Globalisation, Investment, and Global Economic Growth: Examining the Causes of Recent Banking Crises

Financialisation And Global Financial Meltdown

The global economy has, over the past two decades, experienced profound changes and, in recent years, has found itself newly emerged from a protracted phase of economic and financial over-accumulation (Montgomerie, 2008; McNally, 2009). The dominant feature of this era has been the dramatic changes that have transpired in the realm of finance, where the pervasive crisis of over-consumption has been characterized by chronic excesses of productive capacity in the manufacturing and financial sectors of national and regional economies relative to the overall level of effective global demand, and has coincided with the rise of the East Asian and Latin American economies as major manufacturing exporters (Brenner 2006; Lucarelli, 2004).In consequence, both the size and the importance of global financial transactions have been growing continuously, and the lack of effective demand for products and services worldwide has led to the growth of readily available monetary liquidity that has been increasingly channelled into the world’s financial markets and has financed burgeoning levels of global debt (Montgomerie, 2008). Financial markets and agents have thus increasingly acquired a prominent position in the global economy, where both the size and profitability of national financial sectors have increased, and the incomes derived from financial sources have grown in contrast to those from non-financial ones. Total debt within economies has also skyrocketed, as also the measure of engagement of non-financial corporations (NFCs) in financial business transactions, and the level of their investments in financial assets and financial subsidiaries (Orhangazi, 2008).