Abstract
The Introduction provides a brief history of the economic role of financial services. It also deals with the traditional intermediation function performed by banks and discusses the evolution of different types of financial institution, including the modern investment bank. It explains the growing importance of securities’ trading by banks in the developed countries since 1980 leading to a neglect of their traditional functions and how neoliberal ideas have contributed to the phenomenon of financialization in the developed economies and to the rapid growth of financial services in the world as a whole. However, the Introduction avers that financialization has not only led to a massive increase in the global stock of debt but also to a marked increase in the vulnerability of economies to financial crises.
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Notes
- 1.
The word credit is derived from the Latin creditum meaning belief or faith.
- 2.
Money goes beyond the notes and coins issued by the State or central bank otherwise known as legal tender.
- 3.
With the exception of the USA. Here, the Federal Reserve System was created as recently as in 1913.
- 4.
Following globalization it is theoretically possible for any economy to live beyond the limits of its savings by utilizing the surplus savings of other countries. The only caveat is how the savings are then used.
- 5.
Without going into the technicalities of voting and non-voting shares, legally whoever owns the majority of shares in an enterprise is the owner of that enterprise.
- 6.
The favourable tax treatment of debt has been instrumental in a huge increase in corporate indebtedness.
- 7.
The largest banks in the world and the largest investment funds run into hundreds of billions, some into trillions, of dollars.
- 8.
This is when the Glass-Steagal Act of 1933 was passed by the US Congress separating commercial from investment banking. The Act was repealed in 1999.
- 9.
It is rather strange that operators in financial services refer to paper assets as ‘products’ as if they possessed physical characteristics.
- 10.
Merton and Scholes winners of the Nobel Prize in Economics in 1998 had made such a claim.
- 11.
A form of gambling that when extended to the commodities markets in 2010 caused large increases in food prices and led to considerable distress in the developing countries of South Asia where expenditure on food constitutes a major portion of the spending of the poor.
- 12.
The Kay Review of UK Equity Markets 2012, www.parliament.uk Publications and records.
- 13.
All high earners in finance need to ask themselves if their massive compensation packages—often more than the equivalent of 15 times an average teacher’s salary—can be justified on rational grounds.
- 14.
There is near unanimity amongst commentators and social scientists that the Brexit phenomenon in the UK and the election of Donald Trump in the USA have been driven by the scapegoating of immigrants in both countries.
- 15.
For the purposes of this book developing countries are primarily the larger economies of East, South-East and South Asia, i.e. China, South Korea, Hong Kong, Indonesia, Thailand, Malaysia, Philippines.
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Ahmed, S. (2018). Introduction. In: Ruling or Serving Society?. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-00521-4_1
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