The Political Economy of Global Finance Capital

Abstract

The globalization of finance in recent years and the concurrent growth in the financial sector's influence, manifested most dramatically in the recent financial crisis, highlights the importance for political scientists of understanding the political economy of global finance. The authors review six important books that are representative of recent thinking by political scientists on the topic. They address the central questions that have been at the heart of the literature on global finance from its beginning in new and interesting ways. The most important developments highlighted in this article are the move from a predominant focus on state-centered patterns of regulation to the consideration of transnational governance regimes that mix public and private regulation; the effort to understand the causal forces that shape the political economy of global finance by allowing for an interaction among interests, institutions, and ideas; and giving increased attention to new sources of systemic risk in the global financial system, as well to the consequences for domestic politics of interactions with the global financial system. Notwithstanding the progress that has been made in coming to grips with the political economy of global finance, the authors highlight a number of questions that need to be addressed in future research. Although various nonstate actors have been recognized as important in the constitution of the rules of global finance, it is also necessary to understand the behavior of the actors who enact these rules. It is also important to generate evidence that forges some agreement on the causes of the globalization of finance, especially as the arguments made become more complex. Finally, there is a need for a more realistic assessment of the costs and benefits of financialization at the global and national levels. This last challenge is essential for a thorough understanding of the current global financial crisis.