- Multinationals -

Global Financial Markets and Financial Derivative Speculations.

Posted by: James Donelly ( Australia ) on December 10, 1997 at 19:04:39:

Is anyone concerned about the recent slumps in the Financial Markets in the Asia region? Does anyone have an opinion on what is occurring in these regions?
My questions are driven by information I obtained regarding the level of global finance investment and the ramifications of this in terms of social conditions. Many commentators either applaud or reject globalism, but it cannot be denied that in many ways world is "growing smaller" in terms of our interconnections to one another. One sphere of human activity where this is undoubtedly near complete is the global financial markets. Sources state that everyday around US$1.2 trillion dollars are circulate in the world financial derivatives market (Greider. 1997, One World Ready or Not? : The Manic Logic of Global Capitalaism). This includes currency trade, futures and the like.
The majority of this trade is not of a commercial nature, in that it does not flow from the exchange of goods and services. It is merely of a speculative nature. The neo-classical economic ideologues, who have captured the economic bureaucracy in most Western nations, have encouraged trade liberalisation policies in national financial markets. This has enabled the level of trade we now see. It has also altered the nature of financial activity in the global fiancial markets encouraging speculative activities. As an aside, the advent of information technology has facilitated this. But what does this all mean in terms of peoples every day lives?

The nation state is a relatively new social form. It has arisen this century and appears to have its days numbered. How can this be so? Firstly, with the rise of economic rationalism (neo-classical economics or market economics) the driving force behind much of Government policy in western nations is small governmment.For the sake of brevity, the explaination for this process must take place in another posting. The extension of small government is a shrinking of the public sphere (the commonwealth or common good) in the face of an expaning private sphere (capitalist enterprises). The goods and services provided by government, in a way that spreads the costs, are replced by the private provision of these services in a user pays format. The least advantaged loose their meagre benefits.

The second issue concerns how Governments respond to the markets. One of the qualities of a nation-state is that it has soveriegnty over its territory. Currently Governmments are devolving this power to the markest and corperations. But more importantly, the activities of financial speculators can effect the policices of a government by fact that that government defers to the market continuely. This means, as Malaysia has recently seen, if the global speculators are unhappy with the economic indicators in a nation, they will show this displeasure by withdrawing investment. The decline in the Ringet has arisen as speculators withdraw their money and place it in "safer" currencies. The effect becomes two fold. Firstly workers are effected when the costs of imported goods rise, and secondly the Government is forced to institute trade liberalisation and other initiatives that have been demonstarted to increase further the divide between rich and poor. The recent bailout plan for Indonesia, proposed by the IMF which is an insititution full of these economic ideologues, is a good illustration of this process.

Thirdly, the volume of finanial trade on the world markets inhibits any one nation supporting its own currency. The economic role of government has now been assumed by the capitalist markets. This process has gone on more or less unseen by the average person on the street.

Lastly, and this related more to the trade between multinational companies, the quality of trade in these organisations is eroding the revenue base of nation-states. Through the use of subsiduaries in other countries, corperations are able to minimise their tax liablities. They will offset profits in one country by shifting the costs of production to another branch of the organisation in another country. Similarly corperations will shift the profit centre to tax free havens or corridors. It is through intar-firm trade that the revenue base of a nation is erode, compounding the fiscal crisis many nations now endure.

In conclusion, what this means is that the affairs of a nation are increasingly being dictated by the activities of actors on a global stage. The danger in this is that unlike at the national level, were there is a degree of political accountability on the part of decisionmakers, the economic activities of those now making decisions are all but hidden under the concept of the freedom of the corperation to order its own affairs free from state interference, a corner stone of capitialsit dogma. There is no effective judiciary or political executive of sorts at the international level. This means that we are more and more losing the control over our own destiny. William Gibsons vision seem to be reaching fruition.

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