Soon after the 2008 financial crisis, Gillian Tett, an anthropologist and the US Managing Editor of the Financial Times, suggested that regulators’ and practitioners’ inability to anticipate and respond to deep problems in the financial industry could be traced back to what she called “silo thinking,” wherein experts in one area know nothing about the methods and research of other areas. As she put it, “the essential challenges for investors today…”—and, we might add, for regulators and academics—is (...) “to understand the micro-details of the silos, and see how all the macro-pieces add up”.In years since, many researchers in many fields have sought to identify causes of the... (shrink)
This article argues that the key crisis that has overtaken today’s global economy is the classical capitalist crisis of over-accumulation. Reaganism and structural adjustment were efforts to overcome this crisis in the 1980s, with little success, followed by globalization in the 1990s. The Clinton administration embraced globalization as the “Grand Strategy” of the United States, its two key prongs being the accelerated integration of markets and production by transnational corporations and the creation of a multilateral system of global governance, the (...) pillars of which were the World Trade Organization, the International Monetary Fund and the World Bank. The goal of creating a functionally integrated global economy, however, stalled, and the multilateral system began to unravel,thanks among other things to the multiple crises created by the globalization of finance, which was the main trend of the period. In response partly to these crises, partly to increasing competition with traditionally subservient centre economies, and partly to political resistance in the South, Washington under the Bush administration has retreated from the globalist project, adopting a nationalist strategy consisting of disciplining the South through unilateralist military adventures, reverting to methods of primitive accumulation in exploiting the developing world, and making other centre economies bear the brunt of global adjustments necessitated by the crisis of over-accumulation. (shrink)
The aim of this article is to provide a discussion of scholarly ‘crisis of modernity’ discourses that have developed in the field of social philosophy. Re-visiting past and present discourses can be illuminating in at least three ways: it can reveal the broader picture of the present financialized and technologized world and the rise of financial technologies; it can provide scholars with new vocabularies, concepts, and metaphors to comprehend present-day phenomena and developments; and it can reveal the variety of (...) commitments that are possible, today, too. This article starts with a discussion of the original ‘crisis of modernity’ discourses, in which the clashing arguments of Comte and Tocqueville are featured, and a discussion of a second ‘crisis of modernity’ that developed in the context of the ‘Great Depression.’ A third ‘crisis of modernity’ discourse emerged in the wake of the financialcrises of the 1970s. Such crises are still ongoing and discussed within the boundaries of the third ‘crisis of modernity’ discourse. How financial technologies do and do not fit within this third discourse is discussed in the remainder of this article. (shrink)
The Global Financial Crisis is acknowledged to be the most severe economic downturn since the 1930s, and one that is unique in its underlying causes, its scope, and its wider social, political and economic implications. This volume explores some of the ethical issues that it has raised.
The essays in this volume delve deeper into the cultural and intellectual foundations, philosophical ideas, political traditions, and economic movements that underlie the greatest financial crisis in nearly a century.
The crisis of 2008–2009 has been viewed primarily as a financial one, which has spilled over into the economy more generally. I want to argue that there is a much deeper crisis, of which the present one is a result. The deeper crisis is political: more specifically, it is a crisis in the ideology and social ethos of the American people. I refer to what has happened to the thinking of United States citizens since the Second World War, and (...) the dangers that that transformation entails for world peace and cooperation—let alone the creation of an economic regime in which deep financialcrises do not occur. Short of a change in the ideology of a many of its citizens, I do not believe the United States can succeed in preventing a repeat performance, perhaps many encores, which become increasingly severe. (shrink)
The article presents a verbal and mathematical model of medium-term business cycles (with a characteristic period of 7–11 years) known as Juglar cycles. The model takes into account a number of approaches to the analysis of such cycles; in the meantime it also takes into account some of the authors' own generalizations and additions that are important for understanding the internal logic of the cycle, its variability and its peculiarities in the present-time conditions. The authors argue that the most important (...) cause of cyclical crises stems from strong structural disproportions that develop during economic booms. These are not only disproportions between different economic sectors, but also disproportions between different societal subsystems; at present these are also disproportions within the World System as a whole. The proposed model of business cycle is based on its subdivision into four phases: – recovery phase (which could be subdivided into the start sub-phase and the acceleration sub-phase); – upswing/prosperity/expansion phase (which could be subdivided into the growth sub-phase and the boom/overheating sub-phase); – recession phase (within which one may single out the crash/bust/acute crisis subphase and the downswing sub-phase); – depression/stagnation phase (which we could subdivide into the stabilization subphase and the breakthrough sub-phase). The article provides a detailed qualitative description of