The New Era of Global Economic Growth and Urban Infrastructure Investment : Financial Intermediation, Institutions and Markets

In the aftermath of the global financial crisis, questions have been raised about the capacity of banks and related savings institutions to play their traditional roles in financing urban and regional development. Drawing on the theory of intermediation, this paper suggests that, over the past twenty-five years or so, these types of organizations have lost out to new forms of financial intermediation. As a result, in some countries financial services ‘deserts' coexist with overwhelming market opportunities concentrated in certain cities and regions. Implications are drawn for urban and regional growth in circumstances where bank solvency is an issue, and where new kinds of intermediaries have come to market seeking to realize the value embedded in urban economies. Referencing the experience of Europe and Krugman's argument that we are in the midst of an economic depression, the paper provides a stylized account of how the ‘new' financial intermediaries have begun to fill the vacuum left by traditional intermediaries by investing in urban infrastructure. The paper closes with a brief assessment of the costs and consequences of the global surplus of saving for the development of cities and regions