International financial markets and development

Abstract

The current fi nancial crisis has not come about by chance. It is the result of a system that has emerged over the last 30 years and which Keynes may well have called the ‘casino economy’. The dominance of fi nance over real economy characterises the fi nancial crisis, while fi nance itself is dominated by the all-encompassing target of maximum profi t at all times. Other aims of economic activity such as job creation, social welfare and development have fallen by the wayside. In response, new actors are surfacing, e.g. the institutional investor (hedge funds, private equity funds, etc.), while new instruments are leading to highly leveraged and destabilising derivatives. The casino system has been promoted by governments and intergovernmental institutions to liberalise and deregulate fi nancial markets. Although developing countries have not participated in the casino system, they have been suffering most from the spill-over into the real economy. The main lesson learnt is that the casino has to be closed.