macroeconomic dynamics at all the phases; it specifies driving forces of cyclical dynamics and the causes of transition from one phase to another (including psychological causes); a special attention is paid to the turning point from the peak of overheating to the acute crisis, as well as to the turning point from the downswing to recovery. The proposed mathematical model of Juglar cycle takes into account the following effects that are typical for the market economy: • positive feedbacks between various economic processes; • presence of a certain inertia, time lags in reactions of the economic subsystem to the change in conditions; • amplification by the financial subsystem of positive feedbacks and time lags in the economic subsystem; • excessive reaction to changing conditions during the acute crisis sub-phase. The authors suggest that the current crisis turns out to be rather similar to classical Juglar crises; however, there is also a significant difference, as the current crisis occurs at a truly global scale. Yet, due to this truly global scale of the current crisis, the possibilities of regulation with the national state's measures have turned out to be ineffective,whereas the suprastate regulation of financial processes hardly exists. It is shown that all these have led to the reproduction of the current crisis according to a classical Juglar scenario. (shrink)
In the present world order unbridled forces of free market capitalism are frequently cited for much of the social injustice, inequity, and disparity of wealth between the rich and the poor. Although history''s verdict in favor of the free markets could hardly be harsher or clearer, it is clear that after the initial wave of triumph, the free market paradigm has developed some cracks in its façade. What marks the trail of such sustained and pronounced move toward free markets in (...) terms of ethics, morality, social welfare and social justice? How does one keep a social score in this seemingly relentless and irreversible move all over the world toward free market capitalism?In this paper we shall attempt to address these and related questions. Drawing on concepts from organization theory and social philosophy and using publicly available financial information, we shall illustrate how, amidst the myriad and mixed noises, some sense of order and signal can be discerned in addressing issues of equity and social justice. Toward this end, first, we provide a broad contrast between two models of financial markets: the command model and the free market model and proceed to examine publicly available financial information and analyze the trends and patterns with graphical representations using publicly available data from Handbook of International Economic Statistics. Next, we explore the implications of financial performance measures for social welfare and social justice and discuss the social perils of free markets using the Mexican and Asian Financialcrises as the focal points. Finally, we present a set of recommendations for smoother structural transition. (shrink)
Selected as a Financial Times Best Book of 2013Governments today in both Europe and the United States have succeeded in casting government spending as reckless wastefulness that has made the economy worse. In contrast, they have advanced a policy of draconian budget cuts--austerity--to solve the financial crisis. We are told that we have all lived beyond our means and now need to tighten our belts. This view conveniently forgets where all that debt came from. Not from an orgy (...) of government spending, but as the direct result of bailing out, recapitalizing, and adding liquidity to the broken banking system. Through these actions private debt was rechristened as government debt while those responsible for generating it walked away scot free, placing the blame on the state, and the burden on the taxpayer. That burden now takes the form of a global turn to austerity, the policy of reducing domestic wages and prices to restore competitiveness and balance the budget. The problem, according to political economist Mark Blyth, is that austerity is a very dangerous idea. First of all, it doesn't work. As the past four years and countless historical examples from the last 100 years show, while it makes sense for any one state to try and cut its way to growth, it simply cannot work when all states try it simultaneously: all we do is shrink the economy. In the worst case, austerity policies worsened the Great Depression and created the conditions for seizures of power by the forces responsible for the Second World War: the Nazis and the Japanese military establishment. As Blyth amply demonstrates, the arguments for austerity are tenuous and the evidence thin. Rather than expanding growth and opportunity, the repeated revival of this dead economic idea has almost always led to low growth along with increases in wealth and income inequality. Austerity demolishes the conventional wisdom, marshaling an army of facts to demand that we austerity for what it is, and what it costs us. (shrink)
Contemporary financial markets have recently witnessed a sea change with the ‘algorithmic revolution’, as trading automats are used to ease the execution sequences and reduce market impact. Being constantly monitored, they take an active part in the shaping of markets, and sometimes generate crises when ‘they mess up’ or when they entail situations where traders cannot go backwards. Algorithms are software codes coding practices in an IT significant ‘textual’ device, designed to replicate trading patterns. To be accepted, however, (...) they need to comply with regulatory texts, which are nothing else but codes of conduct coding accepted practices in the markets. In this article, I draw on ethnographic fieldwork in order to open these black boxes, while trying to describe their existence as devices encapsulating several points of views. I address the question of a possible misalignment between those visions, and more specifically try to draw the consequences raised by such discrepancies as regards the future of financial regulation. (shrink)
