Financial Markets, Capital, and Globalization
The Evolution of Financial Markets Since 1979
The process of financial markets has been the result of measures that were taken around 1979. The 1979 models reflect the policies of President Ronald Reagan (USA) and Prime Minister Margaret Thatcher (UK). After this time, money began circulating more freely and easily in the financial markets, especially in the United States, the European Union, and Japan. Money in financial markets is intangible, and financial markets can have both positive and negative effects. While they generate money, jobs, and wealth, financial market failures, such as crashes, can cause large economic crises (like that of 1929).
Capital Concentration
Another feature of economic globalization is the rise of large corporations. These large multinationals are significant accumulators of capital and tend to concentrate. There are different types of concentration, including monopolies and oligopolies.
- Monopoly: Control of the market by a single company, allowing it to set prices.
- Oligopoly: Control of the market by a small number of companies, which coordinate pricing.
These multinationals are formed in various ways, some have grown organically over time, others through mergers, or through mutual takeovers (Initial Public Offering of Acquisition) – i.e., the purchase of shares of one company by another, offering shareholders a price above the current market value. Takeovers can be friendly (the company agrees to be bought) or hostile (the company resists the purchase, but market forces prevail). Some multinationals have become so large that their revenue volume exceeds that of some countries, and they influence the policies of many countries both nationally and internationally.
Company Expansion
When we talk about expansion, we mean that companies have spread across the planet; their points of production and management are all over the world. This is related to the New International Division of Labor, including the delocalization of industry. This corporate dispersion creates significant interdependence between firms.
When a multinational establishes itself in a country, it creates jobs and investment, both directly and indirectly (indirectly because a number of companies will supply the multinational). The problem is that, generally, the profits generated by a multinational do not remain in the country where it is established but go to the company’s country of origin. Three prominent Spanish multinationals are Banco Santander, Telefonica, and Repsol YPF.
Social Globalization
Globalization has also brought major social changes. The first is the incorporation of women into the workplace, which has affected family models, leading to later childbearing and new demographic behaviors. Another change is the increased level of consumption; there are so many product offerings in many countries that there is a compulsive behavior to purchase (e.g., USA or Japan). Products are widely distributed, leading to a mass distribution of similar products and a tendency toward standardized consumption (i.e., finding the same types of products in supermarkets everywhere).
The third social change is that the labor market is also being globalized through migration, meaning that workers are going to work all over the planet.