Finance-Led Capitalism
Abstract
In Finance-Led Capitalism , bestselling author and economist Robert Guttmann provides a new conceptual framework to assess the dominate role of modern finance within the workings of our contemporary economic system. This lively and provocative read will challenge some of the core beliefs about modern finance and the world economy.
... This chapter adds historical and institutional context to the previous chapter by demonstrating the role of uneven environmental transformations in the making of financedominated capitalism. Three major stylized facts of the last fifty years, which have previously been left disconnected, are shown be institutionally coherent, interdependent, and highly dangerous: (i) the increasing material and pollution intensity of global production (IRP et al., 2019;, (ii) the increasing speed, scale and geographic scope of physical trade via the proliferation of global value chains (Baglioni and Campling, 2017), and (iii) the exponential growth of financial markets and cross-border financial flows that constitute financialized capitalism (Guttmann, 2016). ...
... See especially work in french regulation theory and world-systems theory, notablyGuttmann (2016) ...
This thesis builds upon the emerging field of "ecological macroeconomics" to study how dominant development patterns are constituted by and reproduce global inequalities and environmental degradation. Chapter 2 reviews and categorizes the available literature in ecological macroeconomics, noting its contributions to studying economy-environment dynamics. Chapter 3 critically assesses the ecological macroeconomics framework. It is argued that the field can better analyze environmental challenges by considering nature as inherently political: human-nature relations are regulated through social conflicts in ways that benefit some groups over others. This approach is applied in chapter 4, which uses a "Core-Periphery" (balance-ofpayments constrained growth) model to explore how global environmental inequalities are produced by 'green' sustainability initiatives. The increasing efficiency within a high-income Core region is shown to depend on displacing carbon-intensive activities to the low-income Periphery. Chapter 5 then extends the analysis to understand financialization, presented here as a global dynamic of environmental (re- )organization that supports accumulation in the Core at the expense of social and environmental stability in the Periphery. This dynamic is permitted by the subordination of Peripheral countries within the organization of global monetary, productive and environmental relations. Chapter 6 summarizes and concludes. The evidence presented throughout the thesis signal that for ecological macroeconomics to address contemporary challenges, it must adopt a political view of nature
... This chapter adds historical and institutional context to the previous chapter by demonstrating the role of uneven environmental transformations in the making of financedominated capitalism. Three major stylized facts of the last fifty years, which have previously been left disconnected, are shown be institutionally coherent, interdependent, and highly dangerous: (i) the increasing material and pollution intensity of global production (IRP et al., 2019;, (ii) the increasing speed, scale and geographic scope of physical trade via the proliferation of global value chains (Baglioni and Campling, 2017), and (iii) the exponential growth of financial markets and cross-border financial flows that constitute financialized capitalism (Guttmann, 2016). ...
... See especially work in french regulation theory and world-systems theory, notablyGuttmann (2016) ...
Cette thèse s’appuie sur le domaine émergent de la « macroéconomie écologique » pour étudier la manière dont les modèles dominants de développement sont la source d’inégalités mondiales et de dégrada- tion de l’environnement tout autant qu’ils en résultent. Le chapitre 2 propose une revue de la littérature sur la macroéconomie écolo- gique, et répertorie cinq thématiques à travers lesquelles elle contri- bue à la compréhension des dynamiques économie-environnement. Le chapitre 3 procède ensuite à une évaluation critique du cadre de la macroéconomie écologique, fondée sur l’idée qu’une analyse ri- goureuse des défis environnementaux requiert d’appréhender la na- ture comme intrinsèquement politique et organisée par des conflits sociaux. Cette approche est mise en pratique dans le chapitre 4, qui utilise un modèle « Centre-Périphérie » (croissance contrainte par la balance des paiements) pour étudier la manière dont les inégalités environnementales mondiales peuvent être renforcées par la transi- tion vers une économie « verte ». En particulier, l’augmentation de l’efficacité énergétique et environnementale au « Centre » (pays à re- venu élevé) dépend de la délocalisation des activités à forte intensité de carbone dans la Périphérie (pays à revenu faible). Le chapitre 5 élargit l’analyse en abordant la thématique de la financiarisation via le cadre théorique de cette thèse. La financiarisation peut alors être comprise comme une dynamique mondiale de (ré)organisation envi- ronnementale, soutenant l’accumulation dans le Centre au détriment de la stabilité sociale et environnementale dans la Périphérie. Cette dynamique est permise par la subordination des pays de la Périphérie dans l’organisation des relations monétaires, productives et environ- nementales mondiales. Le chapitre 6 résume et conclut. Les éléments présentés tout au long de la thèse signalent que pour être en mesure de relever les défis actuels, la macroéconomie écologique se doit de développer une vision politique de la nature.
... 37 and 45) state, generally, financial deregulation and liberalization can act as a shock (or 'displacement'), triggering a wave of optimism between investors and lenders that may start an asset price boom. Guttmann (2016) contends that such a phenom happened in this case. He discusses how financial innovations were crucial for the housing boom of the 1990s and how they intensified the overall importance of financial aspects for the US macroeconomic performance. ...
