The role of financialisation in the geography of European structural change

For several decades advanced economies have been undergoing a profound structural change. Its main characteristic appears to be the progressive decline of industry as the driving force of economy. The propulsory role once played by the manufacturing industry seems to have been replaced by the service sector, a phenomenon usually referred to as post-industrialism†or “tertiarisation†. In addition to this all-encompassing term, the growing importance of the financial sector within the framework of a service-economy has induced scholars to coin the more specific concept of “financialisation†. Financialisation has remarkably emerged in the case of the United States and Great Britain. Less analysed has been the case of the European countries. This paper tries to make a first attempt in this direction, considering, beyond the evolution of the single countries, the internal structural adjustment of Europe as a whole. It starts providing the first pieces of macroeconomic evidence about the alleged rise of a “financial-economy†, then scrutinises affinities and disparities of the countries analysed in terms of their economic structure and its evolution. GDP and employment data document the rise in Europe of a hybrid category which includes both financial and business services related to the growing importance of multinationals’ activities. By disentangling these two components, the financial boom considerably deflates. Moreover, the picture emerging from the intersectoral profit shares analysis somehow challenges the myth of a steadily superior profitability of the financial sector versus real economy. The impression that industry is not necessarily fated to a gloomy decay seems further confirmed when considering its more pronounced increase in 'value-added per hour worked' compared to that of finance. The paper then assesses the degree of financial dependence (with value-added, profit shares and trade data) of the single economies not in absolute terms but with respect to a common European benchmark. A quite precise pattern of regional specialisation emerges, where Scandinavian and German-speaking countries together with their Eastern neighbours reaffirm themselves as the industrial hard core of Europe. On the other side, together with the very specific case of Great Britain, there are the Mediterranean countries and France that are experiencing a loss of competitiveness in industry. These considerations seem to deserve attention not only within the broader context of documenting structural change, but also with regard to the political debate about the future of Europe.