POLITICAL ECONOMY OF THE FINANCIAL MARKETS

By S. Hessler

[This book review of: Jorg Huffschmid’s "Politische Okonomie der Finanzmarkte," 1st edition 1999, VSA publishers is translated from the German on the World Wide Web, http://www.eldoro.de.]




Huffschmid’s “Political Economy of the Financial Markets” begins with a thunderbolt: “On June 2, 1997 American and European financial corporations destroyed the Asian economic wonder.” The reader realizes at once this is not a standard neoliberal work in his hands. Financial markets are not described here as anonymous zones of self-regulation but as instruments of private actors, enforcing their own business interests on state institutions.

Starting from the debates around the Asian crisis, Huffschmid draws a meticulous picture of the changes on the international capital markets over more than 20 years. The credit markets’ change of function and significance occurred in the policy of liberalization and deregulation. Illustrated with more than 50 tables and diagrams, Huffschmid concludes that structural deficits cause the crises in the crisis countries, above all the massive liquidity on the global financial markets. The available capital constantly diminishes and is withheld from consumers through wage reductions, budget consolidations and corporate tax cuts. This capital lands straightaway in the gambling casino of the international financial markets and is not invested productively.

At the end of the book, Huffschmid proposes social reforms that aim at a stronger regulation and de-acceleration of the capital markets.

For the newcomer, the book is easy to understand and offers an abundance of data and background information. The author separates himself from the neoclassical mainstream through his engaged and practical partisanship for the victims of the financial crisis.