This looks extremely interesting -- it doesn't quite match up to my
experience from the "other side" but has some good points. Comments
below:
A note on Susan Stange's *mad money: when markets outgrow governments* Univ of Michigan, 1998.
She attempts to show how the organisation of credit in the world economy has been revolutionized by new ways of marketing credit, new credit instruments and new kinds of financial dealing like derivatives. Strange argues that governments have on control over these innovations: they cannot officially be patented to stop others copying.
<dd>+++++++++++ This is wrong -- governments do have control over what kinds of instruments can be dealt in under their jurisdiction. For example, Japan has banned a lot of derivatives - type deals for a while. In France you can't even get an overdraft!
Not enough emphasis is given here to the power of the global financial regulatory community acting through the BIS and sister organisations. That's the nexus of control over the financial industry -- not national governments, true, but not "no control" and certainly nothing to do with patent law </dd>+++++++++++++
Strange highlights the importance of technical innovations used by the banks and in financial dealings; they are shown to have changed the modes of operation of, and the services provided by, financial markets and institutions, and therefore the distribution of structural power in the political economy. She organizes the detailed discussion around computers, chips and satellites.
<dd>++++++++++++++++++++++++++++++ This ain't right to me. The telephone is the main tool of the financial industry, and that's a whole nother ball game. Sophisticated computer systems have changed not very much about the business </dd>++++++++++++++++++++++++++++++++
She also explores how states have lost control over taxation where their spending power is beyond their own control, determined by the whims of foreign bondholders and by the agilty of buisness leaders in using tax havens to pay less.
<dd>++++++++++++++++ Good point on tax competition, less so on bondholders. Surely the main thing we've learnt from the last few crises is that bondholders don't really exercise any control at all? </dd>++++++++++++++++++++
An interesting discussion of money laundering too. Whether we take the profits from drug trafficking or illegal immigration, the forces of the market are shown to overwhelm the efforts of national police and custom officials.
She then explores how financial inventiveness has made possible a spate of mergers and acquistions. The security provided by size in a competitive global market also creates the need of big firms for large amounts of credit. She then subtly analyzes the problems of moral contamination therefrom.
<dd>+++++++++++++++++++ I'd be really interested to know more about this -- how does she depart from Bagehot? </dd>+++++++++++++
Finally she explores throughout new forms of inequality, including at the international level. Here she argues that the supposed decline of US hegemony was never more than a myth and is even more of one today than it used to be. Reiterating her conclusion in Casino Capitalism (1986), Strange argues again that US will be able to use its bargaining power as military protector, or interventionist meddler or as a major trading partner to get its own way and to make others undergo painful adjustments in case of depression from deflationary bias. But she argues that in the end American multinationals would not be able to stay rich for long in an impoverished world.
<dd>++++++++++++++++++++++ Not sure about this. If the US really could do this so well, why hasn't Japan reflated? But still interesting argument </dd>
Yours, Rakesh
Thanks. This one looks like a buyer
dd
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