The Dynamics of Bubbles and Golden Ages
Chapter 10: Frenzy: Self-Sufficient Financial Capital Governing the Casino
Frenzy: Self-Sufficient Financial Capital Governing the Casino 99 10. Frenzy: Self-Sufficient Financial Capital Governing the Casino133 A. Decoupling and Widening Social Gaps Frenzy is the tumultuous period when financial capital takes off on its own. It is at the same time – and partly for the same reason – a time of extremely unbalanced prosperity and of polarization on all fronts. The bifurcation between the new and the old which begins with the irruption of the technological revolution now becomes more and more of a chasm dividing the successful firms, industries and countries from the lagging ones; the mismatch between the changing economy and the inertial social practices and institutions becomes increasingly tense. The decoupling of financial capital from production capital aggravates both phenomena. New and old producing firms must, from then on, bend their decisions to provide the high short-term gains required by the stock market. The general behavior of the economy is increasingly geared to favoring the multiplication of financial capital, which moves further and further away from its role as supporter of real wealth creation. Its outstanding successes become ironic harbingers of the chaos to come. As may be recalled, this is also the time when two contradictory phenomena are taking place. On the one hand, there is the full flowering of the technological revolution itself, the installation of its infrastructure together with the clear establishment of the new paradigm as the set of technologies and organizational principles for modernizing all other activities. So there are parts of the...
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