I argue that epistemic failings are a significant and underappreciated moral hazard in the financial services industry. I argue further that an analysis of these epistemic failings and their means of redress is best developed by identifying policies and procedures that are likely to facilitate good judgment. I call these policies and procedures “best epistemic practices.” I explain how best epistemic practices support good reasoning, thereby facilitating accurate judgments about risk and reward. -/- Failures to promote and adhere to (...) best epistemic practices contributed to the 2008 financial crisis. Suboptimal epistemic practices were implicated in (at least) the following three areas: (1) the assignment of radically-inaccurate risk ratings to real estate mortgage-backed securities and CDOs on the part of the large credit rating agencies, (2) lack of due diligence on the part of investors, and (3) poor risk management on the part of some large financial institutions. I discuss these in turn. -/- Finally, I touch some of the ways that best epistemic practices have been implemented to correct faulty methodologies and to prepare for possible catastrophic economic scenarios in the future. In effect, the 2006 Credit Rating Agency Reform Act, including its expansion by Dodd Frank, and the subsequent statutory regulation by the SEC aim to facilitate best epistemic practices. These regulatory reforms are examples of proactive and forward-looking regulation, although they were implemented retroactively in response to perceived failures of the rating agencies. I conclude by observing how proactive regulation for best epistemic practices might help us to anticipate and avoid future crises. (shrink)
Not for the first time, the banks and other financial institutions have got themselves – and the rest of us – into a mess, this time on an unprecedented financial and geographical scale. It is no surprise that opinions about causes, consequences and cures abound with ethical issues, as well as technical and economic concerns, a focus of attention. It is to be hoped that useful lessons for the future will be learned. In this chapter, however, we step (...) back from a direct engagement with the stated ills of the financial system itself, whether actual or perceived, chronic or acute. Our starting point is that crisis in the financial system not only makes us stop and think; but it might also, particularly under conditions of moral panic, prevent us from thinking well. Our contention is that a further impediment to thinking well about financialcrises is the lack of a substantial body of academic knowledge that might be termed ‘financial ethics’ – a corpus of well developed conceptual insights and appropriate empirical evidence. We identify some of the reasons for this situation and proffer some suggestions regarding what might be done to remedy it – including the development of knowledge that is as relevant to everyday practices during periods of normality as it is to providing perspectives on crisis. The chapter is structured as follows: the next section provides a perspective on debate during times of crisis; the middle section seeks to explain why academic financial ethics is not a significant constituent element of debate on the financial crisis post-2007; and the final two main sections explore ways in which an academic agenda for financial ethics might be constructed. In a curious way this chapter echoes some of the themes and especially the conclusion of David Bevan’s chapter in this work although the reasoning to the conclusion that finance ethics is an empty set follows a rather different Badiou-inspired path in chapter 18. (shrink)
In this essay David Lea approaches the decline in the study and teaching of the humanities within the university context from a financial perspective. As humanities departments are either closed down or have their curriculum attenuated, it is obvious that the revenue previously available to support such programs has not been forthcoming. This change is often explained as the result of cost cutting necessary during periods of financial crisis, but this justification is belied by the fact that while (...) the humanities have suffered during recent “financialcrises,” other areas within the university have grown. Resources that could have supported the humanities have instead been applied elsewhere: first, to increasing the administration and ancillary support staff; and second, in support of subjects oriented toward technology and the market. Ultimately, Lea links the decline of the humanities to the growing financialization of the economy, the ideology of managerialism, and a contemporary tradition that accords with the “procedures of the realms of the market and of liberal individualist politics.”. (shrink)
We examine the politics of financial crisis response in Japan and the United States. Many existing accounts of Japan's of the 1990s have emphasized Japan-specific factors, such as structural problems, policy errors, and political dysfunction. We argue that Japan may have been subject to a form of first-mover disadvantage. Like innovation in the private sector, developing effective solutions to novel policy problems requires a messy process of discovery, experimentation, and repeated failure. Much as late-industrializing countries adapted the methods and (...) technologies of early developers, second-movers can apply effective policies demonstrated by first-movers in a more targeted, efficient, and rapid manner. We show that the behavior of Japan and the United States during their respective financialcrises is broadly consistent with this theory. In addition, policy adoption in the United States most clearly reflected lessons from Japan in areas where the lessons were considered clear and implementation was less politicized. (shrink)
If global economic justice is to be achieved, debt crises must be assessed within the broader context of the international financial system. But this system has fostered instability and recurrent financialcrises that have severely harmed poor countries and their people.
