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In the same way, Renault shut its Belgian factory in the late s, rather than close one in France. Peugeot, which had taken over the old Rootes-Chrysler operation in Ryton near Coventry, closed its British plant in with the loss of 2, jobs, shifting production of the same Peugeot model to a plant north of Paris. Brummer, , The importance of ownership in terms of the location and culture of the owners having an impact is argued by the distinguished engineer and industrialist Sir Alan Rudge:. Why does ownership matter?

As those who have experienced corporate life will readily recognise, the key issues linked to ownership are those of basic control. The location and culture of controllers of the business are important and will, over time, and in various circumstances, have a fundamental impact on the future of the business. Sir Alan Rudge, cited in Brummer, , — Such matters are usually reported and discussed in terms of national economic interest, but the same issues pertain to regional economic and social interests, and even to localities.

The same factors are likely at play to varying degrees with other local companies or organisations, such as the pub, post office or football club. The case of supporter-ownership of football clubs—or of the companies that own the clubs—is instructive at a number of levels, first in illustrating the fact that different companies can and do have a different relationship to the profit motive within the economy; and second because of the importance of place. Indeed, the profit motive has generally played no part within the original corporate purpose.

Of course, like any organisation—charity, profit-making or other—revenues are required to cover costs, but that is an altogether different matter. In the early days of the development of capitalism in Britain, following the industrial revolution, the Football Association FA recognised that football clubs could be run as for-profit enterprises for the benefit of their shareholders. Instead of welcoming this as a way of introducing market discipline, and rewarding those who had taken the original financial risk, the FA took the opposite view, namely that it would be wrong for football clubs to be owned and run for such profit-seeking purposes.

The FA therefore introduced Rule 34 to prevent shareholders from extracting anything other than fairly modest returns from football clubs. This process, and the economic, political and social issues around it, have been analysed in detail, as reported for example in Michie Here it is worth noting two factors which address issues touched on above and throughout this Special Issue.

Thus, for example, when Manchester United was bought by the American millionaire Malcolm Glazer, a group of supporters established a rival club, FC United of Manchester, as a member-owned club. So member ownership is most definitely consistent with excellence and with success within the current global era. The case of housing is also instructive in relation to ownership, and likewise the importance of place is unavoidable. Ownership of housing in most countries has been mixed, with private individual ownership, corporate ownership, state ownership—at both local and national levels—and various forms of mutual ownership, through housing associations and other such arrangements.

This has been combined with pubic policies that used the remaining public sector housing in the interests of private sector employers, by making participation in the labour market a conditions for receiving rental accommodation. Here Fraser et al. Public housing funds are increasingly diverted to private sector investors and to programmes that regulate the poor by shaping their behaviour based on their need for housing support. Housing also of course played a key role in the — credit crunch, with mortgages home loans being used as collateral, diced and sliced with other assets to create new financial instruments that were sold on—largely by US and UK financial institutions—globally.

Governments across the globe stepped in to bail out the banks, but this just transformed the banking crisis into a sovereign debt crisis, hitting European Union countries particularly badly. The proportion of housing that was privately owned rose. But following legislative changes, it became easier for the existing members to cash in the value that had been built up over previous generations. The members of many of the largest such building societies did just this, in the process converting mutuals into private banks.

One of these demutualised building societies, Northern Rock, became notorious by reinventing the bank-run, a process which had been thought to have become a thing of the past due to the development of banking regulation. The pictures of Northern Rock customers queuing overnight to withdraw their money were reproduced across the world. Of course, as in any such bank-run, if enough customers demand their money back, the institution goes bankrupt—and so it was with Northern Rock.

Of the mutual customer owned building societies that demutualised, not a single one has survived as an independent financial institution. The deregulation of the financial system broke down the traditional barriers between the building societies and the banks and opened the doors to overseas ownership of previously independent, regionally based institutions. Brummer, , 27 6. The Coalition Agreement to which the UK Government is committed is pledged to promote a more corporately diverse financial services sector, including through promoting mutuals. This was a seemingly easy commitment to honour, as the government held Northern Rock in state ownership, and it would have been a simple matter to have transferred it back into the mutual sector in which it had operated successfully for years, prior to its ill-fated operation as a private bank.

