Financial Sector

continued from » Transnational Corporations

Wall Street in New York

An important step for globalization was the (de-) regulation of financial markets. Liberalism and deregulation in the 1980s caused reductions of barriers in capital movements (among others) and admission of new products and new financial contractors. Since the 1990s the financial sector has become more important for the economy. These deregulation and liberalism processes also lead to crisis; for example, the crisis in Mexico from 1995 to 2000, in South Korea from 1998 to 2000 and in Russia from 1994 to 2000, not to forget the global crisis between 2006 and 2008. There had been 124 bank crises, 208 monetary crises and 63 governmental debt crises between 1970 and 2007.

Monetary flows are extremely important in the world of finance and economy, especially since the age of globalization Capital flows as FDI (Foreign Direct Investment) which leads to industrial investment, bank loans, etc. If people from the Caribbean (for example) move to the US to get a job, they pay remittances to their home country; this is called income transfer. Through global city systems (chapter 2.8) there are a lot of flows and pathways.

International loans come usually from World Bank. These loans include loans from bank to state, from bank to business or from state to state. After World War Two, the petro-dollar (currency: US-dollar) helped countries to rebuild their countries (infrastructure projects, state loans and banks, etc.).

FDI are investments in other countries, but with investors to control the economic activities (portion of equity at least 10%). FDI also include (for example) building foreign affiliates. These investments include monetary transfer as well as transferring goods and transfer of know-how. (cf. Kulke 2008, p.241; cf. Steiger 1999, p.21)