Alternative Theories of Money and Finance
New Directions in Modern Economics series
Chapter 6: Financialization: prelude to crisis
INTRODUCTION The concept of ‘financialization’ has informed recent analyses of the contemporary dynamics of monopoly capitalism. In the wake of the global financial crisis in 2007–08, the strategic role of finance and its capacity to destabilize the real economy and push it to the brink of economic depression has rekindled debates over the historical causes and institutional forms, which have characterized this phase of capitalist evolution. In other words, to what extent have the neoliberal policies pursued by most OECD countries over the past 30 years contributed to the emergence of this finance-led regime of accumulation? More specifically, what are the implications of the extraordinary build-up of private debt, which has financed private consumption and fuelled successive asset price and stock market euphoric bubbles over this period? At the same time, the problem of growing global imbalances between the surplus countries/regions and the deficit countries/regions has emerged as a major source of financial instability. In this context, what is the fate of the US dollar as the pre-eminent international means of payments, unit of account and store of value? The aim of this chapter is to provide some tentative answers to these questions. The basic thesis is that all of these seemingly disparate elements are inextricably connected. It will be argued that the breakdown of the mechanisms, which had supported the dynamics of financialization, have set the stage for the current global capitalist crisis. FINANCIALIZATION The global economy has experienced a protracted phase of overaccumulation over the past three...
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