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- Author: Susan Strange x
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This book begins with a recapitulation of the main themes of Strange's earlier Casino Capitalism, stressing the major policy decisions and non-decisions that, in her opinion, had first allowed financial markets seemingly to outgrow governmental control. It adds a number of newer systemic developments that had emerged in the years after Casino Capitalism was published. Following this opening tour d'horizon, the book evaluates many of these developments in greater detail, covering the revolution in information technology interstate politics, contagion risks, global debt, money laundering and the roles of both national governments and multilateral agencies such as the International Monetary Fund and Bank for International Settlements. Great emphasis is placed on the relationship between the United States and Japan, the 'US-Japan axis', which is considered crucial to the effective management of financial crises. All the strings of Strange's discussion are pulled together where she turns her eyes to the future. Most financial research at the time seemed biased toward midlevel theory building, focusing primarily on key relationships within a broader structure whose characteristics were assumed, normally, to be given and stable. The book discusses hypotheses about the most important changes that have affected the global financial system and the international political economy. Key decisions, or non-decisions in the case of failures to act when positive action would have been possible, are also discussed.
Originally released by Basil Blackwell in 1986, and then re-released by Manchester University Press in 1998, Casino capitalism is a cutting-edge discussion of international financial markets, the way they behave and the power they wield. It examines money's power for good as well as its terrible disruptive, destructive power for evil. Money is seen as being far too important to leave to bankers and economists to do with as they think best. The raison d'être of Casino Capitalism is to expose the development of a financial system that has increasingly escaped the calming influences of democratic control.
This new edition includes a powerful new introduction provided by Matthew Watson that puts the book it in its proper historical context, as well as identifying its relevance for the modern world. It will have a wide reaching audience, appealing both to academics and students of economics and globalization as well as the general reader with interests in capitalism and economic history.
Family businesses painstakingly built up over the years were bankrupted. The future looked dark indeed for the once-proud 'tiger economies' of east Asia. It was a coincidence that the book to which this is some sort of sequel, Casino Capitalism, had ended with just such a graphic image of the financial operators drinking champagne, while outside the tower-block offices other people were having a hard time of it. The pace of globalisation and of changes in the financial system that lay behind what people thought of as globalisation had got faster. The chapter presents various hypotheses about the most important changes that have affected that global financial system. To play fair with the general reader, and incidentally, to show what a wide variation there is in theories and interpretations of changes and events, there should also be some review of those conflicting approaches.
Changes have been constant, fast and contagious as between markets, operators and institutions. This chapter describes the most important of the innovations which lay behind some of these changes. It considers the nature of innovation and the wider implications of different kinds of innovation for the economy and society. To explain what derivatives are and how they came to occupy so central a place in the international financial system, the chapter presents a little historical background. Two innovations that are less important than derivatives but nonetheless interesting for both the factors giving rise to them and the consequences that followed are leveraged buyouts and junk bonds. The chapter concludes with some comments on the consequences, social and political as well as economic, of innovations.
This chapter presents a brief analytical survey of the political underpinnings of cooperation and how they have changed for the worse. Two key political relationships that might affect the international financial system are between the United States and Japan and between France and Germany. The chapter provides information on the US-Japan relationship. There was built up a connection between the two deficits, the fiscal deficit between US savings and taxes and government spending, and the trade deficit between US exports and imports. By the end of 1995, the US economy had finally climbed out of recession, while the Japanese economy had not. The politically significant change was that financing the US fiscal deficit depended not on private capital inflows from Japan but on official ones. And meanwhile the US strategy of talking down the dollar had unintentionally done the Japanese bureaucracy a good turn.
Franco-German relations are the important political underpinning for the stability of the international financial system to which observers must pay attention. A Franco-German compromise had laid an early foundation for what was to become the European Union. This chapter shows why so little attention was given in Brussels, Paris and Bonn in the mid-1990s to the uncertainties that surrounded Economic and Monetary Union (EMU) and the dangers that lay in its path. Even assuming that EMU, like the Exchange Rate Mechanism, encounters no market turmoil in the dangerous transition period to 2003, it could very well be that German monetary hegemony in the European Union will doom European economies to prolonged slow growth, high unemployment and low competitiveness. European official and much conventional opinion has always tended to exaggerate the euro's chances of rivalling the dollar.
History and the media between them have spread the idea far and wide that Wall Street, or perhaps stock exchanges generally, are the weakest point in the international financial system. If there is going to be trouble in the world market economy, that is where it will start. This chapter examines whether this is a correct reading of history and the right conclusion to draw from the developments. Besides the quick recovery of the American and world economy after Black Monday, the other argument on the side of optimism has been that of geography. Economic factors alone cannot explain why in the space of few years the optimism of the speculative boom turned to the pessimism of the depression. The chapter suggests the main points of similarity and of difference between the international financial and economic system in the 1990s as compared with the 1930s.
The debtors and how best to deal with them is surely one of the continuing but unresolved issues for the international financial system. This chapter argues that the evolution of that system has changed the nature of the debt problem, but that neither governments nor markets are any nearer a final solution to the question of how to manage transnational debt than they were in the 1980s. If one instructive comparison can be made between the Mexican debt crises of 1982 and 1994 or 1995, another might be made between the latter and the crisis in Thailand and other east Asian countries two and a half years later. If one of the big failures of the 1990s was the treatment of African debt, the other has surely been the treatment, or neglect, of the financial needs of post-socialist countries of east and central Europe, including Russia.
One of the big changes in international finance has been the greatly increased use of the system by organised crime. The business of money laundering could not have so prospered and grown without the facilities for swift and relatively invisible transnational movements of money. This chapter considers, first, how and why this money laundering boom has come about so quickly; and, second, whether the collective efforts of governments to prevent the wholesale laundering of dirty money have been effective. Why governments have been so ineffective in acting to stop money laundering can best be explained by considering the opposing strength of market forces. The lower profitability of the traffic would lessen the demand for money laundering even if it did not much lower the demand for drugs, any more than abolition of the Volstead Act in the United States reduced the demand for alcohol.
This chapter explains how the national systems of financial regulation came into being and how they were shaped by the political ideas and motivations prevailing in national societies. Since it is probably the best known and politically the most dominant system, it looks at the history of financial regulation in the United States. The close symbiosis between the United States and Japan makes their respective systems of financial regulation a matter of mutual concern. Even the briefest account of the French and German systems of national financial regulation will serve to reinforce many of the points already made, concerning the damage done to prudential supervision by the globalisation of finance. The old British empire may have been won by naval power, but it was maintained and extended by British finance capital, which even exerted a dominant extraterritorial influence in Latin America, the Ottoman empire and Middle East and Far East.