Financialcrises have become an all-too-common occurrence over the past twenty years, largely as a result of changes in finance brought about by increasing internationalization and integration. As domestic financial systems and economies become more interlinked, weaknesses can significantly impact not only individual economies but also markets, financial intermediaries and economies around the world. This volume addresses the twin objectives of financial development in the context of financial stability and the role of law in (...) supporting both. Financial stability (frequently seen as the avoidance of financial crisis) has become an objective of the international financial architecture as well as individual economies and central banks. At the same time, financial development is now seen to play an important role in economic growth. In both financial stability and financial development, law and related institutions have a central role. (shrink)
Consumer driven and globally competitive financial markets are crucial for the future prosperity of the Finnish society (Laitamäki, Lehti and Paasio 1996). The largest transfer of wealth in history is currently taking place as Baby Boomers (born 1946-1964) prepare for their retirement and inherit the assets of the previous generation. Due to cognitive limitations and emotional biases these consumers don’t always make rational decisions with financial services. This conceptual study addresses irrational financial consumer behavior and its impact (...) on the Finnish business and society. The study focuses on two research questions: 1) What type of behavioral finance concepts explain irrational consumer behavior? 2) What are the implications of these behaviors for the Finnish business and society? The purpose of this study is to assist individual consumers, business leaders and policy makers in making better financial services related decisions in Finland. The need for better decisions has been illustrated during Finnish and international financialcrises including the US sub-prime loan turmoil in 2008. (shrink)
The ongoing series of global financialcrises offers some important philosophical lessons and insights for educators. The epistemological lesson is stark: we should beware of certainty and all claims to it. Were the disposition of generic skepticism in place at all levels of schooling, then the intellectual rigidity that has characterized economics as a “discipline” would be balanced by demands to consider possible alternatives. The ethical lessons to be learned include ensuring that ethics, as a form of rigorous (...) but openended inquiry into key questions about the kind of world in which we want to live, be included in every classroom and curriculum. At the center of this inquiry are relationships, most notably those between and among individual persons, on the one hand, and those between persons and the groups to which they belong and on which they are often said to depend, on the other. Such relationships also have an aesthetic dimension, in terms of their place in building, not just an ethically better world, but a more wholesome, integrated and harmonious world. (shrink)
The paper uses the example of the failure of bankers and financial managers to understand the risks of dealing in structured financial products, before the financial collapse, to investigate how people respond to crises. It focuses on whether crises cause people to challenge their habitual frames by the application of moral imagination. It is proposed that the structure of financial products and their markets triggered the use of heuristics that contributed to the underestimation of (...) risks. It is further proposed that such framing heuristics are highly specialised to specific contexts and are part of a wider set of heuristics that people carry in their cognitive ‘adaptive toolboxes’. Consequently, it is argued, when a crisis occurs, the heuristics are not challenged, but are simply put away, and other more appropriate heuristics are put to use until a sense of normality returns, and the use of the old heuristics is resumed. (shrink)