Bizarrely, the Coalition Government instead sold Northern Rock at a below market-value price to Richard Branson, to have another go at being a private bank, with no convincing explanation as to why the Coalition Agreement pledge of promoting greater corporate diversity of the financial services sector through supporting mutuals had been broken. Alongside housing, the public utilities—water, gas, electricity and sewerage services—have traditionally been subject to a high degree of public interest, regulation and ownership.

In most European countries these utilities have been in public ownership, whereas in the USA they have been subject to public regulation. With the global move from the s towards privatisation and deregulation, public regulation was weakened in the USA, while in European countries the industries were in many cases privatised, with the perhaps ironic result of requiring an increase in the degree of public regulation over private companies. Amongst European counties, privatisation went furthest in the UK.

Most of the other major European economies—France, German, Italy, Spain and of course the Scandanavian countries—kept more of their industries within public ownership. Indeed, in the case of France this has had the ironic outcome of the UK public utilities having passed from public to private hands as a result of privatisation, only to find themselves back in public hands when purchased by French companies that are still nationalised. By the s, the World Bank was promoting the role of the private sector in the provision of water.

But within 15 years, the shortcomings of such privatisation had become apparent. Similarly, Valdovinos analyses the remunicipalisation of the Paris water services, identifying a new political vision amongst local authorities concerning their own role as key actors in water services management. Scott and Raschid-Sally analyse the commodification of water in a number of countries. In the case of the USA, Pollin argues for greater public involvement and investment in the provision of utilities, including clean energy. Public investment can also serve as the leading edge in building a clean energy infrastructure throughout the USA.

Prechel analyses the way that deregulation of the US electricity market had adverse consequences for the public. Deregulation created opportunities for power producers to search for the highest price on the grid to sell energy, which results in energy loss during transmission and which can overload the grid, increasing the potential for energy blackouts. The deregulated market also created opportunities for financialisation 10 strategies, that is, seeking profits through financial transactions, with Enron leading the way in terms of the proportion of profits generated from trading energy derivatives rather than producing energy see also Prechel, That is, the end result was simply a different configuration of companies, government and markets, and an increase in resources devoted to political lobbying in order to bring the regulatory regime in line with the short-term financial interests of the firms that in many cases had seen their power increased as a result of the supposed deregulation.

Water management in the USA is decentralised, usually to local governments, with only a limited role played by the federal government. Megdal analyses the case of Arizona, concluding that the public sector will continue to dominate water provision, but that the importance of the private sector might increase in times of limited availability of public-sector capital.

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The World Bank documents the ease or otherwise with which countries allow domestic companies to be taken over by foreign companies. They find that utilities such as electricity and transportation have more restrictions placed on foreign ownership, along with the media sector, as compared to industries such as manufacturing:.

In some sectors — such as banking, insurance and media — laws often limit the share of foreign equity ownership allowed in enterprises. In others — such as transportation and electricity — state-owned monopolies preclude both foreign and domestic private firms from engaging in the sectors.

World Bank, , 8. The World Bank surveys the degree of openness to such inward investment in a publication that is blatantly biased in favour of the free movement of capital and the freedom of multinational firms to buy into domestic firms, free of regulatory obstacles. Yet, in this report the average foreign equity ownership index for economies in East Asia is lower than in all other regions.

Should one then infer that the relationship between overall openness to foreign equity ownership and actual FDI inflow is tenuous? The answer is no. The report then attempts to explain this paradox away, admitting that actual FDI inflows are determined by a range of factors, including the growth prospects of an economy.

In other words, despite having restrictions on FDI, that investment is attracted by the prospects of growth. What the World Bank cannot bring themselves to admit is that those prospects of growth have been underpinned in most of these economies by active industrial and regional policies, including the use of public ownership. Ownership delivers control—most obviously with corporate ownership delivering control in terms of economic and industrial processes, with the corporate owner having direct control over the labour process.

