The role of finance in political economy

The third issue of Socio-Economic Review (SER) this year focuses on finance. While post-war political economy developed largely around the study of labor, today a growing number of scholars in sociology and political science are devoting their energies to studying finance. Financial markets play a critical role in corporate governance in ways that influence the very objective of business firms. But the world of finance today plays an even greater role in society. The paper by Josh Pacewicz entitled ‘Tax increment financing, economic development professionals and the financialization of urban politics’ examines the role of markets in public sector finance. While many people are familiar with how financial markets influence sovereign debt in cases such as Greece today, Pacewicz documents how financial markets have a profound effect on public finances at the level of local governments of cities in the United States. In particular, the use of financial instruments by local officials leads to an unsustainable wave of securitization that has a destabilizing effect on the public sector. The paper by Marek Naczyk entitled, ‘Agents of privatization? Business groups and the rise of pension funds in Continental Europe’ shows the salience of finance in shaping the political economy of pension savings. Finally, scholars of comparative capitalism must also look to the dynamics of international finance, as discussed in the article by Thomas Kalinowski, entitled ‘Regulating international finance and the diversity of capitalism.’ Rather than looking at ‘varieties of capitalism’ as isolated national systems, these are tied together in a wider system of international finance that is shaped by and impinges upon the diversity of national-level institutions related to production. While the issues around finance are not inherently new, contemporary financial markets operate at a seemingly unprecedented scale, speed, scope, and complexity – a qualitative shift sometimes denoted by term financialization. Today, we cannot understand almost any political economy topic adequately without addressing and coming to terms with its linkages to financial markets.

Capitalism · Corporate Finance · Debt · Economics · Financial market · Financialization · Geography of finance · Political economy · Political science · Politics · Public finance · Securitization · Social studies of finance · Finance · Housing, Finance, and Neoliberalism

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