In this paper the co-responsibility of the North for the development of the South, the chance of an authentic developmentand Rawls’s maximin rule are indicated as the ethical perspectives from which the financial integration of developing countries will beevaluated. It follows a brief economic analysis of possible problems of high inflows of portfolio investments for developing countries. They become more vulnerable to financial and monetary crises and their domestic banking systems are weakened by a higher risk of (...) devaluation. This will lead to an outline of the goals for reshaping the financial integration: among others limitation of capital inflows,strengthening of the domestic banking system and further development of the country’s particular economic style. Finally someregulations of external financial relations and the proposal of a cooperative monetary arrangement between the South and the Northare discussed as possible measures to improve this integration. (shrink)
The crises of neo-liberalism, modalities of revolt and adaptability The aim of the article is to locate the current crisis within the history of neo-liberalism with its successive crises. The authors point to the fact that the crisis is the latest in a series of financial and economic crises, to which must be added energy and food crises. The article analyses the social effects of neo-liberalism by way of its return to a logic focused on (...) the production of absolute surplus-value, following the revolt of the financial bourgeoisie against the social State. It concludes with an examination of the effects of the various forms of resistance to neo-liberalism upon the modes of legitimation that are in operation. Focusing in particular on the situation in France, the article argues that the reactions to the crisis, between revolt and resignation, are to be explained by way of the structural effects of neo-liberalism and in terms of the crisis of legitimation now affecting it. (shrink)
This special issue introduces the study of financial technologies and finance to the field of philosophy of technology, bringing together two different fields that have not traditionally been in dialogue. The included articles are: Digital Art as ‘Monetised Graphics’: Enforcing Intellectual Property on the Blockchain, by Martin Zeilinger; Fundamentals of Algorithmic Markets: Liquidity, Contingency, and the Incomputability of Exchange, by Laura Lotti; ‘Crises of Modernity’ Discourses and the Rise of Financial Technologies in a Contested Mechanized World, by (...) Marinus Ossewaarde; Two Technical Images: Blockchain and High-Frequency Trading, by Diego Viana; and The Blockchain as a Narrative Technology: Investigating the Social Ontology and Normative Configurations of Cryptocurrencies, by Wessel Reijers and Mark Coeckelbergh. (shrink)
This volume analyses contemporary capitalism and its crises based on a theory of capitalist evolution known as the social structure of accumulation theory. It applies this theory to explain the severe financial and economic crisis that broke out in 2008 and the kind of changes required to resolve it. The editors and contributors make available new work within this school of thought on such issues as the rise and persistence of the 'neoliberal' or 'free-market' form of capitalism since (...) 1980 and the growing globalization and financialization of the world economy. The collection includes analyses of the US economy as well as that of several parts of the developing world. (shrink)
Over the past century, the rise and fall of economic policy orders has been shaped by a paradox, as intellectual and institutional stability have repeatedly caused market instability and crisis. To highlight such dynamics, this volume offers a theory of economic ideas in political time. The author counters paradigmatic and institutionalist views of ideas as enabling self-reinforcing path dependencies, offering an alternative social psychological argument that ideas which initially reduce uncertainty can subsequently fuel misplaced certainty and crises. Historically, the (...) book then traces the development and decline of the progressive, Keynesian, and neoliberal orders, arguing that each order's principled foundations were gradually displaced by macroeconomic models that obscured new causes of the Great Depression, Great Stagflation, and Global Financial Crisis. Finally, in policy terms, Widmaier stresses the costs of intellectual autonomy, as efforts to 'prevent the last crisis' have repeatedly obscured new causes of crises. (shrink)
Corporate governance has resurfaced as a topic in the ongoing financialcrises. This article frames the debate on corporate governance within the ongoing concerns about the corporate role in wider societal governance. It then maps out the context of the six scholarly contributions in this special issue by highlighting how the current debate moves towards a closer integration of governance at corporate and societal level.
