Ewald Engelen

The case for financialization

The tempestuous rise of finance in contemporary capitalism has incited a frantic search for new conceptual tools to make empirical and theoretical sense of it. Financialization and the theoretical connotations it carries, is one such new conceptual tool. Although a growing number of scholars are using the concept, its dispersal over the disciplines and relevant research communities — as a brief analysis of the ISI database and other databases suggests —, is still rather limited. On the basis of a constructive reading of the older debate over ‘conceptual stretching’ in the political sciences, the author presents three conditions for conceptual success, to wit: stay focused on the empirical content, look for the conceptual value added, keep causal mechanisms in mind. Combined with the hard but mundane work of organizing workshops, special issues, setting up professional charters, that might just do the trick.

Reconceptualizing financial innovation: frame, conjuncture and bricolage

Abstract This article argues for a reconceptualization of financial innovation which, as culprit and victim of the current crisis, is now damned by those who once praised it. But what is financial innovation? The dominant answers from mainstream finance and social studies of finance share variations on a rationalistic view whereby financial innovation is about improving markets or at least extending the sphere of rational calculability. Because improvisation is more important than the dominant perspectives can admit, this article proposes a new concept of financial innovation whose three main elements – frame, conjuncture and bricolage – are indicated by the title of this article. The importance of this problem shift is that it highlights the inherent fragility of this type of intermediary-led financial innovation where things will often miscarry and highlights the need for a more radical rethinking about policy responses to the financial crisis that began in 2007.

The logic of funding European pension restructuring and the dangers of financialisation

During the 1990s, pension funds seemed to dominate the worlds capital markets, reaping unprecedented rates of return. This stands in glaring contrast to the budgetary difficulties of most nonfunded European pension arrangements, which are a result of the changing demographic composition of the population. As a result, a growing number of European states is trying to transform the existing pay-as-you-go systems into funded pension arrangements. After a critical examination of these demographic projections, the claim that funded pension systems are not subject to ‘demographic stress’ is critically assessed. Finally, given the logic to which funded pension arrangements are subject, it is argued that the introduction of such institutions could result in a growing financialisation of the economy. It is claimed here that this is not without dangers for the long-term wealth-generating capacity of firms. So, not only are the reasons for pension restructuring less compelling than is generally thought, restructuring could also result in unwanted side-effects.

Geographies of Financialization in Disarray: The Dutch Case in Comparative Perspective

Abstract The securitization crisis that started in mid-2007 has demonstrated that we are indeed living in a “global financial village” and are all subject to the vagaries of financialization. Nevertheless, the fallout from the credit crisis has not been homogeneous across space. That some localities were hit harder than others suggests that there are distinct geographies of financialization. Combining insights from the “varieties of capitalism” literature with those from the literature on “financialization studies,” the article offers a first take on what may explain these different geographies on the basis of an informal comparison of the trajectories of financialization and their political repercussions in the United States, Germany, and the Netherlands. The article ends with some reflections on how economic geography could be enriched by combining comparative studies on institutionalism and financialization, while its distinct research focus—detailed spatial analysis endowed with a well-developed sensitivity for geographic variegation—may help overcome the methodological nationalism of much comparative institutionalism.

Analysing the Changing Landscape of European Financial Centres: The Role of Financial Products and the Case of Amsterdam.

The turn of the twenty-first century saw the re-emergence of debates about the reconfiguration of European financial geographies and the role of stock exchange mergers in this process. There has been, however, no systematic attempt to date to analyse such changes. This paper proposes a specific conceptual framework to explore these issues. It uses a product-based analysis to examine, in the context of recent stock exchange mergers, the factors affecting the competitiveness of a financial centre. It argues that it is important to understand three intertwined influences - product complementarities, the nature of local epistemic communities, and regulation - and their contingent effects on change. This is exemplified by a tentative application of the framework to the case of Amsterdam in order to better understand its recent decline in competitiveness as a European financial centre.

Misrule of experts? The financial crisis as elite debacle

Abstract This paper is about knowledge limits and the financial crisis. It begins by examining various existing accounts of crisis which disagree about the causes, but share the belief that the crisis represents a problem of socio-technical malfunction which requires some kind of technocratic fix: the three variants on this explanation are the crisis as accident, conspiracy or calculative failure. This paper proposes an alternative explanation which frames the crisis differently as an elite political debacle. Political and technocratic elites were hubristically detached from the process of financial innovation as it took the form of ‘bricolage’, which put finance beyond technical control or management. The paper raises fundamental questions about the politicized role of technocrats after the 1980s and emphasizes the need to bring private finance and its public regulators under democratic political control whose technical precondition is a dramatic simplification of finance.

