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(De)regulating automation: the rise of credit scoring and market-led banking in the UK and Germany

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Comparative European Politics Aims and scope

Abstract

AI and other forms of automation are causing a shift into a more capital-intensive form of capitalism. Many scholars have suggested that we can best understand this process as the cost-efficient substitution of labour by capital in routine tasks based on relative factor costs. However, this model, which has cast firms as endlessly chasing the productivity frontier, has not paid sufficient attention to cross-national divergences in technological changes. This paper builds a comparative historical case study tracing the divergent introduction of credit scoring in British and German bank branches to argue that the introduction of credit scoring was a result of a policy-led process in both countries. Increased liberalisation of financial market institutions benefitted the rise of market-led banking which fundamentally changed the business model of banks resulting in a devaluation of the services provided by branch managers. This case suggests we need to think about the role of politics and policy within our, often deterministic, models of labour-saving technological change.

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Fig. 1

Source: British Bankers Association

Fig. 2

Source: Bundesbank (Bankstellenstatistik)

Fig. 3

Source: OECD ‘Bank Profitability’

Fig. 4

Source: Own calculations based on annual reports Barclays, Midlands, Lloyds & NatWest

Fig. 5

Source: Bank for International Settlement

Fig. 6

Source: Bank for International Settlement

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Notes

  1. Policy supporting industrial SMEs.

  2. Anstaltlast is an obligation to keep public-sector institutions solvent. Gewährträgershaftung a guarantee making the state liable for all the banks’ debts in case of insolvency.

  3. BAWe would in 2002 merge with the banking supervisor Bundesanstalt für das Kreditwesen (BAKred) to form the Bundesanstalt für Finanzdienstleistungsaufsicht.

  4. It would continue to operate for assets created before 2001, while the guarantee would lapse in 2015 for newer assets.

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Acknowledgements

Many thanks to Bob Hancké, Saul Estrin, David Soskice, Dustin Voss, Catherine Boone, Waltraud Schelke, Kira Gartzou-Katsouyanni, Angelo Martelli for their invaluable comments. A big thanks also to Aidan Regan for organising the `New Political Economy’ Winter School at UCD in 2019 and subsequently bringing this special issue together. All remaining errors or omissions are entirely my own.

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    Toon Van Overbeke

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Van Overbeke, T. (De)regulating automation: the rise of credit scoring and market-led banking in the UK and Germany. Comp Eur Polit 22, 85–109 (2024). https://doi.org/10.1057/s41295-022-00292-7

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