But economic ownership also delivers political control. This is analysed by Prechel in terms of corporations mobilising politically to advance their economic agendas—and in this case to weaken environmental policy. Indeed, after state structures are created to enforce public policy, they provide the socio-political legitimacy for corporations to further advance their economic interests Prechel, The systematic nature by which ownership operates under capitalism is again stressed.

Oligopoly reflects not only economic power within industries but allows political power and the ability to shape key public policies. Wealth and the ownership of property and assets are of course, unequally distributed within countries and globally. The control that ownership delivers includes control over the production process and the labour process, and this, together with income derived from the ownership of assets in the form of profits, interest payments, dividends, capital gains from increased share prices, and rent determines the distribution of income, and thus the degree of inequality of income.

The distribution of income, as measured by the Gini coefficient, is highest internationally in Brazil and South Africa, with the Scandanavian countries generally exhibiting the lowest degree of income inequality. The degree of inequality in both wealth ownership and income increased hugely during the three decades leading to the — global credit crunch—as analysed for example by Glyn As articulated in several of the articles cited above, capital ownership allows systematic influence over people, places and the path of capitalism. It affects labour market outcomes, and the labour process, and it contributes to the creation of inequality both domestically and globally.

The role of ownership in the changing division of wealth and income within the industrialised economies plays out largely through the labour market and labour process arenas, alongside the impact of the free market form of globalisation that has dominated the past era, as analysed by Wallace et al. In developing economies the role of land ownership is also crucial, and thus the role that the state plays in either maintaining or redistributing land ownership rights is crucial.

Braun and McLees analyse such processes in Lesotho, where the state has supported private development of the tourist industry at the expense of indigenous land rights. This outcome, they argue, was not an inevitable outcome of such processes but rather was due to these policies having been pursued within the prevailing neoliberal context, which led to a privileging of foreign—that is, overseas—private interests.

Between rock, hard place, Greece picks austerity. How did it get into this mess?

Its goal was to analyse the relevance of ownership for economic and social outcomes. The Commission was welcomed by the then Labour Government at the time of its launch, and similarly applauded by the Coalition Government that later took office in May Indeed, the Coalition Agreement included a commitment to promoting corporate diversity within the financial services sector HM Government, Its intention to promote employee-ownership, along with the mutual ownership and delivery of public services also implied profound changes in ownership.

Although peculiarities of the UK economy exist, the conditions examined apply to some degree in most other countries. The Commission also conducted fact-finding missions to the USA and Singapore, and consulted widely, including internationally, in order to place their analysis within the context of global ownership trends.

The international variety of corporate ownership patterns is described by Claessens and Yurtoglu , 13—14 as follows:. These firms can be family-owned or controlled by financial institutions. Families such as the Peugeots in France, the Quandts in Germany, and the Agnellis in Italy hold large blocks of shares in even the largest firms and effectively control them Barca and Becht, ; Faccio and Lang, In other countries, such as Japan and to some extent Germany, financial institutions control large parts of the corporate sector La Porta et al.

Even in the United States, family-owned firms are not uncommon Holderness, ; Anderson et al. One peculiarity of the UK economy is the relative dominance of the large, shareholder-owned Public Limited Company ownership form. Concomitantly, there is a weaker public sector, less family ownership, and a smaller co-operative, mutual and employee-owned share of the economy than is to be found in other countries.

This peculiarity has been exacerbated over the past 30 years of privatisation of formerly state-owned companies including utilities, and demutualisation of formerly customer-owned building societies. A second peculiarity of the UK economy is the short-termism of management decision making and corporate behaviour. This has been a long-standing problem for the UK economy. If anything, it has been made worse by the aforementioned processes of privatisation and demutualisation, in part simply because the sector of the economy where this damaging short-termism is prevalent has become a more dominant part of the national economy.

