But the development of financial markets did not stop on the realisation of this final point. Contrariwise, countries pursued their neo-liberal tendencies and decided upon banding-together in an effort to maintain aspects of sovereignty whilst effectively increasing their share of capital. Regionalism brought with it avenues for trade and commerce and following the Second World War such initiatives were actively promoted in order to avoid the resurgence of a dominant political force, predominantly in Europe.The European Union (then the European Community) was created precisely for this reason and the creation of a protected trade environment for the protection of farmers’ income, with added benefits for labour mobility and migration following on as the Union became more stable. Countries ravaged by the War received compensation and the reconstruction of Europe ensued. Initially however, countries such as Germany (once the effects of war had diminished) and the UK were often willing to forego exchange rate stability in order to maintain political autonomy. This was also observed in the USA and Japan.Interestingly, those involved in post-WWII efforts at promoting trade and international investment are now the leading figures in the economic/political global system, with immense influence on world proceedings and capital movements.
But what were the main reasons globalisation of world markets were even thought of in the first place? The answer to this question is three-fold. To begin with, a system-level approach could be identified, whereby the jobs, economic growth and power promised to states was incentive enough to actively pursue such initiatives.The notion of expanding markets and the possibility of cheap labour elsewhere with more mobile capital movements (and indeed political influence in periphery countries) was as tempting as sweetshops to children. Second came ideology. The neo-liberal tendencies displayed since the true emergence of global trade in the eighteenth and nineteenth centuries toward decentralisation of states and the relaxing of border restraints was seen as a way of avoiding conflict and constructing avenues for profit and cooperation on global issues.Indeed the creation of international institutions discussed below emphasises this point. Enmeshed in this were also dominant class interests, wanting to control the creation of periphery markets for their own purposes, and gain further control over domestic labour markets, whose wages they could then depress by locating employment elsewhere. Finally came the financial aspect, devoid of political influence or ideology.
Following the invention of methods of communication and the development of more advanced forms of transportation, and considerable financial innovation following the Great Depression, investment had grown too large for domestic markets, and in order to receive adequate returns on capital for investors, had to expand in to larger areas. The recent issue in the financial markets’ push toward a more liberal and globalised world market, however, is the widening gap between the emergent economic structure and the established political institutions.”The contemporary reconstruction of the global capital markets is intimately linked to the disruption of that consensus (monetary issues post-WWII) in the 1970s and the dawn of a new era of flexible exchange rates.
” (Oxford University Press, 2000) The attempts at cooperation previous to the Second World War crashed and failed in 1929, crushing all illusions of a harmonious transition to global peace in financial markets and trade liberalisation.A second attempt in direct response to WWII in the form of the Bretton Woods agreement was tabled in order to help reconstruct Europe and facilitate investment to avoid another War. This however also did not last long. Due to stickiness in markets and the immobility of capital, Bretton Woods collapsed in 1970, partly due to he Arab-Israeli wars around that time. Furthermore, although the Agreement collapsed, the individual institutions’ mandates also changed, severely marginalizing the role of the International Monetary Fund partly because of the Dollar’s increasing instability as a monetary anchor.Additionally its sanctions and policies on exchange rates were altered due to the experience of rising oil prices following the OPEC production fiasco of 1973.
The present role of the IMF and OECD since this point has been to provide internal discipline in small quantities throughout the world. Any attempt at stabilization has since been reached through concerted action or negotiation.Thus there are a plethora of reasons that have been given as to the contribution of financial markets to globalisation, but the most predominant appears still to be the traversing of national-boundaries in a perennial effort to seek out new profit. This appears to be an efficient process in the short-run, but the effects of long-run capital movements appear to be hysteria and manias on world markets, noticeably the debt-crisis in the early eighties in Latin America, following huge flows of capital to the region after the creation of Eurodollar markets in the wake of the oil crisis of 1973.On the downside, without international regulation, no one can be held responsible for the hysteria created by individual investors and multinational corporations, who regularly have huge effects on periphery, developing countries (e. g. Asian Crisis of 1997).
National Banks have been made scapegoats for the inadequacies of political actors in this process, but the real proof lies in the ability of international policy makers to find a solution, which promotes the search for profit, but without the inimical disadvantages to those with less influence financially.The paradox of globalisation has been the reduction of political legitimacy just when that legitimacy is required to harness the fluctuations of markets. It is the belief of Capitalists and Conservatives alike that if the Welfare State must suffer in the continuous stampede of investment then so be it, but what of future generations without the ability to break into the capitalist arena? The prospect of increasing destitution and the reinforcement of current social evils seems more plausible by the day.
