1 / 44

FINANCIAL GLOBALISATION AND THE STRENGH OF

FINANCIAL GLOBALISATION AND THE STRENGH OF SELF CENTERED, “SELF REGULATED” (c.f. K.Polanyi) FINANCIAL ACCUMULATION François Chesnais. 1. “SELF CENTERED” FINANCIAL ACCUMULATION 2. FINANCIAL GLOBALISATION 3. “DISTANCE FROM PRODUCTION”

dsmither
Download Presentation

FINANCIAL GLOBALISATION AND THE STRENGH OF

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. FINANCIAL GLOBALISATION AND THE STRENGH OF SELF CENTERED, “SELF REGULATED” (c.f. K.Polanyi) FINANCIAL ACCUMULATION François Chesnais

  2. 1. “SELF CENTERED” FINANCIAL ACCUMULATION • 2. FINANCIAL GLOBALISATION • 3. “DISTANCE FROM PRODUCTION” • 4. FINANCIAL ACCUMULATION NOT LIMITED TO “CORE COUNTRIES”, ALSO IN BRICS • 5. WHAT TYPE OF INDICATORS • 6. SOME ASPECTS OF THE CURRENT GEO-POLITICS OF FINANCE

  3. BRIC: AN ACRONYM COINED BY GOLDMAN SACHS = ECONOMIES « TARGETTED » AS COUNTRIES • WHERE CORE ECONOMY FINANCIAL FUNDS & BANKS COULD EXPAND THEIR OPERATIONS VERY PROFITABLY • WHERE SELF CENTERED, “SELF REGULATED” FINANCIAL ACCUMULATION COULD BE ENCOURAGED & STRENGHENED

  4. “SELF-CENTERED” FINANCIAL ACCUMULATION DEFINED AS: * AS MONEY BENT ON BEGETTING MONEY IN FINANCIAL MARKETS WITHOUT LEAVING THEIR SPHERE * AS ACCUMULATED ASSETS WHICH REPRESENT CLAIMS ON CURRENT AND FUTURE OUTPUT, AS LONG AS FINANCIAL CRASHES DO NOT WIPE THEM OUT * « SELF-CENTERED » BUT NOT «AUTONOMOUS », PREDATORY & HENCE DANGEROUSLY DEPENDENT

  5. * SUCH FINANCIAL ACCULUMATION IS MAINLY THE OUTCOME OF OPERATIONS MADE BY A SPECIFIC TYPE OF CAPITALIST INSTITUTION, WITH VERY DIFFERENT AIMS & TIME-HORIZONS FROM MANUFACTURING FIRMS * SUCH INSTITUTION INCLUDE BANKS, INSURANCE COMPANIES AND FUNDS (PENSION FUNDS, MUTUAL FUNDS, HEDGE FUNDS) * BUT LARGE CORPORATIONS ALSO INVOLVED IN FINANCIAL ACCUMULATION AS ACTIVE AGENTS & AS MAJOR “VEHICLES” = PREDATORY TRAITS INCREASE CONTINUALLY

  6. FINANCIAL INSTITUTIONS CENTRALIZE INCOME THAT IS “SAVED”, e.g. • NOT REINVESTED BY FIRMS IN NEW PLANT (AT LEAST IMMEDIATELY) • NOT SPENT ON GOODS AND SERVICES (BE IT BY PEOPLE EARNING SALARIES OR BY THOSE RECEIVING INCOME ACCRUING FROM PROFITS OR RENT)

  7. THE STRONG AMBIGUITY OF SAVINGS • FOR LOWER INCOME LEVELS THEY REALLY REPRESENT A SACRIFICE • AT HIGHER LEVELS THEY ARE SIMPLY A RESULT OF INCOME IN EXCESS OF NEEDS • IN ECONOMIES WHERE EDUCATION, HEALTH & RETIREMENT ARE LEFT TO INDIVIDUALS, THE SUMS PUT ASIDE ARE FODER FOR AND STRENGTHEN FINANCIAL ACCUMULATION

  8. UNSPENT INCOME IS USED BY BANKS & FUNDS TO MANAGE “PORTFOLIOS” OF FINANCIAL ASSETS (e.g. BONDS ,SHARES) BANK ACTIVITIES, NOTABLY CREDIT STRONGLY AFFECTED SPECULATIVE OPERATIONS = “WINDFALL GAINS ” (KEYNES). THIS ALSO DONE BY CORPORATIONS FUNDS MODIFY THEIR PORTFOLIOS ALL THE TIME = “ARBITRAGE” = ENDEMIC FINANCIAL INSTABILITY

