4 years ago

Financialization in Mexico - Dr. Gregorio Vidal

Financialization in Mexico - Dr. Gregorio Vidal


258 JOURNAL OF POST KEYNESIAN ECONOMICS of financialization and its relevance for developing economies. Later, we analyze the Mexican economy’s process of transition toward a model sustained by the generation and concentration of financial rent. We maintain that the consolidation of the financialized accumulation regime occurred in Mexico during the 1990s and that the current financial and economic crisis exposes the limits of the country’s particular dynamic of wealth concentration and transfer of rents. Financialized capitalism has shown to be a very profitable economic model in Mexico (for a select few), albeit unstable and difficult to govern. The recurring tendency of slow economic growth, the deterioration of working conditions and salaries, the polarization of wealth, and the growing penetration of financial globalization have together created volatile social, political, and economic conditions of great instability, within the context of a constant erosion of public institutions and their policies. Financialization and its differing approaches Over the past twenty-five years or so, various authors have been considering the implications of the notable increase in financial activity and the greater influence of banks, investment funds, hedge funds, and other financial intermediaries on the economy and the management of large firms (Boyer, 2000; Chesnais, 1997, 2001, 2003; Correa, 1992; De Bernis, 1988; Duménil and Lévy, 2007; Guttmann, 1994; Henwood, 1999; Lichtensztejn, 2009; Minsky, 1987; Serfatí, 2009b). However, the characterization of many of the world economies as increasingly financialized or operating under a regime of accumulation dominated by finance continues to be debated. Chesnais and Plihon (2003, p. 11) offer a succinct perspective on the issue, stating that “a new situation has been created in which the requirements of financial activity exert excessive pressure over productive activity.” Sweezy (1997, p. 3) proposes the existence of a “financialization of the accumulation process” as a result of a capitalist system dominated by monopolies with a tendency toward underconsumption. Aglietta (2001) has demonstrated the existence of capitalism driven by finances, while Boyer (2000) constructs the idea of a regime of financialized accumulation and Stockhammer (2007) analyzes a regime of accumulation dominated by finances. Foster and Magdoff (2009) have maintained that capitalism that is based on monopolies tends to stagnate and that financialization has offered a means to mitigate this tendency. Meanwhile, Wray (2009) distinguishes the current stage of capitalism as one dominated by highly leveraged funds seeking maximum returns in an environment that

FINANCIALIzATION IN MEXICO: TRAJECTORY AND LIMITS 259 systematically underprices risk and employs what Minsky has termed “money manager capitalism.” The increasing domination of finance in the U.S. economy has been measured in a number of ways, ranging from the steadily increasing share of the financial sector’s fixed investment as a proportion of gross domestic product (GDP) (Henwood, 1999, p. 125) to stock market capitalization as a percentage of GDP, financial sector profits as a percentage of GDP, total debt to GDP, and dividends as a proportion of total profits for nonfinancial companies (Aglietta and Rebérioux, 2005). While there are many other ways of quantifying financialization in the United States, the expansion of financial activities has also gone hand in hand with their accelerated internationalization, a consideration of utmost importance, which also includes the expansion of nonfinancial firms. Chesnais (1997, 2001) has argued that the development of the regimen of accumulation dominated by finance is an expression of globalization itself. Likewise, Vidal (2004, 2006) has emphasized that the financial domination over the global economy is organized from within the United States. In much the same way, Chesnais et al. (2001) insists that financialization constitutes a new form of organization—or a new phase—of capitalist organization. The new regime of accumulation is a worldwide integral system that is articulated around the three poles of the triad of the United States, Japan, and parts of the European Union under conditions in which the United States establishes the fundamental tendencies. Other authors similarly contend that globalization is a highly hierarchical phenomenon, with a relatively small group of (primarily) U.S.-based banks and nonfinancial corporations engendering (and benefiting from) modifications in international and national institutions and governance that allow for the unrestricted flow of capital throughout much of the world (Omarova, 2009; Plihon et al., 2006). Based on a global monetary system defined by dollar hegemony (D’Arista, 2001), the opening of trade and financial barriers has created growing interconnections between the largest financial centers in such a way that financial innovation and the incorporation of new technologies have allowed banks and other financial intermediaries to conform to an increasingly global market. Freely mobile capital has therefore been able to seek profit through a wide range of arbitrage plays based on differing conditions across national economies such as labor and environmental norms and monetary policies. The exchange of futures, forwards, swaps, and options based on stocks, government debt, and commercial paper issued from multiple points across the globe has created growing connections that have synchronized global economic tendencies, gradually eliminating

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