José Corpataux

The Expansion of the Finance Industry and Its Impact on the Economy: A Territorial Approach Based on Swiss Pension Funds

Abstract A new economic geography of finance is emerging, and the current “financialization” of contemporary economies has contributed greatly to the reshaping of the economic landscape. How can these changes be understood and interpreted, especially from a territorial point of view? There are two contradictory economic theories regarding the tangible effects of the rise of the finance industry. According to neoclassical financial theorists, the finance industry’s success is based on its positive effects on the real economy through its capacity to allocate financial resources efficiently. An alternative approach, adopted here, posits that finance does not merely mirror the real economy and that the financial economy, far from being a simple instrument for the allocation of capital, has its own autonomy, its own logic of development and expansion. A series of complex, and sometimes contradictory, connections link financial markets and the real economy, and there are some tensions between them, calling into question the coherence of the regional and national economies that follow from them. Moreover, the territorial approach shows how the mobility/liquidity of capital and the changing dimensions of new regions and countries are central to the finance industry’s functioning. This article builds an understanding of the financial system through the lens of pension funds and highlights the impact of such a system on the real economy and its geography.

Increased Capital Mobility/Liquidity and its Repercussions at Regional Level

The most significant structural change undergone by the British and Swiss economies during the past 25 years (1975-2000) is indisputably the development of their financial systems. From this point of view, the two countries show a number of similarities: the presence of one or more international financial place(s), large enterprises which expanded greatly on the international front during that period, the decline of their industrial regions, a monetarist-type monetary policy that involved floating their currency on the external market, a more or less enthusiastic policy of liberalizing their financial markets, etc. In these two countries, the development of international financial centres and the decline of the industrial regions took place in parallel. The question that remains is: are these developments linked? There have been many studies dealing with the relationship between finance and industry. But this article is original in that it approaches the question principally from the spatial angle (by contrasting the evolution of the financial centres with that of the other regions) and from the sectoral angle (by making a distinction between finance and the industrial activities).

The territorial economy: a general approach in order to understand and deal with globalization

Today many contributions are dedicated to the role of industrial districts, clusters and other such networks in local economic development, or to local innovation dynamics (innovative milieus, technopoles, regional innovation systems, learning regions and so on). In our opinion, the crucial question at present no longer consists of providing new notions and concepts. We believe that it is time to develop a more ambitious, theoryoriented research programme that aims to take space and time in socioeconomic theory fully into account. The objective of this chapter is to give a first account of what we believe to be the upcoming issues and theoretical questions in research about territorial economic dynamics. Indeed, a better understanding of the territorial economy is central to greater understanding of the roles that networks play in local economic development processes.