On the Freeing of Global Finance.

• Author: Rees, Matthew
• Position: Global Market/Economic Trends

"Much of the institutional scenery of two decades ago--distinct national business elites, stable managerial control over companies and long-term relationships with financial institutions--is disappearing into economic history. We have, instead, the triumph of the global over the local, of the speculator over the manager, and of the financier over the producer. We are witnessing the transformation of mid-20th century managerial capitalism into global financial capitalism."

"Above all, the financial sector, which was placed in chains after the Depression of the 1930s, is once again unbound. Many of the new developments emanated from the United States. But they are ever more global. With them come not just new economic activities and new wealth but also a new social and political landscape."

"First, finance has exploded. According to the McKinsey Global Institute, the ratio of global financial assets to annual world output has soared from 109 percent in 1980 to 316 percent in 2005. In 2005, the global stock of core financial assets had reached $140,000 billion."

"Second, finance has become far more transactions-oriented. In 1980, bank deposits made up 42 percent of all financial securities. By 2005, this had fallen to 27 percent. The capital markets increasingly perform the intermediation functions of the banking system. The latter, in turn, has shifted from commercial banking, with its long-term lending to clients and durable relations with customers, towards investment banking."

"Third, a host of complex new financial products have been derived from traditional bonds, equities, commodities, and foreign exchange. Thus were born...