The Crisis Of Financialization From The Core To The Periphery[2]

Abstract. In this paper I give a structuralist analysis of the financial crisis. First I seek to refute the argument suggesting that the main reason behind the crisis was government failure in the United States. Deregulation, by amplifying market failures, was of fundamental importance from the point of view of the crisis. However, deregulation cannot be understood without an examination of the broader social context, the changes that occurred in the capitalist structure and the consequent changes in the power structure. The term 'financialization' denotes the changes in the social and economic structure which give the background to and the context for a better understanding of financial deregulation and liberalization. The particular class and elite coalition maintaining the Keynesian-welfare consensus fell apart; the middle class now relies to a lesser degree on the lower classes for solidarity, while the financial elite gained dominant influence within the economic elite. In the second part of my paper I continue with an analysis of how the financial crisis impacted the Eastern European semi-periphery and especially Hungary. Contrary to the popular view that blames the erroneous macro-economic policy of the governments for the countries' failure, I highlight that the crisis of the peripheries is rooted in the structure of global capitalism and the mistakes in the adjustment strategy of the countries concerned. Excessive dependence on financial globalization and a growth strategy that had built on the inflow of hot money have led to a fragile economic model just as much as the process of financialization in the core countries. I conclude my paper with presenting a number of policy recommendations.