Finance Curse: our new paper on finance and competitiveness

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Two FG authors, in partnership with Duncan Wigan of the Copenhagen Business School, have just published this new paper in the British Journal of Politics and International Relations.

Fin Curse

As we have remarked before, the Finance Curse thesis is very closely related to the question of what constitutes ‘national competitiveness.’ Just to take one quote out of the paper (originally from the Bank for International Settlements):

“The growth of a country’s financial system is a drag on productivity growth [and] reduces real growth […] financial booms are not, in general, growth-enhancing, likely because the financial sector competes with the rest of the economy for resources. (Cecchetti and Kharroubi, 2015)”

This quote points to fundamental economic concepts put forward by David Ricardo, as analysed by Prof. Matthew Watson, and also by Profs. Anat Admati and Martin Hellwig.

The Finance Curse thesis goes beyond what the BIS measures, however: the financial sector’s competition with other sectors of an economy is just one aspect of a much broader phenomenon. The bottom line is: a national policy that involves the pursuit of a ‘competitive’ financial sector is likely to be harmful for your national economy – for a range of generic reasons we’ve started to lay out here.

FC 2

 

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