Financial Systems and Industrial Policy in Germany and Great Britain: The Limits of Convergence

WZB Discussion Paper No. FS I 95 - 311

42 Pages Posted: 25 Oct 2004

See all articles by Sigurt Vitols

Sigurt Vitols

WZB Berlin Social Science Center

Date Written: November 1995

Abstract

A widely held view is that, since the 1970s, the nation-state has suffered a significant reduction in its capacity to achieve national economic policy goals through the regulation of the financial system; as a result, national political economies are now characterized by a market-driven convergence towards financial systems dominated by privately-owned, internationally-active financial supermarkets with weak links to both industry and government.

Through a comparison of Germany and Great Britain, this paper critically examines this thesis and poses the following two questions: (1) What implications do the lifting of capital and exchange controls and the reorientation of monetary policy to anti-inflationary policies have for the state's capacity to regulate financial systems? and (2) What implications does this regulatory discretion (if any) have for industrial finance and the state's capacity to utilize the financial system to achieve microeconomic industrial policy goals? In response to these questions, it is demonstrated how the state has retained significant regulatory autonomy in ways which have significant consequences for industrial finance and industrial policy.

Keywords: Financial systems, regulation, banking

JEL Classification: G2, G3

Suggested Citation

Vitols, Sigurt, Financial Systems and Industrial Policy in Germany and Great Britain: The Limits of Convergence (November 1995). WZB Discussion Paper No. FS I 95 - 311, Available at SSRN: https://ssrn.com/abstract=608203 or http://dx.doi.org/10.2139/ssrn.608203

Sigurt Vitols (Contact Author)

WZB Berlin Social Science Center ( email )

Reichpietschufer 50
D-10785 Berlin
Germany

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