A widely held view is that, since the 1970s, the nation-state has suffered a
significant reduction in its capacity to achieve national economic policy goals
through the regulation of the financial system; as a result, national political
economies are now characterized by a market-driven convergence towards
financial systems dominated by privately-owned, internationally-active “financial
supermarkets” with weak links to both industry and government.
Through a comparison of Germany and Great Britain, this paper critically
examines this thesis and poses the following two questions: (1) What
implications do the lifting of capital and exchange controls and the reorientation
of monetary policy to anti-inflationary policies have for the state’s capacity
regulate financial systems? and (2) What implications does this regulatory
discretion (if any) have for industrial finance and the state's capacity to utilize
the financial system to achieve microeconomic industrial policy goals? In
response to these questions, it is demonstrated how the state has retained
significant regulatory autonomy in ways which have significant consequences
for industrial finance and industrial policy.