Week 10 - Financialisation and Development Flashcards
What does financialisation refer to and what does the trend highlight?
the increasing dominance of financial markets, motives, institutions, and actors in shaping economic, social, and political dynamics within the global capitalist system
highlights a shift where financial markets extend beyond traditional economic boundaries, embedding themselves into the fabric of everyday life and governance
What did financialisation arise from?
the convergence of neoliberal ideology, historical context, technological advancements, IT Revolution
Why did financialisation arise from neoliberal ideology?
promoted deregulation and market supremacy
Why did financialisation arise from historical context?
stagflation in the 1970s destabilized post-war economic frameworks, paving the way for market-oriented policies
Why did financialisation arise from technological advancements?
tools like the Black-Scholes model revolutionised financial valuation and expanded the scope of speculative activities
Why did financialisation arise from IT Revolution?
lowered financial engineering costs, facilitated global trading, and enhanced the speed and scale of financial transactions
What do some opponents say played a central role in financial crises?
neoliberalism
Why do opponents frame neoliberalism not as a set of policies but as a systemic tool for transforming capitalism into a “rentiers’ delight?
it minimises pressures on big businesses by removing “compulsions,” such as taxation and regulation, while increasing constraints on workers and small firms
What is neoclassical mainstream economics based on?
the premise that rational, utility-maximising agents interacting in competitive markets create equilibrium that is optimal, stable, and self-correcting
What does neoclassical mainstream economics believe financial crises can arise from?
can only arise due to exogenous interference in market mechanisms, such as government overreach, unpredictable bad luck, like natural disasters or sudden economic shocks, currency depreciations caused by large, unexpected external factors
What does Polayni’s framework suggest capitalism alternates between?
suggests capitalism alternates between periods of minimal market regulation, where crises become frequent and periods of active societal intervention, especially in finance and labour markets, to stabilise the system
What is the criticism of Marxism in relation to neoliberalism?
inadequately explains how neoliberalism emerged as a dominant ideology (fails to capture how neoliberalism reshaped the social world to facilitate dispossession and restore class power to the capitalist elite)
Does neoliberalism believe that markets are natural or artificial, and what do they require?
views markets as artificial constructs requiring state support to function efficiently
What ideology calls for “a state under the surveillance of the market, not the reverse”=
Neoliberalism, emphasising minimal regulation and maximum freedom for capital
What does Foucault describe neoliberalism as and what is his critique?
“technology of power” designed to rationalise society
critiques how the capitalist elite misused this technology, using it not for rationalisation but for dispossession and rentier accumulation
What does efficient capital market theory posit?
that financial markets always reflect all available information, making systemic crises unlikely unless external disruptions occur
What ideology promotes the idea that markets are “good servants but bad masters”?
Keynesian-style Liberalism
What does Keynesian-style Liberalism believe? (challenging neoclassical view)
that unregulated markets often lead to sub-optimal equilibria, unemployment, and crises
argues that markets should be regulated by a strong state agency to ensure private self-interest aligns with socially optimal outcomes
Regarding financial inclusion, what are the impacts of financialisation?
while offering benefits like efficient transactions and expanded investment options, inclusion also reinforces the dependency of vulnerable groups on financial systems, leaving them exposed to market volatility
What type of investments did firms prioritise after financialisation?
firms focus on maximising short-term gains for investors, often at the expense of long-term strategic investments and innovation
After financialisation, why did real investments in capital formation decline?
Shift to speculative practices (profits are redirected into financial markets, prioritising high returns over economic productivity)
What does debt-driven consumption after financialisation refer to?
middle- and lower-income groups increasingly rely on credit to finance essentials like education, healthcare, and housing
Why is there loss of fiscal sovereignty in developing countries after financialisation?
reliance on foreign finance limits their ability to pursue independent economic policies
How does financialisation impact growth and inequality?
exacerbates income and wealth inequalities by enabling rent-seeking behaviours among financial elites