The Ownership Commission made a number of recommendations to tackle this second peculiarity—of the long-standing problem of short-termism within British industry—including first, doing away with the quarterly financial reporting that tends to drive decision-making towards these short-term financial figures at the expense of longer-term considerations, and second, making it more possible for directors of a company to reject a hostile takeover bid that they believe would be against the long-term interests of the company as a whole, as opposed to the short-term financial interests of the external shareholders Ownership Commission, The other peculiarity, of the lack of corporate diversity, and the dominance by the shareholder-owned public limited company corporate form, also needs to be tackled, and the Ownership Commission made a number of recommendations that could achieve this objective.

It concluded that greater corporate diversity was indeed necessary and needed to be promoted. The International Co-operative Alliance members have ambitious plans for the co-operative and mutual sector to become the fastest-growing sector of the global economy by Despite the orthodox consensus to the contrary, ownership does matter. The ownership and control of companies has a crucial impact upon the places where these companies are owned and operated, employing staff and undertaking productive activities. The economic growth of nations depends crucially on the decisions made by the companies that are owned by the citizens of those nations.

Of course, many companies operate outside the nation where their owners reside, producing and selling internationally. But two points need to be made.

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First, all this has been true across historical periods, and yet ownership has proved to be an important factor throughout, influencing not only relative economic growth rates and prosperity, but also the drive towards war and other outcomes. We had the inter-war globalisation, with the Wall Street Crash and Great Depression, and with the New Deal and other reactions to and consequences of it, including arguably the rise of Nazi Germany and the Second World War.

At the time of writing June , after 4 years of recession and stagnation, many industrialised countries had still not recovered their levels of national income and production, with many, indeed, still in recession. For the economies of Europe, this is possibly the weakest recovery ever from a major recession, with economies generally having recovered from the Wall Street Crash within 4 years, by —albeit with a subsequent return to fiscal orthodoxy provoking a further downturn in The era of globalisation from the s was one that prioritised the interests of private ownership of productive assets.

It was fuelled by privatisation, demutualisation and deregulation. It was always a false dichotomy to suggest that the critics of such globalisation were opposed to international economic activities—it was not globalisation per se that was being contested, but rather the particular laissez faire , neoliberal form that was being promoted. This is not just being wise after the event.

The free market, laissez faire agenda is one being pursued by those who benefit from such a deregulated, winner-take-all environment. It is not the only choice. The key questions are first, whether the dominant form of corporate ownership in the UK and USA contributed to the — global credit crunch and the subsequent international recession; and second, whether future changes to ownership might be able to contribute towards creating a new era of more sustainable economic growth and development over the coming years and decades?

That settlement was of course the most successful historically for capitalism itself, with not a single year of global recession over those three decades. The form of corporate ownership certainly played a role within that settlement, alongside regulation and the creation of appropriate institutional arrangements. Public ownership of utilities and other strategically important sectors was used extensively in almost all successful economies, other than the USA where ideological opposition to public ownership was stronger.

Richard Vague, managing partner of US-based Gabriel Investments, says "China is entering the beginning phase of a five to year financial reversal". He says two main factors lead to crisis. First, a high ratio of private debt to GDP in a short period "our research would suggest an increase of 15 to 20 percentage points in a five-year period".

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If those two things are true, there's an 80 to 90 per cent chance of a financial crisis. Post Brexit and in the uncertain days of Donald Trump, the tide of regulation may be turning, and not for the better. That's if it ever really turned at all. Mr White says there have been genuine attempts to address risks following the GFC but "below the surface, problems lurk".

Kevin Nixon, global and Asia-Pacific leader at Deloitte's Centre for Regulatory Strategy, says there is a mantra of "we can never let this happen again". He says the Basel III reforms which aim to improve the banking sector's ability to absorb shocks and increase transparency will prevent another Lehman-style collapse. Under Basel, "big global banks hold five times more common equity than they did going into the crisis," Mr Nixon says.

To avoid the potential of taxpayers bailing out troubled banks, global regulators now require a "recovery resolution plan" from financial institutions. Moves are afoot in Australia but the big four banks still don't have plans in place. He says massive changes are unlikely to pass US Congress. Lord Turner says post-crisis reforms have largely stopped outrageous per cent loan-to-value mortgages and rubbish products like synthetic CDOs. Janet Tavakoli, president of Chicago-based risk consulting firm, Tavakoli Structured Finance, and author of several books about the GFC, says regulations to prevent financial fraud have always existed.

