For more than a hundred years, Marx and Engels have always been the most comprehensive interpreters and the most profound critics of the capitalist economic system. In 1848, two young revolutionary mentors jointly published the classic book The Communist Manifesto, which revealed the basic characteristics of the modern capitalist economic system with astonishing insight and sharp brushstrokes that swept through thousands of armies.
Marx and Engels marked the fundamental difference between the capitalist economic system and all previous economic systems, first of all its unprecedented productivity growth and astonishing wealth-creating capacity:
The productive forces created by the bourgeoisie in its less than 100 years of class rule are more and greater than the total productive forces created by all previous generations. The conquest of the forces of nature, the adoption of machines, the application of chemistry in industry and agriculture, the travel of steamships, the passage of railways, the use of telegraphs, the reclamation of entire continents, the navigation of rivers, as if by spell calling out a large number of people from the ground .... Which century would have expected such productive forces in social labour?
When Marx and Engels wrote these shocking classics, the great engine of capitalism had just been launched, and the global capitalist system had just dawned. If Koukes and Engels had looked down from heaven at the rapid progress of human productivity over the past 100 -odd years, they would not have revised the text of the Communist Manifesto, but would have added a few more exclamation points to those famous assertions!
Detailed statistics by economists show that it would take a long 630 years before modern capitalism was born for The per capita GDP level in Western Europe to double, and it would take much longer for the per capita GDP level to double worldwide. Since the birth of the modern industrial revolution and the capitalist economic system, mankind has begun to witness unprecedented rapid economic growth. (2) The time for per capita GDP to double has rapidly shortened to 50 to 60 years. It took 40 years for the United States and 25 years for Japan. After the reform and opening up, China's GDP doubled in less than 10 years. Why has the modern industrial revolution and the capitalist market economy been able to create such astonishing economic growth? What is the secret of economic growth? These are exciting research topics that many economists and historians have fascinated. Another, more profound, predictable and insightful assertion by Marx and Engels is that enough capitalism must develop into an economic system that transcends national boundaries, and must evolve into a full-fledged economic system. Marx and Engels have many wonderful statements about this:
The revolutionary elements within the collapsing feudal society developed rapidly.
The market is always expanding and the demand is always increasing: Large-scale industry established a world market prepared by the discovery of the Americas. The world market has led to the tremendous development of commerce, navigation and land transport. This development, in turn, facilitated the expansion of industry. At the same time, with the expansion of industry, commerce, navigation and railways, the bourgeoisie developed to the same extent, increasing its capital and pushing behind all the classes left over from the Middle Ages.
What makes Marx and Engels superior to ordinary people is that they thoroughly foresaw that the capitalist economic system would create a truly global market for raw materials, a global market for factors of production, a global financial market, and a global industrial division of labor system at the very beginning of the dawn of the global capitalist economic system. The global capitalist economic system will inevitably involve every aspect of human life in the behemoth of the global division of labor system, and every corner of the earth will be included in the global market and industrial division of labor system.
The bourgeoisie, by opening up the world market, has made production and consumption in all countries worldwide. To the great regret of the reactionaries, the bourgeoisie has dug up the national base at the foot of industry. The ancient national industry has been wiped out, and it is being wiped out every day. They have been squeezed out by new industries, the establishment of which has become a matter of vital importance to the lives of civilized peoples; These industries no longer process raw materials that are not local, but come from very distant regions: their products are consumed not only in their own countries, but also in the world. The needs of the old, which depend on domestic products, are raised by the needs of the new ones, which are to be met by the products of the extremely distant national belts, the machines constantly replace the laborers, the industrial reserve army continues to expand, the high effectiveness of production within capitalist enterprises and the disorder of the entire economic system, the continuous decline in the average rate of profit of society, the highly socialized large-scale production creates the preconditions for the replacement of the capitalist economic system by the socialist economic system, and the capitalist economic system is bound to have endogenous cyclical economic fluctuations, etc. All are based on the endogenous technological progress and productivity growth of capitalism. Technological progress and technological innovation determine that the capitalist economic system is a dynamically evolving, non-equilibrium, non-linear economic system. Schumpeter was inspired by Marx's thought to summarize the essential characteristics of the capitalist economic system as innovation, entrepreneurship, and creative destruction.
The profound insights of Marx and Engels are the best starting point for us to think about today's human economic system and the global economic system.