In 2010, two years after the global financial collapse that triggered the worst economic crisis since the Great Depression of the 1930s, the best-selling publication in France was not that year’s Prix Goncourt,1 Michel Houellebecq’s La carte et le territoire (The Map and the Territory), a novel published by Flammarion, one of Paris’s leading publishing houses. That honor went to Indignez-vous! (Time for Outrage!), a 32-page pamphlet authored by 93-year-old Stéphane Hessel, a former hero of the French Resistance, a (...) concentration camp survivor and career diplomat. Hessel’s booklet, issued by Indigène Editions, a small provincial publisher, has since sold over 2 million copies, reaching an estimated 10 million .. (shrink)
The last few years have seen the emergence of a more political, ‘post-Derridean’ generation, critical of the impotent messianism of the politics of deconstruction. As Žižek would have it: ‘Derrida's notion of ‘deconstruction as ethics’ seems to rely on a utopian hope which sustains the spectre of ‘infinite justice’, forever postponed, always to come’ (Žižek 2008: 225). The promise of redemption, it follows, would reside in an insubstantial promissory value, in the writing of irredeemable cheques that, if cashed in, could (...) only ever lead to default. With its ethos of play and over-investment in an empty promise, deconstruction starts to look symptomatic of the now-bankrupt age of excess. Does the current financial crisis not entail a crisis of Derrida? This reading contrives to elide what is genuinely political in Derrida, and thereby fails to recognise the deconstruction of economic theodicy implicit in his work. Jean-Luc Nancy has argued that the concept of sacrifice is irreducibly linked to the short-circuiting of the political. We see in Derrida, however, that sacrifice is at the heart of politics, a response to undecidability that is precisely opposed to the fantasy of economics without sacrifice. Furthermore, sacrificial politics is the condition of possibility of the promise, which is constructed and contingent, rather than a priori. If there is a problem with this, it is that Derrida does not sufficiently entertain the prospect of the promise becoming so distant as to be effectively meaningless. Drawing on Bernard Stiegler, this article argues for an expansion of Derrida's account, to show not only that politics is sacrifice, but moreover that the promise of redemption cannot live on in the absence of sacrifice. (shrink)
The state subvention and distribution of health care not only jeopardize the financial sustainability of the state, but also restrict without a conclusive rational basis the freedom of patients to decide how much health care and of what quality is worth what price. The dominant biopolitics of European health care supports a healthcare monopoly in the hands of the state and the medical profession, which health care should be opened to the patient’s authority to deal directly for better basic (...) health care. In a world where it is impossible for all to receive equal access to the best of basic health care, one must critically examine the plausible scope of the authority of the state to limit access to better basic health care. Classical distributive justice affords a basis for re-examining the current European ideology of equality, human dignity, and solidarity that supports healthcare systems with unsustainable egalitarian concerns. (shrink)
The current economic and preceding financialcrises seem to provide evidence in favour of the self-destruction thesis of capitalism. Responses to the crisis have been polarised. Some suggest that regulatory changes are all that is needed. Others suggest the need to change the economic system by developing a new global economic ethic. The first is too limited, the second too utopian. This article suggests that a MacIntyrean virtue ethics approach provides both a more convincing diagnosis of the problem (...) and leads to a more workable prescription. First, we need to understand the internal contradictions of the tradition that has developed of how to ‘do’ business. Then we need the virtues to be exercised inside practices and institutions. But virtue itself needs to be institutionalised; we need an appropriate governance of virtue in organizations. Even though governance is usually taken to ‘crowd out’ virtue, this article proposes an approach to governance that ‘crowds in’ virtue. (shrink)
Neoclassical economic theory, which still dominates the science, has proven inadequate to predict financialcrises. In an increasingly globalised world, the consequences of that inadequacy are likely to become more severe. This article attributes much of the difficulty to an emphasis on equilibrium as an idealised property of economic systems. Alternatively, this article proposes that actual economies are typically out of balance, and that any equilibrium which may exist is transitory. That single changed assumption is central to complexity (...) economics, a view which is presented in detail. It is suggested that economic crises will be most effectively avoided when economists utilise methods, grounded in complexity theory, which can identify threat in an early stage. As a programmatic example, the use of Agent-Based Models combined with Boolean networks, is defended as a promising method for recognising vulnerability. (shrink)
