2016년 2월 19일 금요일

[발췌: B. Christophers's] Making Finance Productive (2011)


출처: Brett Christophers. “Making finance productive.” Economy and Society. 40:1, pp. 112-140. 19 Feb 2011.


※ 발췌 (excerpt):

ABSTRACT: Western governments' response to ongoing economic crisis has demonstrated that the financial services sector is seen to perform a critical and productive function in today's capitalist economies. This paper explores how this politically potent perception of productiveness has come to achieve the hegemony that it now enjoys. A principal forum or the 'making' of finance sector productiveness, it shows, has been the tradition of national accounting and its reporting of key economic metrics such as gross domestic product. By placing different activities on different sides of a pivotal 'production boundary', national income statisticians effectively dictate what counts as productive─as adding value to the economy─and what does not. Finance's contemporary representation as productive is predicated, the paper shows, on a long and contested history of boundary negotiation.

( ... ... )

Banking Problem

( ... ... )

Their[national accountants'] and our concern, rather, is with how the banking sector comes to be represented in the production account if intermediation is treated as a service. ( ... ... ) One possible solution is some sort of imputation of the value realized through intermediation. But, in the absence of such a solution, it must be assumed─following the model used in accounting for other sectors, where earnings from interest are not considered part of corporations' output or value added─that because no service-specific payment has been rendered, then no value has been generated. In such a scenario, therefore, the only banking activity to register a positive output entry in the national production account is the first of our three categories: services for which banks are explicitly paid fees.

   All of which leads to the crystallization of the 'banking problem'. For if no imputation in respect of intermediation output value is attempted, a large component of banking sector revenue is disregarded in the production account, with inevitable adverse consequences for the calculation and representation of the value added by a sector whose entire cost base (its 'input') is incorporated.  ( ... ... )


Border-crossing

In reviewing the history of how, in Western national accounts, finance in general─and intermediation in particular─became productive, it is suggested that the process of border-crossing that this involved can be divided into three main sequential stages. To do so is, of course, to oversimplify; not all countries, by any means, have passed through each of the stages identified; and , where they have, they have tended to do so at different times and at different rates. But the sequencing does, nonetheless, capture the ^overall^ direction and substance of the movement towards productivity in the treatment of financial intermediation services in the Western national accounting canon. ( ... ... )


(1) Intermediation as unproductive 

The first of the three stages is that in which financial intermediation revenues are explicitly or implicitly excluded from the finance sector's output: national accounts thus representing intermediation services as essentially unproductive. To be sure, there exist countries that, identifying early on the gravity of the 'banking problem', pioneered methods for imputing an output value to banks' interest-based revenues and for including this value within the reported sector product, and which hence skipped this unproductive stage altogether. But a central aim of this paper is to emphasize that many countries did not, and that these were not just those Eastern Bloc nations using the material product system.  Instead, in such Western countries, for varying periods of time, the product/output method for estimating GDP treated the net revenues earned by banks through financial intermediation not as produced wealth but as de jure or de facto transfer items.

  Taking the former, de jure type first, one example of a country that passed through this stage is Australia. Prior to 1948, all output-based estimates for Australian national product treated interest flows in the banking sector, as in other sectors of the economy, as pure transfer items─resulting in the country's banks, collectively, being represented as loss-making (Arndt, 1996; Studenski, 1958, p. 192). But the more prominent, enduring and important example is unquestionably France. For there, too, until 1975, all revenues derived from financial intermediation were omitted from the calculation of value-added and thus from national output (Vanoli, 2005, p. 154).

  Where France and, more briefly, Australia, have both treated intermediation services as de jure mechanisms of wealth transfer─regarded as ‘contributing’, as Shelp wrote of the French system, ‘to the redistribution of income rather than to the generation of output’ (1981, p. 61)─a larger number of countries have, at points, considered them as de facto methods of transfer. Here, the revenue flows associated with these services are not excluded from the production account altogether, as they are in the de jure scenario. Rather, an output value is imputed to such services, typically by deducting banks' interest payments on liabilities acquired from third parties (e.g. cash deposits) from their third-party-derived interest income (e.g. on loans). But, instead of treating this net interest revenue as an input (or, in the lexicon of national accounting, 'intermediate consumption') of one or more other sectors of the economy, it is considered, somewhat perversely, to be an input of the finance sector itself. In other words, net interest receipts feature here as both outputs and inputs of the same sector, thus cancelling each other out in the process─with the result that the reported value added by the finance sector is the same as if those interest flows were treated as actual transfers and simply excluded from the production account accordingly.

