The Political Economy of Global Finance Capital

Abstract

We center this review article around six important books that represent recent thinking by political economists on global finance and discuss their substance, their implications, as well as some of their shortcomings, for our understanding of the subject. We organize our review around three major questions: First, who are the players in the political economy of global finance? Second, what are the causal forces shaping its characteristics? Third, what are the consequences of the current political governance of global finance? The most important developments that we highlight in this article are 1) the move from a predominant focus on state-centered patterns of regulation to a more comprehensive understanding of the role of states and private actors in building a transnational governance regime that mixes public and private regulation; 2) the intensified effort to understand the causal forces that shape the political economy of global finance based on more complex models that allow for an interaction among interests, institutions and ideas; and 3) increased attention to new sources of systemic risk in the global financial system, as well as a greater consideration of the consequences for domestic politics of interactions with the global financial system. In the article we argue that the literature must do more to understand the behavior of actors who enact the rules of global finance, not just those who generate the rules. And we argue that more must be done to assess the costs and benefits of financialization at the global and national levels.

Keywords: global finance, financial market regulation, financialization, rating agencies

JEL Classification: G18, G28, G38, P16