Money, Finance and Capitalist Development

Money, Finance and Capitalist Development

Edited by Philip Arestis and Malcolm Sawyer

In the past thirty years the financial sector has seen unparalleled growth and has exerted increased economic and political influence and significance. This growth has come hand-in-hand with several serious economic crises and greater monetary instability. Set against this background, this important book offers a wide ranging, critical analysis of the financial sector.

Chapter 1: Money, finance and capitalist development

Philip Arestis and Malcolm Sawyer

Subjects: economics and finance, financial economics and regulation, money and banking

Extract

1. Money, finance and capitalist development Philip Arestis and Malcolm Sawyer INTRODUCTION There can be little doubt that the financial sector is much more important now than it was even 20 or 30 years ago. This is not to deny that the financial sector has always been central to capitalism, but rather to point to its increased importance over the period. This importance may be seen in the growth of financial services through to the rapidly increasing flows across the foreign exchanges. The statistics on this account are staggering, no other good or service has witnessed similar rates of growth in the period 1980–97. The value of financial service exports has increased almost fivefold; over the same period, growth in trading manufactured goods has only tripled. Interestingly, financial services are ahead even compared with major areas of growth in international trade, such as telecommunications/information technology (IT) and travel. (Seifert et al., 2000, p. 51) Employment in the financial sector has also generally increased substantially. This era has also been outstanding in terms of increased financial flows across the foreign exchanges (with increases of the order of 50 per cent each three years: see Arestis and Sawyer, 1997), with the inevitable feature that a much decreased proportion of the exchange of one currency for another is linked to trade or to long-term direct investment, and a much increased proportion has been short-term financial movements seeking out higher financial returns or seeking to gain from movements in the exchange rates. In...

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