• Demonstrate a thorough and critical understanding of the course literature.
• Demonstrate an excellent ability to use the course literature to analyze problems with relation to the role of finance and financial institutions in society.
• Demonstrate an excellent ability to communicate his or her findings and understanding of the subject.

The primary overall aim of this course is to give the students a contextual and critical understanding of finance and financial institutions and their role in society. The course provides the students with an opportunity to bring together the knowledge and skills they have attained from earlier courses and to allow them to put their future courses into a context that brings together economic, political, social and cultural – or, broadly conceived, institutional – developments. This course will allow the students to use their empirical and theoretical skills but it will also force them to think out of the box, and to consider the often path dependent and time and space specific character of institutions, markets and organizations.

The course is not a finance or corporate finance course and it is not a strategy course, but it allows the students to draw on their competencies within these areas. The course provides the students with a critical, contextual and institutional foundation for further study in these fields.

Over the last 20-30 years, the international financial sector has developed into an economically highly important as well as a culturally and politically contested industry. In particular, the 2007-2009 financial crisis has stressed the importance of the financial sector as a systemic breakdown was averted only by massive public intervention in financial markets. This intervention has led to other problems such as moral hazard and massive public debt problems in the US and the European Union. At the same time global economic and financial imbalances such as increasing inequality and a basic shift in economic power from the Western world to Asia seems to be accelerating. Finally, the financial crisis resulted in a serious decline in real economic activity that has arguably contributed to the rise of populism and fragmentation of Western socities.

As a result, the interplay between the financial industry and society has become topical and much debated. Do we need more regulation of the financial sector, or smarter regulation, or is the problem the exact opposite that too much state intervention in markets have led to moral hazard and irresponsible rent seeking by huge financial actors? At the more general societal level, the crisis has provoked a new confrontation between protectionist, Keynesian and neo-liberal (and Austrian) approaches to the market, the economy and society in general. Moreover, the focus on share holder value has been questioned along with problems of rising inequality, and more generally the values and the financial industry’s compensation and share of the economy have been hotly debated.

This course provides the students with an opportunity to think about and discuss these issues and how they related to societal changes more generally.

Provisional course readings - subject to change:

“25 People to Blame for the Financial Crisis. The good intentions, bad managers and greed behind the meltdown.” Time Magazine: http:/​/​www.time.com/​time/​specials/​packages/​completelist/​0,29569,1877351,00.html#ixzz1OgGVty5k

Baker, George & George D. Smith, The New Financial Capitalists. Kohlberg, Kravis Roberts and the Creation of Corporate Value, Cambridge University Press 1998, Chapter 1, pp. 1-44

Bhidé, Amar, “In Praise of more Primitive Finance” in Economists’ Voice, February 2009

Calomiris, Charles, “Banking Crises Yesterday and Today”, Financial History Review, vol. 17, no. 1, 2010, pp. 3-12

Cassidy, John, “What good is Wall Street?”, The New Yorker, November 29, 2010

Coffee, Jr, John C., “A Theory of Corporate Scandals: Why the USA and Europe Differ”, Oxford Review of Economic Policy, Vol. 21, no. 2, 2005, pp. 198-211

Dore, Ronald, “Financialization of the Global Economy”, Industrial and Corporate Change, vol. 17, no. 6, 2008, pp. 1097-1112

Eichengreen, Barry, “The Great Detour: European Money and Banking in the Second Half of the 20^th Century”, in Rathkolb, Oliver, Theodor Venus and Ulrike Zimmer, Bank Austria Creditanstalt. 150 Jahre Österreichische Bankengeschichte in Zentrum Europas, 2005

Eichengreen, Barry, “The Crisis and the Euro”, Working Paper, April 2009.
http:/​/​www.econ.berkeley.edu/​~eichengr/​crisis_euro_5-1-09.pdf

Eichengreen, Barry & Peter Temin, “Fetters of Gold and Paper”, Oxford Review of Economic Policy, Vol. 26, no. 3, 2010, pp. 370-384

