Accumulation and Variation: The Sectoral Transformation of Debt in Europe

The recent scholarly focus on rising debt burdens, growing financial wealth, and the resulting rise in inequality and macroeconomic volatility has overlooked a crucial piece of the theoretical and empirical puzzle. The identity of the principal debtors in advanced capitalist societies have changed. Where the "finance-growth nexus" once focused on borrowing by non-financial corporations, finance and the real economy today are principally connected through consumption and the incomes of financial elite. This transformation is significant for two reasons. First, it suggests theoretical accounts of the "financialization" of accumulation are incomplete: they would be improved by acknowledging that it is not simply the case that economic resources are being diverted toward financial activities – those resources are also being diverted to less productive economic sectors. Second, acknowledging this transformation would greatly enhance the explanatory capacity of comparative institutionalist perspectives on economic diversity: the increasingly crucial difference between developed economies is not between production regimes but rather between how domestic real economies are linked to the global financial system. This paper presents (1) the empirical evidence of the sectoral reallocation of capital, focusing on commonalities and disparities among the highly financially integrated European Union and (2) the value of incorporating such reallocation into theoretical accounts of capitalist accumulation and institutional diversity in Europe.