Financial Globalisation
•
Aims of Lecturer
(1) To explore the extent of financial globalisation
(2) To explore the main forces and agents driving
the process of financial globalisation
(3) To explore the social, political and economic
consequences of financial globalisation
Structure of Lecture
• Part One: Offer a descriptive account of
evolution of international monetary
system.
• Part Two: Explore different
incommensurate explanation for why the
IMS has evolved in manner that it has
since the early 1970s
Part One
From Gold to Keynes
• Gold Standard Emerged gradually
• Features of World Monetary System in late
part of C19th:
• London as the Global Financial Centre
• Relatively Free Flow of Capital (to degree
it followed the flag)
• Gold Standard important in disciplining
domestic actors
• Links domestic economic actors to global
market disciplines.
• Makes the economy ‘knave proof’
• System destroyed by WWI
• Attempts to resituate Gold Standard failed
(‘Gold Standard on the Booze’ (Keynes)).
• Problems of International Imbalances and
Recycling (Dawes Plan)
• Attempts to restore ‘wrong parities’
• Changes in Domestic Politics
1930s: Things fall apart!!!
• International Capital mobility collapsed
• Global Deflation
• Gold is abandoned.
• Bretton Woods Conference 1944 (White
and Keynes)
• Fixed but adjustable pegs. Dollar tied to
Gold
• Deregulate Current Account but not the
Capital Account
• A new form of Liberal World Economy
• Bretton Woods never really worked:
• Current Account convertibility was not
established until 1958 in Europe and 1964
in Japan
• From this moment onwards capital
account controls came under pressure
• Sterling Devalued in 1967
• Dollar devalued in 1971 and came off Gold
completely in 1973.
• From 1973 see fairly rapid ‘de-regulation’
by major states.
• Three aspects:
• Deregulation of particular national markets
• Removal of controls separating
functionally distinct market
• Removal of Controls over movement of
capital across boarders
• Deregulation. International Dynamic.
Secure position as a major financial centre
• May Day Deregulation 1975 (US), UK ‘Big
Bang’ reforms in 1980s (1986), Japan
deregulation (2001)
• Massive Increase in Volume of Trading
across different markets.
• The daily volume of share trading on the
New York Stock exchange increased from
approximately 10 million in 1970 to over 1
billion in 2005.
• According to the BIS the size of global
financial market increased from about 300
billion in 1974 to 7000 billion in 1996. By
2004 the total daily foreign exchange
turnover reached $2317 million compared
to $590 million in 1989
• High Levels of Volatility
• Early 2000s Dow Jones lost half its value
• Values of major currencies fluctuant by 50
to 100 per cent
• Finance itself becomes critical industry,
Between a quarter and a third of UK
employees involved in Finance
• Cultural normalisation of debt and
speculation
• Exists semi-globalised world financial
system
Explanations for What has
Happened
• Keynesian (Strange, Grieve, Smith et al):
Policy failures and lack of political will. In its
slightly more radical forms address social
power of key financier group
Soultions: Better Supranational Regulation,
The Reintroduction of Capital Controls and
National Re-regulation
• Neo-Liberal: Basically positive view of
development. In so far as there are
instabilities these are product of
government failures.
• Marxist interpretation:
• Finance is really not the key issue
• What we living through extended period of
financialisation/ fictitious accumulation
• Capital is value in motion, it must do
something!
• Ideally
• Money Capital, Manufacturing Capital,
Commodity Capital, Money Capital (Real
Accumulation)
• But if not possible
• Money Capital, Money Capital
• The rise in financial volatility since 1973 is
not a unfortunate consequence of
government decisions but consequence of
structural logics of capital
• Harvey talks necessary rise in financial
volatility
• Parallels with dominance of Image and the
Simulacrum. Also Parallels with 1920s
• Post-modern Interpretation
• McGoun
• Money is Sign. People want it not to do
anything with it but because of the prestige
it brings. The real value of money is a ‘sign
value’
• Game. Trade for stake of trading!
• For McGoun this is new and relatively
benign and perhaps sustainable.
• Crisis in the Financial Simulacrum do not
effect real economy
Conclusions
• It clear quite fundamental changes in
global financial structure since 1973
• Force us to rethink relationship between
Finance and Production
• We should not fetishise the spatial or
become preoccupied about debates
• I have no idea how stable global financial
system. When will the Perfect storm hit!