Capital Markets, Social Distance, And Solidarity‪.‬

Abstract This paper argues that recent changes in global financial structure have created conditions detrimental to the common good. Specifically, many countries have moved from bank-based to capital market-centered financial systems, increasing the social distance between the providers and users of finance. As a result, disappointed investors now liquidate their holdings, whereas in the past, lenders would help firms overcome their problems. This decline in solidarity has been at least partly responsible for the recent increase in economic insecurity experienced by U.S. managers and workers, and it also makes it more difficult for policymakers to respond to financial crises.