Academic journal article World Review of Political Economy

Geopolitical Economy and Competing Capitalist Blocs in the Eu Post-Crisis Financial Regulation: Two Cases from the Reform of the Banking Sector

Academic journal article World Review of Political Economy

Geopolitical Economy and Competing Capitalist Blocs in the Eu Post-Crisis Financial Regulation: Two Cases from the Reform of the Banking Sector

Article excerpt

In this paper I show how a geopolitical-economic approach can account for the shortcomings of the European response to the 2007/8 economic and financial crisis. Specifically, it helps us to focus on the competing capitalist blocs of states and social classes underlying the uneven development of EU economic integration. I propose to apply this approach to the analysis of two crucial reforms in the EU banking sector: the translation of the Basel III standards in the post-crisis reform package on capital and liquidity requirements-the Capital Requirements Regulation and Directive IV (CRR/CRD IV)-and the ongoing legislative process on Bank Structural Reform. Our analysis of these two important elements of the post-crisis financial reform agenda permits us to assess the usefulness of a geopolitical-economic understanding of EU politics in post-crisis financial regulation.

The paper will be divided into two parts. In the first part I will contend that the concept of the uneven and combined dynamic of the capitalist system, as reformulated in geopolitical-economic theory (Desai 2013), allows scholars to develop an adequate analysis of EU economic governance as a regional field of struggle among competing capitalisms supported by different class and national economic constituencies, mirrored in the asymmetrical power relationships among member states. The operation of capitalist classes transnationally here emerges not as an instance of a transnational capitalist class (TCC) but rather as concrete political coalitions among major and minor EU governments, each advocating a market regulatory approach suited to the expansion of the fraction of capital they represent.

In the second part I will test the above theoretical scheme through an analysis of the two elements of the EU's reform of banking governance mentioned above: (1) the issues concerning the minimum capital requirements and the introduction of a non-risk-based leverage ratio to ensure the resilience and stability of financial institutions in stress situations, and (2) the separation of trading-related activities from the deposit-taking function in the universal banks contained in the proposal for Bank Structural Reform still under debate in the European Parliament and the Council. As I will argue, an analysis of the interests and outcomes at work in these reform processes shows the importance of a theoretical focus on the conflicts and changes among regional coalitions of leading states and influential domestic/ transnational capitalist groups. In particular, we will see how competition between the UK-led and the German-French-led blocs, both reflecting different capitalist projects embedded in different social constellations of domestic and transnational economic interests, could adequately account for the watering down of the most advanced Basel III standards in the final CRR/CRD IV, as well as for the current terms of the debate in the case of the Bank Structural Reform.

A Geopolitical-Economic Approach for the EU Economic Governance

In this section my aim is to show how a geopolitical-economic approach can be extended to include the Neo-Gramscian analysis of contemporary capitalism while overcoming the theoretical biases in it which stem from its linkage to the world system tradition. The analysis of EU financial and economic governance offers a good test for such a theoretical encounter, fostering a renewed Marxian understanding of the primary economic role of states and of inter-state relations in terms of competing capitalisms in an increasingly multipolar world.

Against a "cosmopolitan" Marxism conceptualizing capitalism as a globally unified whole, as do the approaches based on the concepts of Globalization and Empire, geopolitical economy brings the theoretical focus back on the role of nation-states as primary agencies of capitalist accumulation and expansion. The capitalist system and its structural contradictions are recast in the "uneven and combined development" of competing state-capitalist patterns at a world level (Desai 2010a, 2010b, 2012, 2013). …

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