  9. THE TRADING OF ASSETS TAKES PLACE IN “SECONDARY” FINANCIAL MARKETS WHERE ASSETS CAN BE TRADED AT VERY SHORT NOTICE (KEYNES’S “LIQUIDITY”) • FOR BANKS DIFFERENT FORMS OF CREDIT = MAIN SOURCE OF PROFIT • FINANCIAL MARKETS ALLOW THEM TO “SECURITIZE” e.g. TRADE MANY FORMS, NOTABLY MORTGAGE

  10. INTEREST, DIVIDENDS, etc. PROCURE INCOME PERTAINING TO RENT, e.g. FORMS OF LEVY ON GDP • LEVY ON TAXES RAISED OR EXPORTSEARNED • LEVY ON GROSS RESULTS OF FIRMS • EFFECT ON INVESTMENT • EFFECT ON INCOME DITRIBUTION = JUMP IN GROWTH OF INEQUALITY IN INCOME & IN WEALTH POSSESSION

  11. “GLOBALISATION”: THE WORKING OF THE WORLD ECONOMY BASED ON LIBERALISATION AND DEREGULATION OF • FINANCIAL FLOWS, FOREIGN DIRECT INVESTMENT AND TRADE • MARKED BY PRIVATIZATION & ENHANCEMENT OF PROPERTY (IPR) • PROCESS LED BY FINANCIAL INSTITUTIONS

  12. FINANCIAL GLOBALISATION BENT ON: • THE INTERNAL DEREGULATION & OPENING UP OF NATIONAL FINANCIAL SYSTEMS TO PORTFOLIO INVESTMENTS IN A FIRST PERIOD • LATER INCREASINGLY ON *LIBERALISATION OF FDI & THE FREE REPATRIATION OF CORPORATE PROFITS * FREE ACCESS OF FOREIGN BANKS TO DOMESTIC BANKING SYSTEMS

  13. PHASES IN THE ONSET OF FINANCIAL ACCUMULATION : * 2° HALF 1960s: EURO-DOLLAR MARKET IN LONDON * AFTER 1975: SYNDICATED LOANS TO DEVELOPPING COUNTRIES AT VARIABLE INTEREST RATE DETERMINED BY U.S. * 1982: MEXICAN & « THIRD WORLD » DEBT CRISIS = SERVICING OF INTERST ON DEBT AT USURIOUS RATES * U.S. & OTHER G7 GOVERNMENT DEBT = MASSIVE TRANSFER OF MONEY TO FUNDS

  14. IN 1980s: FUNDS BECOME STRONGER THAN BANKS MAIN VEHICLE OF FINANCIAL ACCUMULATION = INTEREST ON GOVERNMENT DEBT • CORPORATIONS « FINANCIARIZE »: CURRENCY SPECULATION, BUT ALSO CHANGES IN MANAGEMENT STRATEGIES (USE OF MONOPSONY, « HOLLOW CORPORATION », PREDATORY  SOURCING OF TECHNOLOGY, EXTERNALIZATION TO LOW COST VULNERABLE FIRMS, AGGRESSIVE LABOR POLICIES, ETC.)

  15. IN 1990s: MAJOR CHANGE IN THE IDENTITY OF OWNERS OF CORPORATIONS WITH SHIFT OF FUNDS PORTFOLIOS TO SHARES • ONSET OF CORPORATE GOVERNANCE • MID 1990s: NEW WAVE OF M&As • NEW PUSH OF FDI, NOTABLY IN ASIA TAKE OFF OF STRONG FDI IN CHINA • IN MANY COUNTRIES MOUNTING PRESSURE ON GOVERNMENTS TO PRIVATIZE AND TO SET UP MARKET-BASED PENSION SCHEMES

  16. « DISTANCE FROM PRODUCTION » = KEY DIFFENCES BETWEEN AUTONOMOUS FIRMS & THOSE GOVERNED BY FUNDS • IN FIRMS CONSIDERATIONS OF LONG TERM EXPANSION & GROWTH CAN PREVAIL, LONG HORIZONS • IN FUNDS THE RULE IS « VALUE FOR INVESTORS EACH QUARTER » • LOYALTY OF MANAGERS THROUHGH STOCK OPTIONS • BUT VERY GREAT PRESSURE ON LABOR

  17. BEGINNING IN THE LATE 1990s VALUE FOR SHAREHOLDERS BASED MORE ON MORE ON PRICE OF SHARES • SINCE circa 2000, NET OUTFLOW OF CASH FROM BOURSES FIRMS BUY BACK SHARES. NO NEW CASH ONCE IPO FINISHED • INVESTMENT IS FINANCED THROUGH ISSUING CORPORATE BONDS e.g. DEBT

