Financialisation in emerging economies: a systematic overview and comparison with Anglo-Saxon economies

Abstract

Financialisation research has originally focussed on the US experience, but the concept is now increasingly applied to emerging economies (EMEs). There is a rich literature stressing peculiarities of individual country experiences, but little systematic comparison across EMEs. This paper fills this gap, providing an overview of the debate and identifying six financialisation interpretations for EMEs. These different interpretations stress (1) financial deregulation (2) foreign financial inflows, (3) asset price volatility, (4) the shift from bankbased to market-based finance, (5) business debt, and (6) household indebtedness. We construct and compare measures of the six financialisation interpretations across a sample of 17 EMEs from Latin America, emerging Europe, Africa and Asia, contrasting them with the US and UK, two financialised economies. We find considerable variation in financialisation experiences of EMEs. Asset price volatility is found across continents. Asia has been more exposed to capital inflows, stock markets have gained importance and private sector debt risen. In emerging Europe financial deregulation has been more pronounced with lower levels but strong increases in household debt. The picture is similar in South Africa, the African EME in the sample, where household debt is comparatively high. Financialisation in Latin America is weaker according to our measures.Keywords: Financialisation; Emerging markets; Financial instability; Asset price volatility; Heterodox economics JEL codes: F30; F34; G01; G12; G15; B50 Acknowledgements: We would like to thank our colleague Rex McKenzie for comments on the paper. The usual disclaimers apply.

The International Dimension of Financialization in Developing and Emerging Economies

“…The aspects investigated include the increased holdings of financial assets and market funding by large nonfinancial corporations (NFCs) (Orhangazi, 2008;Stockhammer, 2004); the importance of shareholder value (Lazonick and O'Sullivan, 2000); the rising involvement of households in predatory debt relations (Aalbers, 2008;Dymski, 2010;Montgomerie, 2009); the changing income pattern of banks, from deposits and lending to fees and commissions (Erturk and Solari, 2007;dos Santos, 2009); the rise in bank funding from markets rather than from deposit taking (Lapavitsas, 2009); and the financialization of everyday life (Langley, 2008). Similar phenomena have also been highlighted in DEEs: see Bonizzi (2013) and Karwowski and Stockhammer (2017) for overviews. For example, Akkemik andÖzen (2014), Correa et al (2012), Powell (2013) and Rethel (2010) show the increased involvement of DEE NFCs with (international) financial markets.…”

“…Similar phenomena have also been highlighted in DEEs: see Bonizzi () and Karwowski and Stockhammer () for overviews. For example, Akkemik and Özen (), Correa et al.…”

Financialization without liquidity: in‐kind payments, forced credit, and authoritarianism at the periphery of Europe

“…The Macedonian government, however, who had spearheaded the process of financialization, could rely on international interlocutors to leverage the country's low debt and geostrategic importance to control the domestic money and credit supply. Substituting the violence generated by globally fast or abstract financial flows (Carruthers & Stinchcombe 1999) with forms of domestic forced credit, the Macedonian path supports Karwowski and Stockhammer's (2016) intuition that peripheral financialization is not only a residual economic landscape produced by profit-seeking switches in capital flow (Aalbers 2008). In Macedonia, and perhaps other southern ex-Yugoslav countries, peripheral financialization has become a crucial feature of an illiberal statecraft project (see also Bruff 2014;Konings 2016).…”

How Financialization Undermines Democracy

“…Crashed details the crisis responses in Russia, China and to a lesser extent South Korea but a more detailed assessment of the hoped‐for growth potential of EMEs would have been desirable. Just like rich economies these countries have been increasingly affected by the growing power of finance — they too have been facing financialization (Karwowski and Stockhammer, ). Given the very different international status of their currencies EMEs are more vulnerable to these changes in financial markets.…”