Financial capital: setting the scene

 

The huge growth of deregulated finance has been associated to a new financial regime and great transformations in the pattern of economic growth. Looking backward, there has been a narrow relationship between the crisis of the post-war accumulation pattern, the evolution of the international monetary system and the process of financial deregulation. In fact, as Bello  warned, in the 1980s, Reaganism and structural adjustment were not successful attempts to overcome the post-war accumulation crisis. One decade later, the Clinton administration embraced globalization as an American strategy. First, this strategy aimed to accelerate the integration of production and markets by transnational corporations. Secondly, it aimed to create a multilateral system of global governance centered on the World Trade Organization, the International Monetary Fund and the World Bank.

 

 

 

Global liquidity, stimulated by the evolution of the American monetary policy since the early 1990s, favored the expansion of private capital flows and deepened the interconnections between national financial systems. The notion of a financial-led accumulation regime highlights that finance decisively shape a pattern of accumulation where low growth rates and a high degree of financial fragility have been observed. The growth of financial assets, generated by debt cycles, has included growing and sophisticated risk management practices. The financial expansion also proved to subordinate the pace of investment to financial commitments, enhanced deep international imbalances and reinforced macroeconomic volatility. In this scenario, financial capital has exercised control over social and economic structural forms in order to foster cycles of capital valorization, thanks to the centralized money at disposal.

 

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