First And Second Financialisation Analysis

Differences between Between First and Second Financialisation.
So far, I focused mainly on the analogies between different episodes of financialisation. This preliminary investigation justified the view here adopted that the process of financialisation is a recurring phenomenon. The ensuing analysis of the fluctuations of financialisation suggested that they occur around a secular trend of increasing financialisation. This view of financialisation may offer a useful background for a thorough analysis of the specificities of each single episode of financialisation. This is what I intend to do in the second part of the book which is about the most recent episode of financialisation, often called Second Financialisation. To pave the way for this
At the turn of the nineteenth century, a few major investment banks became so powerful to play almost the role of private planning authorities. At the turn of twentieth century, financial markets became so powerful to manage not only the financial system but also the entire economy. This view is not altogether groundless but requires a few important qualifications. The importance of banks during the First Financialisation is often over-emphasised under the influence of Hilferding who generalised his experience of bank-based German and Austrian capitalism, while in contemporaneous Anglo-Saxon capitalism financial markets played a greater
The financial innovations underlying the process of financialisation tend to expand the freedom of the economic agents that adopt them. In principle, this expanded freedom could improve the wellbeing of all the citizens. However, in the absence of apt institutional and policy constraints, a small minority of financiers, rentiers and complacent politicians reaps the advantages of enhanced freedom. This distributive bias has been a crucial cause of the Great Recession and the ensuing Eurocrisis. The advocates of the neoliberal policies that have brought about the Second Financialisation claimed that more inequality would have strengthened the incentives to growth, while in the longer run the extra income so produced would have percolated to all the citizens through a trickle-down mechanism. An extensive interdisciplinary empirical literature has demonstrated that inequality does not provide constructive incentives to improve the effort of individuals while significantly jeopardising their health and wellbeing. Moreover, whether there is an effective trickle-down mechanism or not depends on the nature of the specific innovation and the institutional and political environment. In most cases, spontaneous redistributive mechanisms of this kind proved to be insufficiently effective to avoid increasing inequality. In the absence of effective redistributive policies, the inequality