  Perverse it may be, but this, nevertheless, was the approach to financial intermediation services long utilized in the UK (Feinstein, 1972, p. 142; Haig, 1973, p. 626)─until, in fact, the early 1980s. Hence only financial services for which UK banks explicitly charged their customers made a net positive contribution to the national production account. (Pre-1980s chancellors would have struggled, then, to acclaim the value-added by the finance sector in the manner of a Darling or Brown, for the simple reason that the national accounts rarely documented any, and then only of very modest proportions.)[n.8]  Other countries to have pursued the same approach, with same outcome of a minimal or negative deemed output for the banking sector, include Denmark, Germany and Greece. All three, moreover, were still employing this approach as late as the year 2001 (OECD, 2001, p. 8).

  All of which is to say that, in these countries, there have been long periods of time when the banking 'problem' was either not recognized as such or was deemed less problematic than the statistical machinations─which we turn to presently─required to nullify it. As the UK's Central Statistical Office put it, a hypothetical allocation of banks' net interest revenues to other economic sectors, making those net revenues an output of the former and an input of the latter, ‘would be more misleading than the paradox of financial concerns appearing to make steady annual loss’ (1968, p. 205). Much of the subsequent history of re-engineering of accounting for financial intermediation in those countries can be read as a reversal of this perspective: the paradox, or 'threat', of a seemingly unproductive banking sector ultimately coming to be seen as much the greater concern.

  Equally, and as already indicated, there are countries that have never experienced this 'problem' of representing their banks as marginal or negative contributors to national output. In these countries, the 'banking problem' was quickly recognized as such and ways were immediately found to mitigate it. The US is probably the most important example of such a country. Up to 1947, it used a treatment of finance that was, and remains, unique (Arndt, 1996), whereby the financial sector's overall contribution to national product was considered to be equal to the sum of its profits and of wages paid.[n. 9]  For more than half a century, the US then followed a method for treating intermediation services that also came to be used through much of the rest of the Western world. This was the method recommended in the original (1953) SNA. And if the treatment of banking intermediation as unproductive represents the first of the three stages of our 'border-crossing', then SNA 1953 represents the one of the two main treatments of intermediation as implicitly productive that comprise the second stage.
CF. Arndt, H. (1996). Measuring trade in financial services. In Essays in International Economics 1944-1994 (pp. 215-32). Aldershot: Ashfate.
[n. 9] A somewhat similar approach was used in Australia from 1948 to 1972, except that there profits were excluded from the calculation of banking output on the grounds that they were deemed transfer items. 
(2) Intermediation as implicitly productive

The approach recommended by the 1953 SNA differed in one central and critical respect from the de facto transfer approach described above for the UK and others. Specifically, the net interest revenue derived from intermediation services, termed now the imputed bank service charge (IBSC), was to be treated as an input not of the finance sector but of other economic units. These units included both other business sectors and consumers, with the allocation between the two based upon respective levels of deposit ownership. The upshot, in terms of the representation of sectoral value-added in the production account, was twofold. 
  • First, other business sectors were each shown to generate less value than where no value was imputed to financial intermediation (France) or where such value was netted off against bank profits (the UK), since, aside from that component deemed consumed by the public, banks' collective net interest revenue was apportioned between those other sectors as inputs
  • Second, and most importantly for our purposes, value added by the finance sector was commensurately greater to the tune of the entire IBSC
  ( ... ... ) 

  In most countries where SNA 1953 had been employed, it was replaced, in the shape of SNA 1968 (UN, 1968), by a second approach to financial intermediation services that is considered in this paper under the heading of 'implicitly productive'. This recommendation, too, separated out the IBSC on the basis of the differential between banks' intermediation-derived interest earned and interest paid. But it suggested yet another different placement in the national production account for this imputed net interest income: not as an input of the finance sector itself and not as a distributed input of the consumer and other business sector accounts, but, rather, as the input of a new, notional industry sector with no output. That is to say, the IBSC was still to be considered a valuable output of the finance sector, but, instead of being traceable to other, tangible parts of the national economy, it is now disappeared into what was effectively the black hole of a dummy industry with a negative value-added equal to (but opposite in sign) to the IBSC.

