The role of elites in the co-evolution of international financial markets and financial centres: The case of Luxembourg

Abstract

This article investigates the co-evolution of Luxembourg’s financial centre with influential developments on a macro scale since the late 1950s and employs insights from the evolutionary approaches of regional path creation and dependence. Framing the narrative from a historical perspective, this case study illustrates how a unique conjuncture of local conditions and intentional decision making by a small group of influential individuals in Luxembourg embraced and exploited the new opportunities of the internationalizing financial markets, thus forming the birth of Luxembourg’s financial economy. The article argues that only the role of the elite during this time makes the creation of Luxembourg’s financial centre plausible, whilst Luxembourg’s continuing financial path has been accompanied by a changing composition of previously local and often individualistic elite. The changing conditions of globalization have brought a new type of elite to the fore, in particular the organized power of large banks, which continue to reshape Luxembourg’s institutional environment in different ways. The fundamental shift in power between Luxembourg’s financial and political interest groups has also spawned increasingly complex interlinkages between institutional architectures across different geographical scales. By strengthening the conceptualization of the particular role of agency, this article adds knowledge to the prevailing concepts of (regional) path dependence in general and to the contingent development in financial centres in particular.