Opinion Sur
The accumulation of burdensome and unsustainable external debts, that is, the accumulation of external debts beyond the normal ability to pay—so much in peripheral economies as well as increasingly in central economies—is one of the most important factors in explaining the loss of sovereignty in the running of the economic policy.
In turn, this abnormal accumulation of debts is explained by the generalized deregulation of the financial markets that took place since the mid-1970s. Especially critical in this sense was the liberalization of international financial flows. With the liberalization of financial flows starts the conformation of an increasingly globalized financial system, over and above national monetary authorities. Formerly an exclusive attribution of the central banks, the creation of money and credit increasingly becomes an attribution of globalized financial markets. Since the global deregulation and liberalization of the financial markets, money and credit are increasingly being created by a global system integrated by international banks and other private financial intermediaries. The almost universal liberalization of capital movements, together with the generalized deregulation of financial markets, have placed the global financial system—de facto, if not de jure—above national monetary and financial authorities. The global financial market is in fact a supranational market, or more precisely an extraterritorial market, beyond the control of any national authority.
This global financial system is the main provider of liquidity to individual economies, as it is quantitatively revealed by the fact that global exchange transactions have reached (in 2013) 5.3 trillion dollars per day, i.e., 37 times the magnitude of the (daily average) total international trade and 19 times that of the (daily average) global GDP [1]. This gigantic speculative mass is in perpetual agitation and movement in search of global benefits, abruptly leaving markets whose risk is suddenly perceived as unacceptable, in contrast to what the (yesterday dominant, today discredited) theory of “rational expectations” would suggest.
A not discussed fact that should also be noted is that the instability and volatility of expectations is a characteristic that suits the big players of the system (biggest banks and investment funds), who are the ones — along with the relatively arbitrary and changing political and financial “news” that are created daily — that determine in advance the main market trends. These big players are followed, often with less fortune, by the atomistic base of the myriad of small intermediaries and individual investors. Seeking to protect, as it is natural, their interests, this gigantic mass of money is played by the financial sector against any measure of economic policy that might be perceived as setting obstacles to financial speculation. Moreover, every real economic situation that might be seen by investors as risking profitability or financial security provokes the mass withdrawn of capitals.
This, as much as briefly relates with quantitative factors that exercise a permanent contractive pressure on individual economies, as they are forced by the constant threat of capital flight, to pursue the orthodox policies considered healthy by financial markets, those policies widely known as the Washington Consensus.
Among the additional qualitative factors of contractive pressure, there is the severe obstacle represented by the persistent dominance of neoliberal or neoclassical economic ideology among economists, and among those that decide over economic policies. The prevalence of (agonistic) neoliberal economic dogmatism is still a serious hinder for the rational discussion of positive alternatives to recessive and regressive policies.
Another important qualitative factor is the rise in notoriety and influence of the credit rating agencies. These private agencies, usually linked with banks or investment funds, evaluate from an orthodox perspective the credibility and creditworthiness of governments and economies. Despite the evident risk of connivance of these insiders with their parent companies, the assessment of these agencies, true public-relations offices of the financial system, have a media transcendence and influence that can only be explained by the growing isolation and disrepute of the system.
Summarizing, as a result of the liberalization and deregulation of the international flows of capital, the decision power over the economic policies has largely moved towards the international financial markets. These markets enjoy a decisive veto power over national economic policies (as well as over international ones), thanks to the permanent threat represented by the huge mass of capitals that, in case of a disagreement, can “vote with their feet,” that is, fly away. On top of its huge “fire-power”— as the power of extortion of this superior monetary mass has come to be called — the global financial system still enjoys the reputation that is granted by the diverse organs of generation of opinion and, equally important, of generation of (false) images and interpretation models of the economic reality.