  Thus, if one consults national product accounts where this method has been used, what one finds is a list of GVA figures for all the different recognized industries (including finance), together with a single anomalous negative entry for the notional sector that the treatment recommended by SNA 1968 introduced. Take, as an example, the figure for the UK in 2003.[n.10] These showed total national GVA for the year of £981.7bn at current prices (compared with an estimated GDP of £1,099.9bn). Within the mix, they showed a GVA of £39.8bn for the 'banking and finance' sector─a healthy 4.1% contribution, on the face of it. But they also showed, on the very last line, a negative GVA of £45.9bn for the IBSC[n.11]  In other words, had the UK still been using its previous approach, whereby financial intermediation net revenues were treated as implicit transfer items and effectively excluded from sector value-added, the banking and finance sector would have been reported as making a £6.1bn negative contribution to the national economy in 2003─a vastly different picture from the one painted in the quotations reproduced in the first section of this paper. Adopting SNA 1968 had, in effect, made UK finance productive.

  This method of ascribing a negative income to an imaginary industry sector, it should be noted, has probably been the most used for financial intermediation services in the entire history of Western national accounting. The UN only came up with a new official recommendation in 1993 (see below), meaning that SNA 1968 was in place for 25 years. ( ...... )

  In this discussion of both SNA 1953 and 1968, however, one key issue remains unaddressed. Why have these treatments of financial intermediation been discussed under the heading implicitly productive? By making net interest revenue an output but not an input of the banking sector, both approaches, it could be argued, paced financial intermediation firmly within the production boundary. But there are, it is submitted here, important reasons for entering a caveat about the extent to which the treatment in question effected the border-crossing that concerns us. For the issue of accounting for intermediation clearly remained, in 1968 as much as in 1953, a highly and explicitly troublesome one. Neither SNA reads as if the authors, and the statisticians who contributed to its formulation, had come to consensus that intermediation services were productive and that the methods for showing this were self-evident. It would take until 1993 for something resembling such a consensus to crystallize. In contrast to this subsequent iteration, SNA 1953 and 1968 give the cumulative impression of intermediation being nudged tentatively─if not quite covertly─towards the productive domain, not lodged there by right. Writing in 1986, Bryan Haig perfectly captured this sense of intermediation services having been 'made' productive not so much because they were genuinely and unanimously believed to be so, but because their representation as unproductive was so discomfiting. The arguments hitherto advanced for treating interest as anything other than a transfer item, he argued, 'amount often little more than the assertion that a change in treatment of interest is necessary in order to solve the banking problem' (1986, p. 415).

  Where SNA 1968, in particular, concerned, the introduction of a fictitious sector was undeniably awkward, bearing all the appearance of an fudge, and it was castigated as such by many practitioners, particularly those of the US and Canada. Peter Hill echoed a large number of his peers in later calling it an 'expedient' an, hence 'no solution' to the banking problem. He continued: 'It is debatable whether inventing an imaginary industry with negative value added is much better than recording negative value added for financial intermediaries. It is certainly much less transparent to users' (1996, p. 2). Yet, arguably, even Hill misses the most important point of all here. Inventing this imaginary industry to 'absorb' value-added in order for the value shown to be added by finance to be inflated accordingly may not be conceptually superior (Hill's worry). But, in an environment where the banking industry wields considerable political influence, it is, patently, politically superior, and the lack of transparency referred to by Hill is, in this regard, of little or no import.


