Financial Services, Globalization and Domestic Policy Change

301 Pages·1996·32.135 MB·English

by  William D. Coleman (auth.)

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SOUTHEAST ASIA IN THE NEW WCRLD ORDER: The Political Economy
of a Dynamic Region
Financial Services,
Globalization and
Domestic Policy Change
William D. Coleman
Professor of Political Science
McMaster University, Ontario
First published in Great Britain 1996 by
MACMILLAN PRESS LTD
Houndmills, Basingstoke, Hampshire RG2I 6XS
and London
Companies and representatives
throughout the world
A catalogue record for this book is available
from the British Library.
ISBN 978-1-349-24716-5 ISBN 978-1-349-24714-1 (eBook)
DOI 10.1007/978-1-349-24714-1
First published in (he United Slates of America 1996 by
ST. MARTIN'S PRESS, INC.,
Scholarly and Reference Division,
175 Fifth Avenue,
New York, N.Y. 10010
ISBN 978-0-312-12979-8
Library of Congress Cataloging-in-Publication Data
Coleman. William D. (William Donald), 1950-
Financial services, globalization and domestic policy change / by
William D. Coleman.
p. cm. — (International political economy)
Includes bibliographical references and index.
ISBN 978-0-312-12979-8
I. Financial services industry. 2. Financial services industry-
-Government policy. 3. Banks and banking, Central.
4. International finance. I. Title. II. Series: International
political economy series.
HGI73.C665 1996
332.1—dc20 96-5595
CIP
© William D. Coleman 1996
Softcover reprint of the hardcover 1st edition 1996
All rights reserved. No reproduction, copy or transmission of
this publication may be made without written permission.
No paragraph of this publication may be reproduced, copied or
transmitted save with written permission or in accordance with
the provisions of the Copyright, Designs and Patents Act 1988,
or under the terms of any licence permitting limited copying
issued by the Copyright Licensing Agency, 90 Tottenham Court
Road, London WIP9HE.
Any person who does any unauthorised act in relation to this
publication may be liable to criminal prosecution and civil
claims for damages.
10 9 8 7 6 5 4 3 2
05 04 03 02 01 00 99 98
For Matthew, Jesse and Caitlin
Contents
List of Tables and Figures ix
Preface x
Acknowledgements xii
Acronyms and Abbreviations xiv
1 Financial Globalization, Political Institutions and
Democracy: An Overview 1
Liberalization and Globalization of Finance 3
Policy Complexity, Globalization, and Democracy 8
The Analysis of Financial Services Policy 10
PART I FROM ECONOMIC POWER TO POLITICAL
POWER
2 Comparative Structures of Financial Services 19
Defining Terms 21
Towards the Universal Bank Model 22
Universal Banking and Political Power 27
Global Activity and Power Potential 32
Finance and Industry 36
Finance and the State 41
3 Financial Services, Interest Intermediation and
Political Power 47
Evaluating Power Potential 48
Step One: Competition for Members 49
Step Two: Internal Resources 53
Step Three: Building Horizontal Bridges 55
Step Four: Vertical Integration 61
4 State Capacity, Political Power and Policy Networks 67
Central Banks and Finance Ministries 68
State Capacity in Banking 73
Banking Policy Networks 80
State Capacity in Securities 87
Securities Policy Networks 90
vii
viii Contents
PART II COUNTRY STUDIES
5 France: Relaxing Dirigisme 97
Challenges 98
Conditions for Strategies of Action 101
Strategy of Action 107
Evaluation 114
6 Germany: Protecting Bank Power 123
Challenges 123
Conditions for Strategies of Action 127
Strategies of Action 134
Evaluation 144
7 The United States: Booting the Ball? 149
Challenges 150
Conditions for Strategies of Action 153
Strategies of Action 161
Evaluation 171
8 The United Kingdom: Threadneedle Street Ascendant 175
Challenges 176
Conditions for Strategies of Action 181
Strategies of Action 185
Evaluation 195
9 Canada: Federalism and Bank Power 201
Challenges 202
Conditions for Strategies of Action 205
Strategies of Action 212
Evaluation 221
10 Conclusion 227
Economic and Political Convergence 227
Democracy and the Policy Process 234
Citizens and Financial Services 237
Appendix 1 Project Interviews 241
Appendix 2 Structural Data on Financial Services Interest
Associations 247
Notes 255
Bibliography 279
Index 291
List of Tables and Figures
Tables
4.1 Functions Assumed by Central Banks 74
4.2 Power and the Policy Process 79
4.3 Corporatism Index - Securities and Banking 82
Al United Kingdom 247
A2 France 249
A3 Germany 250
A4 United States 251
A5 Canada 253
A6 European Community 254
Figures
2.1 Universal versus Narrow Banking, 1960-1990 24
2.2 Financial System Structure, 1990 28
2.3 Residential Mortgage Credit, 1990 29
2.4 Market Share of Business Lending, 1990 31
2.5 Per cent of International Bank Lending 34
ix
Preface
This book grows out of previous research on industrial policy in Canada
and on relationships between business firms and the state in advanced
market economies. The importance of the structure of financial systems
was highlighted in important ways by the work of John Zysman and by
Michael Moran. Zysman pointed out how the structure of financial sys
tems affected the range of industrial policy options available to political
leaders. Moran took as his focus democracy and the policy process and
investigated the changes to the 'esoteric' world of banking politics in the
UK. In later studies, he focused on similar issues as they bore upon the
politics of securities markets. In these studies, he began to take account of
a phenomenon that was only just underway when Zysman completed his
field work: the present era of globalization. Like both of these authors'
work, this study is comparative, focusing upon Canada, France, Germany,
the United Kingdom and the United States. Missing from the study is
Japan, a major financial power. Since part of my research on the impact
of political institutions requires intensive elite interviews, I could not cover
Japan because I was lacking the requisite language skills.
This books seeks to build on the work of both of these authors plus
many others in looking more broadly at the impact of globalization on the
structure of financial services, on the nature of financial services policy, and
on the governance of financial services markets. I argue that the important
structural differences outlined by Zysman have narrowed considerably over
time. These changes tell us certain important things about the nature of the
state in France and Germany and the extent to which it continues to differ
from those in the Anglo-American democracies. They also permit me to
speculate a little about the relationship between convergence in economic
structures and convergence in public policies.
I also keep close to heart Moran's concerns about how these kinds of
changes might affect the democratic character of policy-making. I have
found Moran's analysis consistently insightful and very stimulating. I hope
that this study of financial services builds on his work and encourages
others to continue in a similar vein. Many of Moran's ideas about regu
lation by the modem state, policy complexity, meso-corporatism, openness
in the policy process, and the power of large complex organizations merit
reflection and application well beyond financial services.
I conclude in this book that globalization has not been kind to demo
cratic politics in the financial services policy area. I find that a new 'esoteric
x