This article differentiates between three different axes of conflict in world risk society. The first axis is that of ecological conflicts, which are by their very essence global. The second is global financialcrises, which, in a first stage, can be individualized and nationalized. And the third, which suddenly broke upon us on September 11th, is the threat of transnational terror networks, which empowers governments and states. Two sets of implications are drawn: first, there are the political dynamics (...) of world risk society. In an age where trust and faith in God, class and progress have largely disappeared, humanity's common fear has proved the last - ambivalent - resource for making new bonds. Second, the methodological nationalism that preoccupies the sociological imagination has to be overcome and a `methodological cosmopolitism' has to be created. (shrink)
The question we pose in this paper is: How can wisdom and its inherent drive for integration help information systems in the development of practices for responsibly and ethically managing and using big data, ubiquitous information and algorithmic knowledge and so make the world a better place? We use the recent financialcrises to illustrate the perils of an overreliance on and misuse of data, information and predictive knowledge when global Information Systems are not wisely integrated. Our analysis (...) shows that the global financial crisis was in part caused by a serious lack of integration of information with the larger context of social, cultural, economic and political dynamics. Integration of all the variables in a global and information hungry industry is exceptionally difficult, and so “exceptionality” of some kind is needed to make sufficient integration happen. Wisdom, we suggest, is the exceptionality needed to lead successful integration. We expect that a wisdom-based shift can lead to more organizationally effective and socially responsible Information Systems. (shrink)
When can we say that a debt crisis has been resolved fairly? An often overlooked but very important effect of financialcrises and the debts that often engender them is that they can lead the crisis countries to increased dependence on international institutions and the policy conditionality they require in return for their continued support, limiting their capabilities and those of their citizens to exercise meaningful control over their policies and institutions. These outcomes have been viewed by many (...) not merely as extremely unfortunate and regrettable, but also as deeply unfair. And indeed, increasingly potent popular movements have pressured governments, financial institutions, and the financial community to seek what they take to be fairer solutions to debt crises. The merits of these programs and proposals for dealing more fairly with sovereign debt remain hotly disputed. In this essay, we try to take a step back from the political fray and examine some more fundamental considerations that seem relevant to assessing the fairness of current arrangements governing economic exchanges related to debt contracts and alternatives that have been proposed to them.Our discussion is organized into seven sections. First, we characterize briefly the concept of fairness and its role in social evaluation. Second, we clarify what sovereign debt is, and, third, the ethical statuses that particular sovereign debts can have. Fourth, we identify and describe the main features of current practices related to sovereign debt. Fifth, we describe an "ideal picture" of creditor/debtor relations. We argue that in such a scenario a broad range of ethical considerations can plausibly be invoked in support of practices that closely resemble those presently governing sovereign debt. Sixth, we draw attention to the many ways in which in reality the relations between sovereign debtors and their creditors differ markedly from the relationships between the creditor and debtor in the ideal picture. Because of this, many of the ethical considerations that would support present practices were relations between sovereign debtors and their creditors to resemble more closely those depicted in the ideal picture fail to do so under present circumstances. We conclude, moreover, that the remaining ethical considerations that might be advanced in support of the present system are at best quite inconclusive. Finally, we describe briefly specific reform proposals to current practices. While we will not attempt to show that these proposals would necessarily make the rules governing economic exchanges relevant to sovereign debt more fair, we conclude, in light of our earlier analysis, that they must be given much more serious consideration than they have so far received in policy circles. Indeed, there are strong prima facie reasons to believe that some combination of these proposed policies might prevent or mitigate some of the most ethically regrettable outcomes of present practices and norms by changing the incentives of sovereign borrowers and those who lend to them. (shrink)
Full-reserve banking, which prohibits private money creation, has not been implemented since the 19th century. Thereafter, bank deposits became the dominant means of payment and have retained their position until today. The specific contribution of this paper is to provide a comprehensive outlook on the historical and contemporary proposals for full-reserve banking. The proposals for full-reserve banking have become particularly popular after serious financialcrises....