(3) Intermediation as explicitly productive

SNA 1953 and 1968 made financial intermediation only 'implicitly productive', then, in the sense that, while these banking services now counted as productive, there remained a certain hesitancy and unsatisfactoriness both about the treatments through which they did so and about the intellectual justification thereof. This is perhaps most evident in the language used to discuss what financial intermediation services actually were. At no point did either SNA actually describe and define those services as explicitly productive. This changed decisively, however, with SNA 1993, the third and latest UN System (United Nations, 1993)[n.12] Paragraph 4.78 of this SNA begins as follows (emphasis added), leaving no reader in any doubt as to how the service of intermediaton is now to be considered.
Financial intermediation may be defined as a productive activity in which an institutional unit incurs liabilities on its own account for the purpose of acquiring financial assets by engaging in financial transactions on the market. The role of financial intermediaries is to channel funds from lenders to borrowers by intermediating between them.
With SNA 1993, in other words, no ambiguity─outwardly, at any rate─remained.

  Methodologically, the treatment of financial intermediation services recommended in SNA 1993 was, in one respect, something of a throwback to the past (though one would be unlikely to find many national accounting practitioners who would ever describe it as such). Specifically, its suggestion for how the output of such intermediation services should be allocated between users, as those users' respective inputs, harked back directly to SNA 1953. The latter, we saw above, advised that the IBSC should be apportioned to both consumers (as final demand) and other business sectors (as intermediate demand) according to relative levels of deposit ownership. SNA 1993 recommended much the same approach─a consumer allocation, having been eliminated in SNA 1968, thus retaking a place in the preferred SNA treatment. Where SNA 1993's recommendation for allocation differed from the 1953 method was primarily in the fact that the split of the IBSC between consumers and business─and, within the business category, between industries─was now to factor in respective levels of borrowing from, as well as lending to, financial intermediaries.

  This issue of allocation made the recommended SNA 1993 treatment an especially contentious one. Based on work carried out in large part by the International Monetary Fund, the proposal to allocate the output of intermediation services in such a manner was first presented to the UN Statistical Commission in 1991. The presentation caused, it has been said, 'upheaval' among European Union national accountants, who claimed the methodology was 'too complicated, too imprecise' (Vanoli, 2005, p. 155). The most important implication of this hostile reception was that, by threatening not to vote in favour of the recommendation, these practitioners secured a compromise position: SNA 1993 would allow countries to continue to use the 'nominal industry' treatment of SNA 1968 if they preferred. The granting of this alternative treatment helps to explain why many countries, the UK included, had still not switched to the favoured SNA 1993 methodology a decade or more later.

  Unfortunately, the contentious nature of this approach to allocation recommended in SNA 1993 has tended to divert critical attention away from what was, arguably, the new guidelines' more important suggested change to accounting for financial intermediation services. This concerned not the allocation but the derivation of the imputed value of the banks' output. With both SNA 1953 and 1968 having based this value on the difference between interest earned from borrowers and that paid to lenders, SNA 1993 now recommended a new derivation. And a new name: FISIM (financial intermediation services indirectly measured).

  This new name was, in some ways, no less important than the new methodology─for both were indicative of a considerably greater confidence in what SNA 1993 newly asserted: that financial intermediation was a productive activity.
  • The phrase ‘imputed bank service charge’ was now regarded as altogether too tentative: it intimated that banks performed valuable services, but it did not specify what those services were, and in requiring a value to be ‘externally’ attributed to those services it communicated the fact that this value could not simply be measured. 
  • 'FISIM' was subtly, but crucially, different. Not only were the services in question now labelled, but a rather abstract and cautious exercise in 'imputation' had now became a putatively robust and transparent process of measurement─albeit, still, an 'indirect' one.

  This shift was most clearly manifested in the recommended new methodology for deriving FISIM.[n.13]  Instead of assessing banks' borrowing and lending activities together, and intimating that the combination constituted a portfolio of services whose collective value could be imputed by deducting interest paid on the former from interest generated by the latter, SNA 1993 separates the two functions and defines each─independently─as a productive activity whose output can be measured.
  • It does this by introducing the pivotal idea of a ‘reference’ rate of interest, which is defined as ‘the pure cost of borrowing funds’, and for which, it is suggested, either the inter-bank lending rate or the central bank repo rate could serve as a meaningful proxy. 
  • The productive output of financial intermediaries's borrowing activities (which consist not only of taking deposits, of course, but also ‘issuing bills, bonds, or other securities’) is then defined as ‘the difference between the interest [creditors] would receive if a reference rate were used and the interest they actually receive’; 
  • and the output of the banks' lending activities becomes ‘the difference between the interest actually charged on loans, etc. and the amount that would be paid if a reference rate were used’.

