Abstract This paper contributes to the understanding of subordinate financialisation in emerging and developing economies by setting out a novel core–periphery framework that elucidates the place of ...Latin America in the global architecture of finance. This framework builds on the centre–periphery financial model of uneven regional credit and economic growth, originally proposed by Victoria Chick and Sheila Dow in 1988. In the era of deregulated financial flows and market-based credit, the core–periphery relationship has become a three-level hierarchical system, in which Latin American nations occupy a subordinate place. The key drivers of this structural shift within these nations have been the liberalisation of cross-border financial flows and investment, the deregulation of banking and the adoption of private pension systems. These drivers’ adoption can be traced to both push and pull factors: specifically, recurrent financial crises requiring external intervention (especially by the International Monetary Fund (IMF)), and the possibility of engaging with the financial instruments and megabanks driving the globalisation of finance. Participating in this hierarchical system has required importing elements of the financial architecture that evolved in the 1980s in advanced economies and has also arguably deepened this region’s financial dependency and vulnerability.
Abstract
Disagreements over the systemic implications—the future—of financialization can be traced in part to the absence of sustained attention to the role of banking firms in driving this secular ...shift forward. That is, the financialization literature lacks an adequate microfoundation. Accounting for the drivers of financialization processes solely at the macro level overlooks the problems of how these processes came about and whether they are sustainable. This paper addresses this explanatory gap, arguing that a key independent microeconomic driver of increasing financialization did exist: the incessant efforts by money-centre banks in the USA to break out of Depression-era restrictions on their size, activities, and markets. These banks’ growth strategies in turbulent times led to an institutional (meso) shift—the rise of a megabank-centred shadow banking system—that now shapes global financial architecture even while operating in ways that are unsustainable. In short, too-big-to-manage megabanks are at the heart of the fragility and instability of the economy today.
This thesis presents a theoretical and empirical study of the financial structure of Latin American economies in the context of financialised capitalism, using Chile as a case study. It argues that ...the financial structure in Latin American economies has been transformed in the past 40 years. Previous studies of this structural shift have emphasised the liberalisation of cross-border credit and investment flows, banking deregulation, and the adoption of private pension systems. This thesis develops an alternative triple-lens framework for analysing this shift, drawing on three paradigms in heterodox political economy. First, its approach is grounded in key elements of post-Keynesian economics: fundamental uncertainty, liquidity preference, and the endogeneity of money. Second, it builds on Minsky's (1975) view of monetary capitalist economies as built on fragile interconnection among the balance sheets of financial agents whose behaviour depends on the liability structures that finance their asset positions. Third, this thesis understands the variegated financialisation of Latin American economies as unfolding from a subordinate position in the global system of financialised capitalism. Financialised capitalism has been characterised as the shift toward market-based finance, driven by US structural power in global finance. This power is reflected in the 'Americanisation' of national financial systems. This dissertation shows that these drivers are part of a broader process that has turned finance into a globalised market-based system centred on US dominance, as embodied in the strength of the US dollar. Using social network analysis and the results of 23 semi-structured interviews with Chilean financial market experts, this thesis empirically documents the transformation of Latin American financial structures, focusing in particular on the institutional structure of-and behaviour within-Chile's banks and financial markets. This analysis demonstrates that Latin American economies experience financialisation from a subordinate position at the micro, meso, and macro-levels.
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