The Role of the Financial Sector in the Socialist Economies in Transition: The Second “Primitive Accumulation of Capital”

Abstract

This article discusses the functions of financial systems in capitalist economies and the potential role of finance in both encouraging and influencing the development of market-guided economies in the socialist economies in transition. The implications of several types of financial systems such as the German-Japanese universal bank and the US-UK narrow bank-equity market models for the nature and characteristics of these economies are considered. The article argues that financial system characteristics and structure will influence distribution and equity in the transitional economies, and that these effects should be considered along with efficiency in the allocation of financial capital in designing financial systems in those economies.