Emerging themes in economic geography: outcomes of the Economic Geography 2010 Workshop

Background Economic Geography sponsored a workshop to brainstorm collectively the emerging research themes in economic geography. We gathered a small group of midcareer scholars from 19 institutions in 7 countries on April 12–13, 2010, in Washington, D.C., to address what we considered a collective concern: that our discipline could use a significant boost in theoretical and thematic developments at this particular juncture. The workshop was intended to be one of the journal’s many contributions to disciplinary activities and ongoing efforts to keep the discipline vibrant for the next generation.The workshop aimed to achieve multiple goals. First, this was an attempt to develop a sense of collective responsibility for the discipline’s future. Economic geography is no longer monological and singularly centered, as Peck and Olds (2007) observed in their assessment of the Summer Institute of Economic Geography. Indeed, prior to the workshop, quite a few participants reported that they did not have a particular identity affiliation to the discipline but instead enjoyed multiple disciplinary affiliations through joint appointments or appointments in multidisciplinary departments. The increasingly specialized and fragmented nature of the discipline and the resulting “disappearing of the middle” translate into fewer scholars who are dedicated to the discipline, which, in turn, endangers the survival of the discipline. As Johnston (2002, 425) stated, “eternal vigilance is necessary to survival” of a discipline, and mobilization, as in the language of Latour, is a first step in disciplinary change (Johnston 2006).Thus, as editors with a disciplinary name that crowns the journal, we thought that the time was ripe for a deliberate intellectual mobilization.ecge_1114 111..126

‘Cognitive Closure’ in the Netherlands: Mortgage Securitization in a Hybrid European Political Economy

There is a strong case that mortgage-backed securities were at the root of the 2007–09 financial crisis. Even though geographers have convincingly demonstrated that loan origination is strongly locally rooted and that the fallout from the subprime mortgage crisis clearly had spatially circumscribed effects, securitization is still generally perceived as a universal, private, and purely market-based financial technique. In this paper we use a description of the securitization chain in the Netherlands to contest these perceptions. Building on and adding to Thomas Wainwrights analysis of securitization in the UK, we first argue that securitization in the Netherlands has taken a form which reflects Dutch corporatist institutional arrangements, implying that both geography and states do matter for the supposedly aspatial process of securitization. Second, we argue that the Dutch state has been very much implicated in the construction of the securitization market in the Netherlands. Third, we suggest that this can best be seen as an effect of ‘cognitive closure’ rather than of ‘regulatory capture’: that is, Dutch pro-banking regulation is not so much an effect of bankers hijacking regulators but, rather, more the result of bankers seducing regulators with their stories. This paper is a detailed case study of the workings of financialization and adds to the growing body of work which seeks to analyze the different ‘varieties of financialization’ and the variegated geographies of the financial crisis.

How innovative are Dutch immigrant entrepreneurs? Constructing a framework of assessment

Asks how innovative Dutch immigrant entrepreneurs are. Since the mid‐1980s the number of immigrant firms has more than tripled. This coincides with a huge increase in the number of start‐ups in the Dutch economy as a whole. However, international comparisons show that this increase has not resulted in an equal rise in the number of fast growing firms that add value and create employment – the so‐called gazelles – and are hence the preferred ideal of policy makers. This raises the question of how innovative the Dutch economy might be. To address this issue, constructs a framework of assessment, derived from the divergent capitalisms approach of Richard Whitley and associates, as this approach offers a useful conceptual instrument to do so. Concludes that, despite appearances, the Dutch institutional setting is not very conducive for value creating innovations, but instead seduces firms, especially small and medium enterprises, to follow reactive strategies. Offers some general remarks on how the conditions for innovation can be improved.

Don't mind the ‘funding gap’: what Dutch post crisis storytelling tells us about elite politics in financialized capitalism

In this paper the lobbying efforts of the Dutch financial elite aimed at safeguarding the securitization of Dutch mortgages, which had become a crucial part of Dutch banking business models, is reconstructed, centred on the so-called Liquidity Coverage Ratio of the Basle Committee of Banking Supervision, which dates from January 2013. Section 2 traces the effects of these lobbying efforts. Section 3 describes the storyline used by the Dutch elite to distinguish Dutch securitization (‘good’) from its US counterpart (‘bad’). Section 4 contrasts this storyline with some ‘empirical irritants’ (‘ugly’) which raise broader questions about the role of securitization in the crisis, to lead, in section 5 to the straightforward question: who is telling this story and why? The concluding section draws lessons from this case about elite politics in financialized capitalism.