  18. TODAY WHAT THE ECONOMIST (31.03.07) CALLS « VULTURE FINANCE » NURTURED BY « EXCESS LIQUDITY » IS OMNIPRESENT * PRIVATE EQUITY OPERATING FOR MUTUAL & HEDGE FUNDS & BANKS * LBOs LEVERAGED BY THE HUGE MASS OF MONEY LOOKING FOR JUICY FINANCIAL INVESTMENT

  19. FINANCIAL INVESTORS KEENLY INTERESTED IN « EMERGING MARKETS » • FOLLOWING THE MEXICAN & ASIAN CRISES & THE SHIFT TO SHARES, THE INTEREST OF INVESTORS HAS ALSO SHIFTED = EMERGING ECONOMIES AS • LOCUS FOR PROFIT & ROYALTY REMITTANCES BY TNCs = BETTER VALUE FOR SHAREHOLDERS

  20. AS AREAS OF EXPANSION OF MAJOR INTERNATIONAL BANKS THROUGH RIGHT OF ENSTABLISHMENT AND M&As • SHIFT FROM FOREIGN TO DOMESTIC PUBLIC DEBT MUCH OF WHICH HELD BY DOMESTIC BANKS = INTERNATIONAL BANKS ENT ON CASHING IN ON THIS

  21. EMERGING ECONOMIESNOT ONLY « TARGETS » ALSO LOCUS OF ENDOGENOUS PROCESSES • FOR FINANCIAL ACCULATION BY LOCAL OLIGARCHICAL GROUPS • FOR THE BUILDING OF LARGE DOMESIC CORPORATIONS • FOR ENDOGENOUS « PURE » FINANCIAL ACCUMULATION BY BANKS & LATTER FUNDS

  22. ENDOGENOUS FINANCIAL ACCUMULATION • IN BANKS & INSURANCE COMPANIES CENTRALIZING SMALL SAVINGS • IN PENSION FUNDS WHEN PENSIONS ARE PRIVATIZED • CHANNELS OF ACCUMULATION = HOLDING OF DOMESTIC PUBLIC DEBT • CREDIT AT HIGH INTEREST RATES

  23. DOMESTIC FINANCIAL INSTITUTIONS ARE EARLY & STRONG ADVOCATES OF LIBERALISATION IN FINANCE & FDI • DEFENSORS AND INITIATORS OF PRIVATE PENSION SCHEMES • PARTNERS AND EVEN INITIATORS OF TAKEOVERS OF NATIONAL FIRMS BY FOREIGN ONES AND OF M&As BY « MIXED CONSORTIUM »

  24. « DELIGHTS OF LIBERALISATION » • FDI LIBERALIZATION AGREEMENTS SPELL THE END OF LISTIAN POLICIES • FIRMS PLAY IN A « NEW LEAGUE » WITH RISK OF UNDER-ESTIMATION OF INTENSITY OF RIVALRY & SCALE OF ENNEMY FINANCIAL STRICKING POWER

  25. MEANINGFUL DATA COLLECTION • DATA NEEDED ON FORMS, SCALE & EFFECT OF FOREIGN FINANCIAL TARGETTING • DATA NEEDED ON FORMS & SCALE OF ENDOGENEOUS FINANCIAL ACCUMULATION

  26. DATA PROVIDED BY THE EXTERNAL CAPITAL ACCOUNT. • CAPITAL INFLOWS: TOTAL AND COMPOSITION: • FDI, INTERNATIONAL BANK LOANS AND SHORT-TERM CAPITAL • IDEALLY TYPE OF INVESTMENT (GOVERNMENT BONDS, OPERATIONS IN THE HOST STOCK MARKET, ETC.) • CAPITAL OUTFLOWS: IDEM

  27. DATA ON GOVERNMENT DEBT (CENTRAL GOVERNMENT & STATE & MUNICIPAL AUTHORITIES • SIZE OF DEBT (IN DOLLARS, % OF GDP, % of EXPORTS, etc.) • IDENTITY OF CREDITORS (FOREIGN OR NATIONAL) • IN THE LATTER CASE BREAKDOWN (DOMESTIC BANKS, PENSION FUNDS, etc.).

