《Financialization of the global economy》.pdfVIP

Industrial and Corporate Change, Volume 17, Number 6, pp. 1097–1112 doi:10.1093/icc/dtn041 Advance Access published October 30, 2008 Financialization of the global economy Ronald Dore The instability of the world financial system, starkly revealed in the recent debacle, is not the only problem it poses. Its secularly increasing dominance over the real economy is in itself a phenomenon that needs examining. The article traces the source of this increasing dominance not just to the increasingly leveraged and increasingly incomprehensible forms of intermediation between savers and those in the real economy who need credit and insurance, but also to the increasingly ˆ universal doctrine that maximizing “shareholder value” is the sole raison d’etre of the firm and the promotion by governments of an “equity culture.” Some of the social consequences of financialization are exacerbating inequalities, greater insecurity, misdirection of talent, and the erosion of trust. “Era ends as two Banks cut risks and form holding companies,” announces the International Herald Tribune,1 reporting the humbling application by Morgan Stanley and Goldman Sachs to renounce the money-spinning, and never before so dangerous, advantages of unlimited leverage, off-balance-sheet financing, and secrecy, for the relative security of a regulated deposit-taking bank. Similar “era ends” headlines might well have appeared 70 years ago when the Glass-Steagall Act reached the statute books. But one is entitled to be skeptical. The underlying processes of financialization which have been evident in free-market capitalism since the last world war—processes for the most part originating in the United States and