  This mobilization of a ‘reference rate’, enabling the output of borrowing and lending activities to be measured independently of one another, is absolutely fundamental to the attempt, in SNA 1993, to show intermediation services as explicitly productive. For the very notion of ‘production’ requires a base of some kind against which the extent of the productive activity can be assessed. In the world of material goods production, this base is the raw commodities whose transformation into final goods constitutes the productive process. SNA 1993 claims that financial intermediation represents something similar: the quantum of ‘production’ effected by banks is represented by the differential between the reference rate and the actual rate of interest, because the former is the rate that would be payable/receivable were no ‘productive work’ performed.

  But this still leaves one open question─a question that returns us to the very genesis of the ‘banking problem’. If this interest rate differential represents the quantum of productive output, what is the essential nature of the productive work herein performed? What is the underlying service for which intermediaries are being paid, and which justifies that interest rate spread?
  • It is, SNA 1993 says, the taking of risk. ‘Financial intermediaries ... intermediate between lenders and borrowers by channelling funds from one to the other, putting themselves at risk in the process’ (para 6.121). 
  • And the reference rate of interest is that ‘from which the risk premium has been eliminated to the greatest extent possible and which does not include any intermediation services.’. 
  • Financial intermediaries contribute to economic output, in other words, by assuming financial risk; and we are able to measure the amount of such output because the gap between actual and ‘base’ interest rates signals the level of risk and hence ‘the extent of intermediation supplied’ (Begg, Bournay, Weale & Wright, 1996, p. 455).


Conclusion─or perhaps not

What is most striking about the SNA 1993 approach to defining and measuring the services of financial intermediation is how far things had come since contemplation of such services first led to the emergence of the 'banking problem' in the mid-20th century. By conspicuously disentangling the activities of borrowing and lending, and thus muddying the links between them, SNA 1993 was able to define each as explicitly productive in its own right. Forty years previously, by contrast, it had been perceived that, given the profits they generated, intermediation services ^must^ be in some way productive, but that it was difficult enough to identify the nature of this output, let alone value it. To fully appreciate the distance travelled in the course of the subsequent border-crossing, one need only compare SNA 1993's analysis of how intermediation make money─by assuming risks, of varying scale, on both borrowing and lending activities─with analysis offered by Studensk in 1958. Studenski, note, was no critic of banking; as we saw above, he believed that showing banks as a drain on the economy made 'no sense'. Nevertheless, his pithy conceptualization of banks' profitable ^modus operandi^, one shared by the national accounting community about which he wrote, was that of 'withholding all or a large part of the interest earned on the loans and investments made with their depositor' uds' (1958, p. 192). Through the mutations effected by SNA 1953, 1968, and, most importantly, 1993, 'withholding' had thus been transformed  into 'producing'.

  ( ... ... )

  Yet it is evident that, where accounting for financial intermediation services is concerned, questions do remain. Some of these, moreover, are 'big' questions. Thus, although national accounting statisticians are generally agreed that these services are productive and need to be reported as such, some still query the very essence of the SNA approach to this matter. Three years later SNA 1993 was published, for example, the influential Peter Hill (1996, pp. 3-4) continued to argue that what made financial intermediation 'productive' was the ancillary services provided (e.g. security and convenience for depositors, timeliness and flexibility for borrowers) and ^not^ the fact─a la SNA 1953, 1968 ^and^ 1993─that the interest earned and paid was on 'intermediated' rather than 'own funds'. After all, as he pointed out, it seems curious to insist that lending constitutes production ^only^ if a bank lends third-party funds, when 'the institution itself may be incapable of identifying the origin of the particular funds in question and even though the activities involved may be the same whatever the origin of the funds'. (One might also note, as Frits Bos [2006, p. 194] does, the oddity that 'lending money by a bank is production' while 'lending money by non-financial producers or households is no production.') Alongside these large questions, a number of 'niggles' also linger, in the practitioner community, concerning the specific treatment of FISIM contained in SNA 1993.[n.14]

  ( ... ... )

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