The Finance Curse: Britain and the World Economy

Abstract

Outlines harms caused to countries hosting an oversized financial sector

Argues Britain is subject to a Finance Curse, which carries many similarities with the Resource Curse, afflicting mineral-exporting countries

Provides a narrative and framework to analyse the political economy of finance and financialisation

The Global Financial Crisis placed the utility of financial services in question. The crash, great recession, wealth transfers from public to private, austerity and growing inequality cast doubt on the idea that finance is a boon to the host economy. This article systematizes these doubts to highlight the perils of an oversized financial sector. States failing to harness natural resources for development led to the concept of the Resource Curse. In many countries, resource dependence generated slower growth, crowding out, reduced economic diversity, lost entrepreneurialism, unemployment, economic instability, inequality, conflict, rent-seeking and corruption. The Finance Curse produces similar effects, often for similar reasons. Beyond a point, a growing financial sector can do more harm than good. Unlike the Resource Curse, these harms transcend borders. The concept of a Finance Curse starkly illuminates the condition of Britain’s political economy and the character of its relations with the rest of the world.

Keywords

Finance Curse financialisation international political economy UK economy

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