Tag Archives: finance

on the demise of neo-liberalism

Stumbled on this excellent blog – The blogger Haroon Akram-Lodhi writes:

… global financial crisis of the past 3 weeks has, in my view, fundamentally changed the landscape of global capitalism. A world that was effectively born on 4 November 1980, with the election of Ronald Reagan as U.S. President (I was in San Francisco at the time) has ended, and a period of untrammelled global neoliberalism will have to change if global finance capital is to survive.

How much has the world changed? Consider this. In the United Kingdom, where, of course, London is the second most important financial center in the world, the Royal Bank of Scotland, one of Britain’s most important financial institutions, will soon be 57 per cent owned by the British state. It is also expected that the British state will own up to 40 per cent of the newly merged (and so far unnamed) Lloyds-TSB-Halifx Bank of Scotland combination, which is also one of the largest and most important British financial institutions. Continue reading

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Filed under finance, neo-liberal

Farewell to the neo-classical revolution

by Robert Skidelsky

A few geniuses aside, economists frame their assumptions to suit existing states of affairs, and then invest them with an aura of permanent truth. They are intellectual butlers, serving the interests of those in power, not vigilant observers of shifting reality

The looming bankruptcy of Lehman Brothers and the forced sale of Merrill Lynch, two of the greatest names in finance, mark the end of an era. But what will come next?

Cycles of economic fashion are as old as business cycles, and are usually caused by deep business disturbances. “Liberal” cycles are followed by “conservative” cycles, which give way to new “liberal” cycles, and so on. Continue reading

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Filed under capitalism, finance, United States

Financial Liberalization and Crisis in the Age of Globalization

by Muzaffer Vatansever & Mustafa Kutlay (courtesy Turkish Weekly opinion)

“Periods of high international capital mobility have repeatedly produced international banking crises, not only famously as they did in the 1990s, but historically.” Reinhart and Rogoff[1]

 Globalization has turned out to be one of the most controversial topics of our time. It is almost impossible to conclude a debate without touching upon at least one aspect of globalization. Moreover, it is not an easy job to make a comprehensive and adequate definition of it that leads to overselling of this term. Notwithstanding the definitional ambiguity, there is more or less consensus on what economic globalization is: It briefly refers to the abolishment of customs and trade barriers, the surge in technological developments and knowledge, the widespread liberalization and integration of financial markets, and the movements in labour markets (Figure-1)

 Arguably, the most dynamic and unstable part of economic globalization is the financial side of the story. The recent financial crises have clearly demonstrated this fact, and proved that the deterioration in the financial system has the potential to plunge the overall economy into a crisis, per se. For instance, the perversion of the financial globalization had caused huge economic meltdown in Mexico and South Korea even these countries have solid macroeconomic fundamentals at the very beginning of the crises. For example, before the crisis in Mexico, the inflation fell from 130% in 1987 to 7% by 1994; economy was growing at an annual rate of 4.4%; while the government budget was -0.7%. The only problem was the current account deficit with 7.2% of GDP[2]. The uncontrolled and very fast liberalization of the Mexican financial system has paved the way to full-fledged financial crisis. These and the similar other crises brought up one important point into the agenda of world economy: What are the risks associated with capital market liberalization, and in which ways:  Continue reading

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Filed under Capital markets, Economy, finance, IFIs