…Most of the various notions of what globalization is about focus on the growing mobility of capital across the globe in the ‘global capital market’ and upon the impact of this mobility on national economies. But the term ‘capital market’ is analytically incoherent, because it embraces radically different phenomena in the field of finance, most of which have nothing directly to do with capital in the usual common sense meaning of the term, while at the same time it excludes a great deal of the operations of what capital actually does.

So we need to clarify our notions about ‘capital markets’, global or otherwise, in order to understand this international phenomenon known as globalization.

The So-Called Capital Markets

In common sense language we associate the word capital with the idea of funds for productive investment, for putting together machines, raw materials and employees to produce sellable items. This is a useful starting point for using the word capital because it stresses its socially beneficial role within a capitalist system. One of the central confusions concerning globalization lies in the widespread belief that the so-called ‘global capital markets’ in which trillions of dollars are bouncing back and forth across the globe are in some way assisting the development of the productive sector of capitalism. It is because we imagine that the ‘global markets’ are integral to production that we imagine that we have no choice but to accept them. Yet in reality the great bulk of…

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The existence of this fictitious credit money is very beneficial for the whole economy because of its role in facilitating the circulation of commodities. Without it, economic development would be far slower. It is especially important to employers, enabling them to raise large amounts of money for equipment which will yield up its full value in production only over many future years. If employers could invest only real savings — the money derived from past value-creation — investing in fixed capital would be far more costly –too costly for a lot of investment. And credit has also become a very important means of expanding the sales of goods to consumers. This is another way of saying that modern economies run on large amounts of debt. So the banks do play an important role in both channelling savings and creating new funds (fictitious money) for productive investment. An entire capitalist economy could be run with a financial system consisting entirely of such banks.

But historically, other forms of financial institutions have grown up, especially in the Anglo-Saxon world which has played such a central role in the historical development of capitalism. First there has been the development of shares and bonds as means of raising funds. A company can offer shares for sale and use the funds from the sale to invest in the business. The shares are pieces of paper giving legal titles to a claim on future profits from the company’s activities. Companies or governments can also sell bonds and use the funds from the sale for an infinite variety of purposes. These bonds are similarly pieces of paper giving legal titles to a fixed stream of future income to the holder for a fixed period of time. A special feature of shares and bonds (known collectively in England since the 18th century as ‘stocks’) is that secondary markets have grown up enabling people to buy and sell these pieces of paper entitling the holder to future royalties. Today there are all kinds of pieces of paper that can be bought and sold and that entitle the holder to some kind of future royalty or right…

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Within the workings of the DWSR [Dollar-Wall Street Regime], US administrations in the 1980s had extracted gains from crisis-hit countries in terms of opening their financial markets to free flows of international funds, opening their financial markets to US financial operators, opening their asset markets for buy-out by US corporations and so on. But these were piecemeal gains associated with particular countries and crises. Some of them, particularly in relation to the free flow of international funds were partially reversed, as occurred in Chile and other places. But the problem was that East and South East Asia had largely escaped such treatment because these states had largely avoided financial crises.

Building upon work already achieved under the Reagan and Bush administrations, the Clinton administration decided to radicalise the programmes of various multilateral organisations in order to commit them to the radical opening of national economies. This would then turn them into the functional equivalent of the role played by what Huntington called the security zones of the Cold War. States that wished to function within these multilateral institutions would, to paraphrase what Rothkopf said in the context of bodies like NATO, have to deal with the United States — the controlling power within these organisations — on its domestic economic assets. And if the state tried to evade ‘dealing with the United States’ on these issues, it could be excluded from members of the multilateral institutions. And if it was so-excluded, it could be subjected to a full range of instruments of economic warfare and be denied secure insertion in international markets, since such secure insertion increasingly depends upon a state’s good standing in the multilateral organisations. The result was…

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