Edited by Jan Toporowski and Jo Michell
Chapter 20: Globalization
Of all the developments from the 1980s broadly termed ‘globalization’, growing cross-border financial activity attracted most attention. Commentaries prophesying the ‘death of distance’ and ‘end of geography’ envisaged the emergence of a seamless global capital market. This was variously expected to lead to allocative efficiency gains, international risk sharing and consumption smoothing, and major capital flows from the rich North to the capital-scarce South. Governments would be constrained, if not effectively prohibited, from pursuing inefficient policies. The potential for external crises was downplayed, attributed to government policy failures or seen as the occasional price to be paid for faster growth through exploiting risk–return trade-offs. Financial globalization in these accounts was largely attributed to the impact of new information and communication technologies. Whilst these technologies facilitated the exponential growth of cross-border transactions in assets and derivative products, a more historical perspective qualifies this account.
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