The problem is that regulators don't enforce them.

Extract: The 5 emotional stages of debt · www.newyorkethnicfood.com

After Enron's bankruptcy the USA passed securities laws known as Sarbanes-Oxley that address the issues raised by financial fraud and overreach. But "Sarbox and Dodd-Frank are cosmetic cover-ups of the fact that the USA chooses to not enforce its laws," she says. Locally, regulators are more attuned to risks. Although, as with their global counterparts, there are questions as to whether moves go far enough.

In March the Australian Prudential Regulation Authority imposed tougher limits on lending which saw some big banks increase their lending rates to borrowers — including to limit the flow of new interest-only lending to 30 per cent of total new residential mortgage lending. Both have made clear in public speeches that financial risks exist because of indebted households. APRA has in recent years been running what it calls "stress tests" testing the development of crisis scenarios.

Its disclaimer about the tests is that it can't actually with accuracy "predict the probability of a period of stress, let alone the precise scenario by which it will arrive". Nevertheless, it examines hypothetical cases of the housing market falling by about 40 per cent, and unemployment and interest rates rising. Its stress test results found that "banks may well survive the stress, but that is not to say the system could sail through it with ease.

Introduction

Keen says these stress tests use the same "DSGE" models that in christened as a great year for the world economy. He says they do not reflect the real economy. David says Australian lenders are "chronically undercapitalised relative to the risks they have taken". He also believes banks are still issuing mortgages that are too large for borrowers to service over the life of the loans.

Another problem highlighted during the crisis was the big pay packets received by Wall Street bank chiefs who behaved badly. He has authored several books criticising orthodox monetary theory and policy and says "the whole thing will again collapse", even if it's sometime off. Wray points out that "no top executive of any of the fraudulent financial institutions was prosecuted. Tavakoli says after the crisis, bankers simply connected, gave huge campaign contributions to Congress and were "protected".

Financial executives are still not held accountable, she says, pointing to JPMorgan Chase's London Whale debacle in as another example of executives getting away with bad behaviour. Jamie Dimon had signed off on documents stating risk management was fine. Yet he wasn't held accountable under Sarbox regulations or anything else.

Extract: The 5 emotional stages of debt

White says there needs to be more and tougher prosecutions of financial criminals, including tougher fines and prison. Navidi says "flawed incentives, lax personal liability laws and skewed ethics" encourage risk taking. And, "US banks have become even larger and more systemically important and have the luxury of operating with an implicit guarantee by taxpayers," she says.

Former treasurer Wayne Swan defends the massive stimulus package he and former prime minister Kevin Rudd and the then treasury secretary Ken Henry pulled together to stop Australia plunging into recession.

But Swan concedes there's a "moral hazard" whereby "if banks expect they will be bailed out, they may engage in riskier behaviour". He says governments should not be seen "simplistically as guardians against individual irrationality". Eslake says governments will always feel obliged to "step in" to protect depositors in the event that any bank is at risk of failing — as they did in Australia.

The political consequences of failing to do so — large numbers of people losing potentially all their life savings — are simply too great, he says. Lord Turner says even if regulators had spotted the problems before they occurred in and tried to stop it, they would have faced intense lobbying from banks, and media stories saying such moves will send us into recession. He criticises regulators who pretended things were rosy when they weren't. But overall, he blames an "intellectual failure" that accepts excessive debt so long as the economy keeps ticking on.

Levy says as economist Hyman Minsky explored in his work on financial instability, there is such a thing as macroeconomic risk, and individuals cannot protect themselves from it. Follow Nassim Khadem on Facebook and Twitter. Ten years since the global financial crisis, world still suffers 'debt overhang'. The Sydney Morning Herald. Sign up for our newsletter It is almost exactly 10 years since the financial world began a wobble that would swing into what we now know as the global financial crisis.

The crisis highlighted a number of key problems which remain unresolved. Irrational exuberance Let's start with the question of debt.