University of Sussex
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Deriving a normal country: Italian capitalism and the political economy of financial derivatives

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posted on 2023-06-08, 16:20 authored by Andrea Lagna
The financialisation literature is an invaluable resource to explore the expansion of finance in modern capitalism. However, the debate focuses on the US and the UK extensively, whilst being too general with regard to other contexts. This inattention hinders a proper understanding of financialisation in its di?erential nature across societies. To rectify such limitation, this thesis advances a theoretically controlled and historically informed study about a striking instance of financial excess outside the Anglo-American scenario: derivatives in Italy. The work argues that scholars are inattentive to the heterogeneous nature of financialisation because they conceptualise the power of finance as entrenched in socio-economic structures. As a result, they underplay the actors who adopt financialised practices di?erentially. Premised on this critique, the thesis advances an agency-centred approach that analyses power from the perspective of agents. In so doing, it examines the diverse traits of financialisation in relation to the specific power struggles in which actors are involved. Drawing on this method, the work shows that financialisation studies fail to appreciate how key social forces deployed derivatives for political-strategic purposes in the Italian context. During the 1990s, a neoliberal-reformist alliance of pro-market technocrats and centre-left politicians got to power and pushed for Italy to join EMU. This project functioned as an external limit on the domestic political-economic establishment which relied on high public debt, the vast state-owned enterprise and the opaque corporate-governance regime. In brief, citing a slogan widely used in those days, the neoliberal-reformist coalition attempted to make Italy a ‘normal country’ in Europe. Derivatives were crucial in this regard because they helped the Italian government comply with the EMU admission criteria. First, reformists encouraged hedge funds to arbitrage the interest-rate convergence between Italian and German bonds via OTC derivatives markets. Second, they arranged a currency swap that window-dressed the 1997 deficit. The thesis concludes by examining how other actors adopted derivatives to deal with the neoliberal-driven modernisation of Italy. It studies how the Agnelli family used equity swaps to secure ownership over FIAT and how municipalities manipulated budget restrictions through interest rate swaps.


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University of Sussex

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