In the ongoing political debates over how Greece should overcome the consequences of the burden of its debt, a major phenomenon of the current global financial and economic structure is commonly avoided; namely, a process of global structural adjustment of social systems, dramatically known by peripheral economies in the past decades. In an attempt to explain the process, the following chapter draws on contributions from the international economy, historical, and institutional sociology. It traces how with the increasing influence of deregulation of financial capital, former isolated countries are now capable of tightening up the strings of the global economic system over the social system. The distrust of global debt rating agencies over the credit of the United States, Spain, Greece or Italy, represents an upcoming reality of core western territories on an historical process of “modern development”.
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From the outburst of the financial bubble of the US housing market, to the difficulties some European countries are facing repaying or refinancing their debt, the concept of economic and systemic crisis has filled tabloids and research agendas at unusual levels. The attention paid to the “unpredictability” of the events has consistently ignored their similarity with previous cases of speculation of financial instruments or failed fiscal policy choices that occurred repeatedly during the recent decades. The economic measures that seek to deter the course of the devaluation of debt instruments in some of the most developed economies in the world, frequently appear problematic and socially conflicting. Yet, at the moment of the elaboration of this chapter, the aftermath of the events has not ceased, and the debt levels of countries like Spain, Italy or Greece have increased to historical peaks1 (País, 2013) (The Economist., 2013). Meanwhile, the economic projections of the US Federal Reserve forecast high levels of unemployment up to the year 20152, and a difficult recovery from the depression that began in 2007 (Krugman, 2012b).
While a glimpse at the diverse diagnoses reveals multiple causes for the deviation from the normal stability, of some of the countries currently implementing shock measures, a more structural element has been consistently set aside from the political debate. This is; in a global economic system based on competitiveness, political asymmetries, exponential debt growth, and legal and normative structures of financial capital and trade liberalization, the ability of national political entities to halt the pressure of economic actors over national policies is smoothly eroded until symptoms of systemic disability arise. The events experienced since 2008, entail a de facto reconfiguration of the geographical boundaries of an economic system that, in previous decades, had tightened both the discretionary margins and the living conditions of numerous peripheral economies and societies. With the inclusion of new players in the global economy, the system is gradually beginning to exert pressure on social and political orders that had experienced relative advantage over most of the previous century.
While such events are customarily described as signs of a weakening or breakdown of the current economic system, this chapter argues that they are quite the opposite. Re-pricing of financial instruments owned by core economies, such as mortgage securities, public and private debt or subprime bonds; are indeed clear signs of the contemporary robustness of the economic system over the boundaries of the political sovereignty of the nation state. They represent a wider transition to “modern development”: a normative construction inherited from the end of the Second World War with the constitution of the Bretton Woods organizations.