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Varieties of Liberalism:
Anglo-Saxon Capitalism
in Crisis?
Sue Konzelmann &
Marc Fovargue-Davies
(Gerhard Schnyder)
REFGOV / DEMOGOV
Brussels 26-28 May 2010
Market capitalization
& Cost of bank bail-outs
Change
1999-2009
($bn)
Bank bail-out
package as a %
GDP (March 2009)
Canada
97.5
0.0 %
Australia
85.6
0.1 %
UK
-211.4
19.8 %
USA
-633
6.8 %
Source: Financial Times, 23 March 2009, p.9. 1999 values are as of 31 May
1999; 2009 values are as of 17 March 2009; Stewart 2009.
Overview
• The logic & rise of economic liberalism
• Early effects & responses to crises
• Industrial restructuring & the market for
corporate control
• Financial market liberalization
• Regulators & the regulated
• Financial alchemy & the US sub-prime bubble
• Conclusions & implications for policy reform
The logic & rise
of economic liberalism
• Classical versus ‘Ordo’ Liberalism
• The collapse of Bretton Woods and relaxation
of international money movements
• Globalization and the onset of deindustrialization
• Growing confidence in markets and the ‘reregulation’ of the real & financial sectors of the
economy
Early effects of
liberalization &
responses to crises
• Australia & America
– Australian corporate & financial scandals (1980s)
– US Savings & Loan Crisis (1980s & 1990s)
• Canada & Britain
– Bank, insurance trust & investment house failures
(1980s & 1990s)
• All four systems had looked into the abyss …
Industrial
re-structuring & the
market for corporate control
• Leveraged buyouts & hostile take-overs in
Britain (1960s & 70s) & America (1980s)
• The ‘market for managerial control’ &
industrial re-structuring
• Take-over markets in the Anglo-Saxon world
• The structure of the economy &
opportunities for investment
Financial market
liberalization
• Stock market liberalization
– ‘May Day’ 1975 (New York)
– 1986 ‘Big Bang’ (London)
• The structure of financial markets
– Domestic banks & financial institutions in
Canada & Australia
– A global marketplace in London & New York
• The structure of regulation
– fragmentation versus a single regulator
Regulators &
the regulated
• Britain & America: ‘light touch’ regulation
– Increasing relative power (economic & political)
of the regulated
• Australia & Canada: prudential regulation &
high levels of own capital reserves
– ‘Banks are bastards; bigger banks are bigger
bastards.’ (Maiden 2008)
– ‘Our job is to tell you what to do, not to make it
grow.’ (Freeland 2010)
Financial Alchemy
& the American
sub-prime bubble
• Presence of the pre-conditions for financial
instability
• Conditions uncomfortable for banks in London
and New York
• Financial ‘innovation’ & exploitation of the
American sub-prime real estate market
• Loss of confidence precipitates crisis
• Financial market crisis has re-bound effects on
the real economy & the recession deepens
Conclusions
& Implications for Policy
• The philosophy shaping liberalization
• Relationship between the regulator & regulated
• Investment opportunities outside of finance & rebalancing a ‘post-industrial’ economy
• National political context
• The role of the state & philosophy of government
• The direction of reform