory agencies) within a country creates a unique set of challenges for national regulators. Regulators should there-
fore regulate by activity not by institution –if you are facilitating proactive bank risk management in Germany you should
be subject to German banking regulation irrespective of the fact that you are an American insurance company.
•Just like we cannot essentialize the US experience of financialization, nor should we essentialize the US policy response to
the crisis of financialization. European financial instability requires European (and national) policy solutions.
By the summer of 2009, the US financial system had broadly
stabilized following the 2007–2008 global financial crisis
(GFC), and the US economy had emerged from recession (al-
beit, into what can be described at best as a ’stunted recov-
ery’). In Europe meanwhile, concerns over the solvency of
private financial institutions, as well as recurring freezing of
interbank markets and broader (systemic) financial instability
persisted, while the Eurozone plunged into a prolonged per-
iod of economic crisis. The diverging fortunes of the US and
European financial systems were, and remain, puzzling, par-
ticularly in light of the dominant narrative of the GFC which
consistently identified the US financial and real-estate sec-
tors as the epicenter of the crisis. Indeed, the GFC has often
been dubbed as the ’crisis of Anglo-Saxon Capitalism’by
the burgeoning body of academic literature as well as the
global financial media (e.g. Hay, 2013).
Thus, this article’s main contribution is in challenging
these widespread assumptions pervasive within global politi-
cal economy (GPE) scholarship as well as in European policy
elite circles that view the GFC as a US made crisis, pushed
out onto the rest of the world, including, and most visibly,
Europe. In paraphrasing Queen Elizabeth’s innocuous ques-
tion to leading academics at the London School of Eco-
nomics in November 2008 (The Queen reportedly asked ’if
these things were so large, how come everyone missed
them?’Beattie, 2008), the article offers an explanation for
the epistemic failure of economists (and political econo-
mists) to recognize specifically, the accumulation of vulnera-
bilities within the European financial system responsible for
Europe’s persistent financial malaise.
The article therefore contributes to the growing body of
literature seeking to elucidate why European financial insti-
tutions and the European financial system as a whole
proved so susceptible to the GFC and why has financial
instability persisted so long (Becker and J€
ager, 2012; Berend,
2013; Bruff and Horn, 2012; Hardie and Howarth, 2009; Hod-
son and Quaglia, 2009; Lapavitsas, 2012; to name a few
notable examples among many others).
Global Policy (2017) 8:2 doi: 10.1111/1758-5899.12410©2017 University of Durham and John Wiley & Sons, Ltd.
Global Policy Volume 8 . Issue 2 . May 2017159
Research Article
Get this document and AI-powered insights with a free trial of vLex and Vincent AI
Get Started for FreeUnlock full access with a free 7-day trial
Transform your legal research with vLex
-
Complete access to the largest collection of common law case law on one platform
-
Generate AI case summaries that instantly highlight key legal issues
-
Advanced search capabilities with precise filtering and sorting options
-
Comprehensive legal content with documents across 100+ jurisdictions
-
Trusted by 2 million professionals including top global firms
-
Access AI-Powered Research with Vincent AI: Natural language queries with verified citations
Unlock full access with a free 7-day trial
Transform your legal research with vLex
-
Complete access to the largest collection of common law case law on one platform
-
Generate AI case summaries that instantly highlight key legal issues
-
Advanced search capabilities with precise filtering and sorting options
-
Comprehensive legal content with documents across 100+ jurisdictions
-
Trusted by 2 million professionals including top global firms
-
Access AI-Powered Research with Vincent AI: Natural language queries with verified citations
Unlock full access with a free 7-day trial
Transform your legal research with vLex
-
Complete access to the largest collection of common law case law on one platform
-
Generate AI case summaries that instantly highlight key legal issues
-
Advanced search capabilities with precise filtering and sorting options
-
Comprehensive legal content with documents across 100+ jurisdictions
-
Trusted by 2 million professionals including top global firms
-
Access AI-Powered Research with Vincent AI: Natural language queries with verified citations
Unlock full access with a free 7-day trial
Transform your legal research with vLex
-
Complete access to the largest collection of common law case law on one platform
-
Generate AI case summaries that instantly highlight key legal issues
-
Advanced search capabilities with precise filtering and sorting options
-
Comprehensive legal content with documents across 100+ jurisdictions
-
Trusted by 2 million professionals including top global firms
-
Access AI-Powered Research with Vincent AI: Natural language queries with verified citations
Unlock full access with a free 7-day trial
Transform your legal research with vLex
-
Complete access to the largest collection of common law case law on one platform
-
Generate AI case summaries that instantly highlight key legal issues
-
Advanced search capabilities with precise filtering and sorting options
-
Comprehensive legal content with documents across 100+ jurisdictions
-
Trusted by 2 million professionals including top global firms
-
Access AI-Powered Research with Vincent AI: Natural language queries with verified citations