Financialization And The World Economy

. . . the book’s combination of breadth and depth suggests it will remain a standard work for heterodox students for some time. It quite correctly puts financialization at the center of the political economy of our time. I highly recommend Financialization and the World Economy to scholars in the field.’
– William K. Tabb, Queens College, CUNY, US

‘We are all acutely aware of the increasing role in economic life of financial markets, institutions and operations and the pursuit of financial rewards, that is financialization. This book helps us to understand this dominant feature of neo-liberalism by examining the distributional implications, the effects of financialization on the US economy, international dimensions and monetary system, financial crises and policy responses. The breadth and depth of the analyses in this book will make it a most important contribution to the awareness of the problems raised by financialization and to the development of policy responses.’
– Malcolm Sawyer, University of Leeds, UK

‘This is a valuable collection of articles on financial globalisation from leading unorthodox economists. Edward Elgar are to be commended for bringing together these diverse writings in one volume. This will surely become a standard reference on the subject, even for those with orthodox perspectives.’
– Ajit Singh, University of Cambridge, UK

‘One of the most important economic developments of the last quarter century has been the growth of the financial sector. In almost every country there has been a large increase in the share of profits that go to finance. This growth in the financial sector’s profits has not been an accident; it is the result of conscious government policies. Remarkably, the economics profession has mostly viewed the growth of the financial sector as being of no special consequence, regarding its expansion as no different from growth in any other industry. This book takes an important step towards addressing this gap in research, examining the causes and consequences of an enlarged financial sector. The need for such work will become more evident as the world economy confronts more financial crises, like the stock market crash of 2000–2002.’
– Dean Baker, Center for Economic and Policy Research, Washington, DC, US

‘Financialization is a central and shaping feature of the world economy in the current period of liberalization of financial markets and trade. Financialization and the World Economy offers a series of expert, well-informed, critical studies of this phenomenon which explore its risks and costs. Readers who seek a balanced understanding of globalization will find this book an invaluable resource.’
– Duncan Foley, New School University, New York, US

Financialization – the increasing importance of financial markets, institutions and motives in the world economy – is described and analyzed in this rigorously researched volume. The contributors, top scholars in their fields, explore the quantitative and qualitative dimensions of financialization and tally its costs and benefits for society as a whole. They explore the puzzling promotion of financial liberalization by governments despite its enormous costs, and describe what can be done to alter the destructive path toward excessive financialization that most countries are taking.

The book begins by presenting basic data on the distributional implications of financialization. Part two focuses on financialization in the context of the US economy, with discussion of the relationship between financialization and non-financial corporations, the stock market bubble, and the evolution of derivatives markets. The international dimensions of financialization are explored in part three, with particular attention paid to the evolution of the international monetary system. Part four presents five case studies of financialization and financial crises in emerging markets in the 1980s and 1990s: Mexico, Turkey, Argentina, Brazil, and South Korea. The final section offers ideas for policy responses, including capital controls and securities transaction taxes.

Researchers and students of international economics and finance will find this provocative volume an important part of the debate surrounding this multi-faceted phenomenon.

Contents:

Preface

PART I: INTRODUCTION AND DISTRIBUTIONAL IMPLICATIONS
1. Introduction: Financialization and the World Economy
Gerald A. Epstein

2. Costs and Benefits of Neoliberalism: A Class Analysis
Gérard Duménil and Dominique Lévy

3. The Rise of Rentier Incomes in OECD Countries: Financialization, Central Bank Policy and Labor Solidarity
Gerald A. Epstein and Arjun Jayadev

PART II: FINANCIALIZATION AND THE US ECONOMY
4. The Neoliberal Paradox: The Impact of Destructive Product Market Competition and ‘Modern’ Financial Markets on Nonfinancial Corporation Performance in the Neoliberal Era
James Crotty

5. The Late 1990s’ US Bubble: Financialization in the Extreme
Robert W. Parenteau

6. Derivatives Markets: Sources of Vulnerability in US Financial Markets
Randall Dodd

PART III: FINANCIALIZATION AND THE INTERNATIONAL MONETARY SYSTEM
7. Financial Globalization, Exchange Rates and International Trade
Robert A. Blecker

8. The Eurodollar Market and the New Era of Global Financialization
Edwin Dickens

9. The Role of the International Monetary System in Financialization
Jane D’Arista

PART IV: CASE STUDIES OF FINANCIALIZATION AND ECONOMIC CRISIS
10. The Rise of the New Money Doctors in Mexico
Sarah Babb

11. The Making of the Turkish Financial Crisis
Yilmaz Akyüz and Korkut Boratav

12. The Recent Crisis – and Recovery – of the Argentine Economy: Some Elements and Background
Arturo O’Connell

13. International Liquidity and Growth Fluctuations in Brazil
Nelson H. Barbosa-Filho

14. The Causes and Consequences of Neoliberal Restructuring in Post-Crisis Korea
James Crotty and Kang-Kook Lee

PART IV: POLICY PERSPECTIVES
15. Averting Crisis? Assessing Measures to Manage Financial Integration in Emerging Economies
Ilene Grabel

16. Why International Capital Mobility Should be Curbed and How it Could be Done
David Felix

17. Applying a Securities Transactions Tax to the US: Design Issues, Market Impact and Revenue Estimates
Robert Pollin

Index