Attached is a December 1995 draft for a chapter that was published in 1997 for a book I edited for the United Nations University: Globalization, Democratization and Multilateralism (see Publications page for full details).
It sketches the global financial system of the mid 1990s — a system that contained many of the seeds of the enormous and catastrophic collapse that has just occurred. The article links global finance to the everyday lives of individuals and families — and specifically to how levels of personal indebtedness were on the rise in the USA partly due to stagnating real wages and growing family expenditures — an unsustainable situation.
The second half of the essay “The Risky Business of Global Finance” shows how the financial system emerging during the Clinton Administration was not only built on these “real” foundations of indebtedness of individuals and families, but also how it was prone to collapse at it highest levels, not least because of the way the expansion of financial firms and banks was partly based on the proliferation of risky financial derivatives. Created largely on Wall Street, the essay suggested that derivatives formed an equivalent of a “black hole” at the epicentre of the interconnected universe of high finance.
Partly at issue then — as of course now — is the neglect by governments (notably the US and UK) of the need for prudential regulation to make the system safe, accountable and secure from collapse. The essay therefore calls for more “democratic surveillance” of financial systems to protect the life savings and incomes of the vast majority of the population.
Perhaps this proposal could be taken up today?
To view the pdf click here