Financial Globalisation

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Financial Globalisation
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• Aims of Lecturer
• To explore the extent of financial globalisation
• To explore the main forces and agents driving the
  process of financial globalisation
• To explore the social, political and economic
  consequences of financial globalisation

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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

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Part OneFrom 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)

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• Gold Standard important in disciplining domestic
  actors
• Links domestic economic actors to global market
  disciplines.
• Makes the economy knave proof

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• 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

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• 1930s Things fall apart!!!
• International Capital mobility collapsed
• Global Deflation
• Gold is abandoned.

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• 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

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• 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.

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• 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

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• 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)

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• 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.

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• 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

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• 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

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• Exists semi-globalised world financial system

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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

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• Neo-Liberal Basically positive view of
  development. In so far as there are instabilities
  these are product of government failures.

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• 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!
  

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• Ideally
• Money Capital, Manufacturing Capital, Commodity
  Capital, Money Capital (Real Accumulation)
• But if not possible
• Money Capital, Money Capital

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• 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

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• 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!

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• For McGoun this is new and relatively benign and
  perhaps sustainable.
• Crisis in the Financial Simulacrum do not effect
  real economy

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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!