Increasing international cooperation and interdependence are important features of the contemporary globalized world. In the present age, foreign aid is a very peculiar type of transaction in the sense that its focus is to satisfy the objectives of the donor and the recipient, which are not always the same. This paper attempts to analyse the situation of US and British aid to Pakistan’s education sector. The role of international donors in the development of the education sector in Pakistan cannot be (...) underestimated. They have been even more important for this developing country which has faced financialcrises, particularly during the 1990s. These financial hardships faced by the country were mainly the outcome of the changed regional, political, as well as the geostrategic situation which also caused the change in the behaviour of international donors. It is especially true in the case of the USA and the UK where the aid to Pakistan was seriously affected by the changed situation in Afghanistan, political changes within the country, its nuclear programme and more recently the events of 9/11. This discussion reflects that the potential benefits of the aid were not reaped adequately due mainly to disruption and resumption of aid on the grounds of the geo‐political situation and strategic interests of donors. (shrink)
In the wake of the current financialcrises triggered by risky mortgage-backed securities, the question of ethics and risk-taking is once again at the front and center for both practitioners and academics. Although risk-taking is considered an integral part of strategic decision-making, sometimes firms could be propelled to take risks driven by reasons other than calculated strategic choices. The authors argue that a firm's risk-taking propensity is impacted by its ethical climate (egoistic or benevolent) and its emphasis on (...) output control to manage its marketing function. The firm's long-term orientation is argued to moderate the control–risk propensity relationship. The authors also extend research on risk and performance and argue that the association of risk-taking propensity and firm performance is contingent on the ownership (publicly traded versus privately held) structure of the firm. Based on survey data from a sample of manufacturing industries in the United States, the results show significant impact of ethical climate and marketing output control on a firm's risk-taking propensity; also risk-taking propensity shows a stronger association with firm performance in privately held firms than in publicly traded firms. (shrink)
Financialcrises are now commonplace in the global economy. It was not always so. For over two decades after World War II, under the Bretton Woods system of capital controls, financialcrises were relatively rare. Since the early 1970’s the number and frequency of financialcrises (currency crises, banking crises, sovereign debt crises, or combinations thereof) increased dramatically, culminating in the enormously destructive global crisis of 2008-2009. (By one count, there were (...) at least 124 banking crises between 1970 and 2008. During the postwar decades before 1970 the number is: two.) What explains the post-1970 rise? The date suggests a natural explanation: capital liberalization. With the early 1970’s breakdown of Bretton Woods, governments increasingly removed controls on private capital movements across their borders. As capital flows dramatically increased, economically integrated countries became markedly more susceptible to financialcrises as compared to the postwar years of careful controls. While each crisis has its own varying local causes, and leaves plenty of blame to go around, the general tendency for crises to become more numerous and more frequent is substantially (even if not wholly) explained by a major trend in government policy: the choice of governments to remove capital controls has created a global economic environment in which financialcrises readily break out. It is difficult to overstate the profoundly consequential nature of this choice. More than most any adverse economic event—and import surge, downturn in the business cycle, a commodity price spike—financialcrises cause severe and potentially irreparable harm on a large and even global scale. Developing countries from Argentina to Mexico to Japan to Malaysia have become familiar with crisis-induced ravages of high unemployment, reduced tax revenue, exploding public debt, and cuts in social services. The losses often fall to very poor people, though they would be significant for most anyone.. (shrink)
As a rising power, China has become actively involved in regional bilateral/multilateral arrangements in the post-Cold War, especially post-crisis (1997– 98 financialcrises) era, and this has attracted much attention from within and outside East Asia. Diverse understandings of China's regional ambition have appeared, especially since the launch of the China-ASEAN free trade agreement (FTA). Aiming at deciphering the ideas behind China's regional thinking, this paper argues that China's perspective on regionalism is a broadened economic regionalism, which is (...) basically economic-centered, because economic performance is vital both to its long-term strategic target and to its internal social stability. This economic regionalism will last for some time because China will be a developing country at least in the mid-term, which means China will have to focus more on its economic performance. In practice, China will engage bilaterally or multilaterally with others through its FTA strategy. Thus, China cannot be a main contributor to East Asian integration as expected, owing to the inward-looking nature of its economic regionalism. Also, the institutional integration of East Asia needs the effort of all the players in the region. (shrink)
Global capitalism’s specific contradictions and antagonisms and their threats for mankind Around 1990-1992, world capitalism opened for itself a new period of expansion, marked in particular by the incorporation of China. But the movement whereby “capitalist production overcomes its immanent barriers, but does so only by means which again place these barriers in its way on a more formidable scale” is under way. New contradictions and antagonisms are discernable, alongside earlier ones. The consequences of the relationship between “man and nature” (...) developed under capitalism, will now impinge on the accumulation process directly and indirectly. Given the external economic foundations of US hegemony, the scale on which it has accumulated fictitious capital and its dependency on energy, the situation is ripe with financialcrises and with military conflict. (shrink)