  28. DATA ON INWARD AND OUTWARD FDI, WITH BREAKDOWN BETWEEN GREEN-FIELD AND M&As • FOR INWARD FDI OF INVESTORS (FIRMS OR FUNDS) & NATIONALITY • FOR OUTWARD FDI COUNTRIES OF DESTINATION AND NATURE OF INVESTMENT (M&A or GREENFIELD)

  29. DATA ON M&As & POST-1990s CHANGES IN OWNERSHIP OF: • NATIONAL PRIVATELY OWNED FIRMS: OWNERSHIP BY FAMILIES, BANKS, DOMESTIC PENSION FUNDS, etc. • OF STATE OWNED ENTERPRISES (PRIVATIZATION)

  30. ACQUISITIONS BY • FOREIGN CAPITAL: INDUSTRIAL CORPORATIONS (MANUFACTURING, MINING OR SERVICES), FINANCIAL INVESTORS • DOMESTIC CAPITAL (idem) • CHANGES IN THE DEGREE OF CONCENTRATION ACCOMPANYING CHANGES IN OWNERSHIP

  31. DATA ON THE FINANCIAL SYSTEM • FINANCIAL DEPTH (FINANCIAL ASSETS AS % OF GDP) • MAIN BREAKDOWN OF ASSETS (BANK DEPOSITS, GOVERNMENT DEBT, CORPORATE DEBT, EQUITY) • SIZE AND GROWTH OF THE NATIONAL CORPORATE BOND MARKET

  32. DATA ON THE DOMESTIC STOCK EXCHANGE • CAPITALIZATION AND PERFORMANCE (BACK TO 1995) • LISTED COMPANIES (SECTOR OF ORIGIN, VALUE OF CAPITALIZATION) • REGULATORY REGIME FOR FOREIGN INVESTORS.

  33. DATA ON THE NATURE OF SAVINGS & THEIR CENTRALIZATION BY BANKS AND OTHER INSTITUTIONS • SIZE OF HOUSEHOLD SAVINGS AND THEIR COMPOSITION (BANK DEPOSITS, FINANCIAL ASSETS, GOLD, PHYSICAL ASSETS) • SIZE & GROWTH OF PENSION FUNDS

  34. DATA ON BANK CREDIT • DISTRIBUTION BY TYPE OF CREDIT (FIRMS, LARGE, SMALL, MORTGAGE, CONSUMER CREDIT, etc.) • COST (INTEREST RATES FOR TYPES OF CREDIT)

  35. THE GEO-POLITICS OF FINANCE: A FEW FEATURES • CHANGE IN « THIRD WORLD DEBT » = LARGE TRADE SURPLUSES& DOLLAR RESERVES BY SEVERAL MAJOR COUNTRIES, NOTABLY BRICS • U.S. AS MAJOR DEBTOR COUNTRY • U.S.-ASIA AXIS AS MAIN GLOBAL RELATIONSHIP STRUCTURING WORLD MACRO-ECONOMICS

  36. The backbone of the current systemic configuration of the global economy is the US-Asia axis : China & Japan in different as well as in similar capacities ; less crucially Korea &Taiwan ; India in a particular position • All other regions, including the EU, subordinate to this power axis & dependent on the demand pull created by both poles

  37. United States needs the : • “China effect” on wages & the price of manufactures • profits and so the capacity to pay dividends made by US TNC exploiting in situ China’s cheap, disciplined labor force • purchase of T-Bonds made by the Central Bank of China

  38. Other indirect positive effects for U.S. * Support provided by China to Japan, Taiwan & Korea • it was unwilling/incapable to help Japan out of the post 1990 recession • it needs the purchase of T-Bonds also made by Japan, Taiwan & Korea * Indirect benefits from China’s demand for raw materials to Latin America

  39. China needs the United States: • as its principal export market = “U.S. consumer of last resort” • as a source of productive capital but also of managerial know-how and technology to be assimilated and improved • currently China pays the price in the form of outward flows of profits, but already candidate for the M&A of Western firms

  40. High vulnerability of these relationships • Risk in a quite near future of transition from “healthy” deflationary conditions to outright deflation • Asia again the seat of strong latent over-accumulation & excess capacity • In other parts of the world system play of capital’s “classical” contradiction

  41. Goods must be bought by economic agents with monetary income • Wages provide “demand”, but are viewed by capitalists as “costs” and as “levies” on their profits = inherent pressure to reduce real wages • Large scale resorting to the “China effect” = little leeway to offset a U.S. recession

  42. U.S. mortgage & consumer credit expansion has reached its limits • U.S. external deficits put a ever greater strain on the dollar: what the limit level that holders of dollar reserves accept?

  43. A major global financial crisis with New York as its heart • Did not materialize in 1998 or in 2001, but it cannot be ruled out because of the huge accumulation of assets (e.g. fictitious capital) and the U.S. deficits • Much harder, possibly impossible for the Fed to resort to new massive “anti-cyclical” credit creation as in the past

  44. Any financial incident can trigger off the latent situation created by overcapacity & endemic overproduction • Trade wars which WTO would not be able to control • Monetary blocks, but great tension between rivals for their leadership • Reminder that the global economy created by liberalization is an unregulated one

More Related