A century and a half after the publication of the Communist Manifesto, the global capitalist economic system, as profoundly foreseen by Marx and Engels, began to take on its full form. In the second half of the 20th century, a truly global commodity market, a global industrial division of labor system, and a global monetary and financial market system began to take shape, beginning to influence the economic, financial, monetary, and political and national strategies of each country and region. In 1997, researchers at McKinsey, a world-renowned consulting firm, published Markets Without Borders, which systematically explained how borderless markets, or a truly global market, are accelerating changes in the economic landscape and economic policies of countries around the world:
A truly global form of the economy finally emerged around 2000 AD. The wave of increasingly liquid assets has driven the wave of global capitalism and accelerated the global circulation of products, services and labor. It is not surprising that during this period, governments not only appeared to be in a hurry to deal with such a powerful global capital market, but also created a lot of chaos.
Regardless of individual wishes, we are experiencing a global capital revolution. The global capital markets, like a teenager who is growing up but does not yet know how to use his muscles, clumsily rampages, discovering his strength and potential in trial and error. The most powerful driver of global upheaval is the growing global capital market. The global capital market is not only grand in scale, but also magnificent in integration, which will create a powerful single market, making the markets of various countries lose their own characteristics and have to strive to integrate into the global market.
The tradable assets in global financial markets, including stocks, bonds, currencies, and more, exceeded $41 trillion as early as 1994 and have been growing rapidly. The growth rate of global liquid financial assets is more than 3 times faster than the growth of the real economy. The issuance of large numbers of shares, the increasing number of government bonds, the fact that financial assets that were previously considered non-tradable, such as bank loans, have become tradable assets, and the increasing number of countries joining the global market have made the market even larger. In 1992, global liquid financial assets amounted to about $32 trillion, equivalent to twice the total GDP of OECD countries. By 2000, global liquid financial assets are expected to reach $80 trillion, at least three times the total GDP of all OECD countries. Looking ahead, the growth rate of global liquidity assets will continue to exceed the growth rate of the real economy. ①
The McKinsey researchers' analytical predictions were prescient. The rapid growth of global liquid financial assets is a basic feature of the global economic system in the past few decades, and the most prominent feature of economic, financial and monetary globalization.
The growth rate of global liquid financial assets far exceeds the growth rate of the real economy, which is the key and secret to the rise of global financial capitalism. It was hailed by many as the gospel of the human economy, and it does make an important contribution to the development of the human economy, yet, to a greater extent, global financial capitalism is the "demon" or "devil" of the human economy.
The rapid growth of global liquid financial assets has not only changed the structure and sexual shield of capital, changed the price structure and market power structure of the economic system, changed the global industrial division of labor system, but also changed people's concept of wealth, and changed the transmission mechanism of monetary policy and fiscal policy. More importantly, global financial capitalism has led to a continuous decline in the growth rate of the real economy, the gap between the rich and the poor and the income gap have accelerated, financial crises have erupted frequently, and social, political, humanistic and ecological crises have become increasingly severe.
Global financial capitalism is a new stage in the development of capitalism, which is the inevitable result of the determination of the inherent laws of the capitalist economic system or the human economic system. It is already a reality, not subject to the will of the people. However, this does not mean that human beings can only passively follow and do nothing in the face of the inherent laws of capitalism or the human economic system; On the contrary, if we want to curb the "wild horse" of global financial capitalism, make full use of its unlimited vitality and impact, and prevent it from frequently creating financial crises and the accompanying economic, political, social, humanistic and ecological crises, then we must transform our concept of wealth, transform the philosophical and moral foundations of economics, transform our policy ideas and work to restart the new dialogue between man and nature, and restart the new dialogue between Eastern and Western civilizations. This is certainly not a simple task, but a systematic long-term project. The first step is to systematically study the rise of global financial capitalism and its operating mechanisms on a national basis, and to dissect its inherent contradictions and the root causes of crises.
Here we first briefly summarize some of the characteristics of the rapid growth of global finance, so that readers can have a general understanding of the high-speed growth trend of global monetary aggregates, total financial assets, and gemdales in the era of global financial capitalism. Later chapters will divide the facts and logic of high-speed financial growth. The data is mainly based on the United States as an example, other developed countries and even emerging market countries have shown similar trends, but the amplitude is slightly smaller than the United States.
First, the contribution of the U.S. financial sector to GDP grew from 2.8 percent in 1950 to 4.9 percent in 1980 and peaked at 8.3 percent in 2006. After the subprime mortgage crisis in 2007 and the financial tsunami in 2008, the contribution of the U.S. financial sector to GDP declined in the short term and soon (since 2010) began to rise rapidly. The financial industry has become the fastest recovery industry in various countries, and governments even expect the recovery of the financial industry to lead to the recovery of the real economy.
