> -----Original Message-----
> Bank-centered means that banks hold large amounts of corporate stock,
> exerting effective control, rather than dispersed stockholders like
> pension funds, mutual funds, and rich individuals. In bank-centered
> systems, stock markets tend to be small (relative to GDP), trading
> volume relatively low, and there's no "liquid market for corporate
> control" (an active takeover market). In stock-centered systems - of
> which the U.S. is the paradigm (Brits like to call it an
> Anglo-American system, but British industry never fully made the
> transition to the joint-stock large corporation model, keeping a lot
> of family and privately held firms of smallish size) - firms are
> under minute-by-minute scrutiny and great pressure to maximize
> profits.
One irony here is that the "stock-centered" system in the United States is due to much more extensive regulation of the stock markets here, notably the ban on banks holding stock. Our system is not the result of laissez-faire but a history of populist regulation that had unintended consequences (or rather, unexpected consequences that certain interests nurtured as the advantages for certain parts of the elite became clear.)
While Doug emphasizes the "short-termism" of stock-centered countries, that argument can be overdone given some notable examples over the years in the US of more long-term oriented companies. But the big difference a stock-oriented system makes is in giving individual corporate leaders great independence from one another. WHere bank-centered systems have a strong interlocking system of board control (its less savory aspects degenerating into the epithet "crony capitalism"). The "social democratic" aspect of such interlocking systems is that it cuts down on incentives for business "free-riding" because of mutual interests between such interlocking firms. i.e. support for a basic social safety net to reproduce a trained working class to staff your companies is stronger in such a system.
--Nathan