Fox, Justin, “Cultural change is key to reform”, Financial Times, 26-03-2010

Goodhart, Charles, “How should we regulate bank capital and financial products? What role for living wills?” Adair Turner et al, The Future of Finance. The LSE Report, London School of Economics and Political Science, London 2010: http:/​/​harr123et.files.wordpress.com/​2010/​07/​futureoffinance-chapter51.pdf

Hamilton, Stewart & Alicia Micklethwait, Greed and Corporate Failure. The Lessons from Recent Disasters, Palgrave MacMillan: New York 2006. Chapters 2, 3 and 9

Hansen, Making sense of financial crisis and scandal. A Danish bank failure in the era of finance capitalism”, Working Paper, 2011

Ho, Karen, “Disciplining Investment Bankers, Disciplining the Economy: Wall Street’s Institutional Culture of Crisis and the Downsizing of Corporate America”, American Anthropologist, vol. 111, no. 2, 2009, pp. 177-189

James, Harold, The Creation and Destruction of Value. The Globalization Cycle. Harvard University Press, 2009

Johnson, Simon, “The Quiet Coup”, The Atlantic, May 2009, http:/​/​www.theatlantic.com/​magazine/​archive/​2009/​05/​the-quiet-coup/​7364/​

Jones, Geoffrey, Ivar Kreuger andthe Swedish Match Empire, Harvard Business School Case no. 9-804-078. This text must be purchased and downloaded from http:/​/​harvardbusinessonline.hbsp.harvard.edu/​b01/​en/​common/​item_detail.jhtml?id=804078&referral=2340

Kindleberger, Charles, A Financial History of Western Europe, New York: Oxford University Press 1993, pp. 264-279

Lai, Linda, “The Norwegian banking crisis: Managerial Escalation of Decline and Crisis”, Scandinavian Journal of Management, 10(4): 397-408.

Lamoreaux, Naomi, “Scylla or Charybdis? Historical Reflections on Two Basic Problems of Corporate Governance”, Business History Review, vo. 83, (Spring 2009), pp. 9-34

Minsky, Hyman, “A Theory of Systemic Fragility”, in Edward I. Altman & Arnold W. Sametz (eds.), Financial Crises: Institutions and Markets in a Fragile Environment, New York, Wiley 1977, pp. 138-52.

Moss, David A., “Reversing the Null. Regulation, Deregulation and the Power of Ideas”, Harvard Business School Working Paper, 10-080, 2010

North, Douglas C., “Institutions and the Performance of Economies Over Time” in Claude Menard & Mary M. Shirley, Handbook of New Institutional Economics, Dordrecht, 2005, pp. 21-30

Punch, Maurice, Dirty Business. Exploring Corporate Misconduct.Analysis and Cases, London: Sage 1996, chapters 1-3, pp. 1-83. This text is included in the compendium.

Republican Commissioners on the Financial Crisis Inquiry Commission, Financial Crisis Primer. Questions and Answers on the Causes of the Financial Crisis, December 15, 2010 ( http:/​/​republicanleader.house.gov/​UploadedFiles/​Financial_Crisis_Primer_Final.pdf)

Schumpeter, Joseph A., “The Process of Creative Destruction”, in Schumpeter, Capitalism, Socialism and Democracy, 1944. pp. 81-6.

Schwartz, Anna, “Origins of the Financial Market crisis of 2008”, Cato Journal, vol. 29, no. 1, pp. 19-23

Smith, George David, Richard Sylla, and Robert E. Wright, “The Diamond of Sustainable Growth”

Smith, Roy & Ingo Walter, Governing the Modern Corporation. Capital Markets, Corporate Control, and Economic Performance, Oxford: Oxford University Press 2006, chapter 11, pp. 270-292.

Wade, Robert, »From global imbalances to global reorganizations«, Cambridge Journal of Economics, vol. 33, 2009, pp. 539-562.

White, Lawrence H., “How did we get into this financial mess?” Cato Institute Briefing Papers, No. 110, November 18, 2008. http:/​/​www.cato.org/​pubs/​bp/​bp110.pdf

Østrup, Finn, “The Danish Bank Crisis in a Transnational Perspective”, Danish Foreign Policy Yearbook, 2010, pp. 75-112