The leading role of residential investment in the business cycles is a robust stylized fact for the US economy. The housing bubble of the 2000s has increased interest in the macroeconomic relevance of this expenditure. However, there is still controversy surrounding its determinants. This article is an attempt to fulfill this gap. We propose to combine mortgage interest rate and house price inflation — two of the most relevant variables according to the literature — in a single index: houses’ own-rate of interest. This index represents the real cost of buying houses, so we expect a negative relationship with the growth rate of residential investment. Regarding the US economy from 1992 to 2019, we find a unidirectional negative correlation between houses’ own-rate of interest and residential investment growth rate in the long run. In the short-run adjustment process, we report no statistically significant effect of residential investment growth rate on houses’ own- rate of interest. Our results are robust to lag order specification and show that houses own-rate of interest explains more than half of the variability of residential investment rate of growth.
... 8. The dismantling of the "Bretton Woods" system and the following liberalisation of global capital markets , the internationalisation of production, technological advances in communication and computer sciences, the deployment of financial innovations, and the rise of the neoliberal paradigm are among some of the events of the 20 th century that contributed to expanding the size of the financial sector and the volume of financial capital in circulation (see, e.g., Guttmann, 2016;Huffschmid, 2009;Fine, 2008). ...
This article introduces financialization as a critical concept for analyzing contemporary reforms in public health systems (PHS). It argues that financialization offers a distinct analytical lens that complements and goes beyond established notions such as privatization. A central contribution of the paper is clarifying the conceptual boundaries between financialization and privatization, two terms that are often conflated in the health policy literature. The study shows that while both processes respond to fiscal constraints and promote market-based reforms, financialization brings in new actors, such as global investors and financial intermediaries, and transforms public financing mechanisms in unique ways. It also highlights how financialization can exacerbate the challenges previously associated with privatization, including reduced transparency, increased inequality, and diminished democratic control. The paper encourages the incorporation of financialization into the conceptual toolkit of health policy research seeking to open up new directions for investigating the political economy of health and the evolving role of the state in service provision.
... Since this paper focuses on the peripheral currencies, these controversies concerning the list of the "central currencies" do not cause any problem for the arguments. It is also important to notice that the Chinese renmimbi is quickly increasing its usage at the international level; this issue goes however beyond the scope of this paper (for details, see for instance Guttmann, 2016). ...
p>This paper presents the recent debate on modern monetary theory (MMT) and contributes to a critical view on its application to peripheral countries. MMT has been centered on both demystifying postulates of the ‘New Macroeconomic Consensus’ and offering an alternative theory to reach full employment with price stability. However, it has been criticized for assuming that constraints on domestic policies are generally self-imposed, not arising from international markets. Using the “international currency hierarchy” approach, this paper argues that peripheral countries, in the context of financial globalization, are not fully sovereign in determining its own macroeconomic policy. Our main argument is that currencies issued by peripheral countries do not fulfill money classical functions at the international level. Being hence illiquid at the international scenario, these peripheral currencies (and assets) are demanded by the international investors only in the quest for high returns; moreover, this demand depends on the “international liquidity preference” and the markets’ confidence in this country. Consequently, interest rates in peripheral countries tend to be higher and volatile. Additionally, the exchange rate is potentially under the pressure of this capital flows movements. Finally, monetary, fiscal and exchange policies in peripheral countries have constrains that are not considered by MMT.</p
... It also meant forcing an improvement in the regulation and supervision systems. The new rules for the operation of financial systems seem to go in the direction of an improvement of Basel II at a global level, according to what has been called supervised self-regulation, i.e., with some rules regarding the degree of leverage, stress tests for new instruments and corporate governance reflecting the fiduciary responsibilities of financial institutions (Guttmann, 2008). 6 The financial 6 Within the Basel Committee for Banking Supervision (BCBS), negotiations and improvements in the models and in the mechanisms of risk management and monitoring continue: 'In April 2008, the Basel Committee has announced a institutions -whether they act on a global scale or not -will follow the norms of risk-weighted capital and the increasingly sophisticated monitoring and management systems. ...
The depth and width of the crisis of deregulated, liberalized and poorly supervised finances will entail changes in the regulation and supervision of financial systems. However, these changes are very unlikely to result in a structural reform of the international financial framework and in the reversion of financial globalization. The main proposals for reorganization currently being discussed tend to take no consideration of the subordinate position of developing countries in the international monetary and financial system. This article thus seeks to discuss the implications of the crisis for peripheral countries which have become part of the financial globalization, turning into "emerging markets". Since the strategies implemented after the crises of the 1990s have proven insufficient to protect them against the intrinsic volatility of international capital flows, the article proposes to rekindle debate concerning controls and management techniques for these flows, which also involves prudential regulation on operations with foreign currency by the financial institutions of such countries.
Financialisation has been represented as a recent phenomenon linked to the deregulation and globalization of the international trade and payments system that has been in progress since the opening of the Chinese economy in the 1980s. It is often represented as the dominance of finance over production or of monetary over real variables. This essay challenges the usefulness of this dichotomy, arguing in the tradition of Keynes, Schumpeter and Minsky that it is impossible to separate the financing of production into separate categories since a production decision always requires finance to be implemented. It instead suggests that it is the process of innovation in the creation of liquidity by the financial system that provides a more insightful analysis of the implications of financialisation.
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