ABSTRACT
The transformation of global finance since the 1970s is closely linked to the parallel transformation of the real economy. Transformation of the real economy has gone hand-in-hand with transformation of the financial sector. A powerful stimulus to financial sector concentration arose from the wide array of services that the financial sector performs for global firms in the real economy. During the era of globalization there developed a growing influence among academics and policy-makers of the view that financial markets are inherently efficient and self-regulating, requiring only ‘light’ government regulation. The policy response of governments to the global financial crisis across the high-income countries followed a common path. They chose not to use fiscal policy in order to redistribute income and wealth, strengthen social welfare systems and expand infrastructure. The stated economic logic behind the Western governments’ drive to push down interest rates was to stimulate economic growth through the impact on wealth and consumer demand.