Second, in 1980, the total value of financial assets in the United States reached 5 times the gross domestic product, and by 2007 it had more than doubled, and the total value of financial assets exceeded 11 times the gross domestic product. After the financial crisis, the US financial industry took the lead in recovering. Stock trading, bond trading, commodities and derivative financial instruments all exceeded pre-crisis levels and reached new highs. The ratio of total financial assets to GDP continues to climb rapidly.
Third, the price-to-earnings ratio and market value of U.S. companies have increased significantly, far exceeding the growth rate of gross domestic product and the growth rate of corporate profits, resulting in a sharp increase in the ratio of the total value of financial assets to the value of physical assets (capital). Finance scholars have summarized the "Moore's Law" of U.S. and global financial markets: from 1929 to 2009, the market value of U.S. stocks doubled every 10 years, and in the last 30 years, the market value of stocks has doubled every 2.9 years. ①
Fourth, financial asset management and securities are the leaders in the rapid growth of the U.S. financial sector. In 2007, the U.S. securities industry produced $676.1 billion and added $241.2 billion. Asset management was the largest, reaching $341.9 billion, a more than fourfold increase compared to 1997, when asset management was unheard of before 1980. The added value of asset management includes investment advisory fees and asset management fees. Asset management includes various mutual funds, pension funds, trusts, custody businesses, etc. Why is there a rapid growth in asset management? The main reason is that the total size of financial assets has risen sharply, especially the sharp rise in the market value of stocks, which in turn comes from the sharp surge in the stock price-earnings ratio. At the same time, asset management or wealth management is rapidly concentrated from individual investors to institutional investors, from amateur investors to professional investors.
Fifth, since 1980, the rapid growth of the US and global securities industry has shown a "remarkable feature, that is, the proportion of securities underwriting income, which is closely related to the growth of the real economy, has declined rapidly." At the same time, securities trading volume and trading revenue rose more than 4 times. The added value of the securities sector as a percentage of GDP in 1980 was only 0.4 per cent, and in 2001 it reached 1.7 per cent. After 2007, the proportion exceeded 2.0%.
Sixth, household credit as a share of GDP rose from 48 per cent in 1980 to 99 per cent in 2007. Household credit growth was mainly due to residential mortgages, followed by consumer credit (automotive, credit cards, student loans), and consumer loans secured by household housing assets. Soaring household credit, in turn, has contributed to the rapid growth of a variety of financial products such as asset securitization, securities issuance and trading, fixed income products, derivative finance, instruments, etc., which in turn have further significantly increased financial transaction income and asset management income.
Seventh, trading in the foreign exchange market soared, reaching astronomically large trading volumes. At present, the daily trading volume of the global foreign exchange market exceeds $5 trillion, and the annual trading volume reaches at least $900 trillion, or even more than $1,000 trillion. At the same time, the trading volume of financial derivatives in the foreign exchange market and the money market with interest rate swaps as the main body has also reached a record. The market capitalization of derivative financial products has exceeded $400 trillion (and statistics say it has exceeded $650 trillion).
Eighth, the total size and trading volume of the bond market, the total size of the commodity market and the rapid growth of trading partners. The total size of the global bond market has expanded from trillions of dollars in the 1980s to tens of trillions of dollars during the 2008 financial crisis. The volume of bond market trading has expanded rapidly from less than $10 trillion in 1980 to a trillion dollars the day before the financial crisis. Before 190, commodity trading was almost negligible, and before the financial crisis, commodities traded more than $10 trillion. Hedge funds trading in commodities alone exceed $500 billion. Commodities are increasingly showing a trend of financialization, and financial speculation has become an important force or even a key force in determining commodity prices. Ninth, the invention of debt default swaps (CDS) has greatly contributed to the expansion of derivative financial products and trading markets, and the nominal market value of debt default swaps themselves once exceeded $62 trillion. After financial institutions and investors buy debt default swaps, they believe that asset quality is improved and guaranteed, and in turn, they frantically expand the scale of assets and liabilities. The asset-liability scale of almost all large banks and financial institutions has expanded dramatically. At the same time, all kinds of so-called quantitative trading, high-frequency trading, hedging transactions, and arbitrage trading are surging and emerging, and the transaction volume has reached an amazing astronomical level.
Tenth, the rapid expansion of global foreign exchange reserves (mainly US dollar reserves). In 1971, the global foreign exchange reserves were only 48 billion US dollars, and now they have exceeded 12 trillion US dollars, an increase of nearly 300 times! After the financial tsunami in 2008, countries used loose monetary policies to save the crisis and recover the economy, and the growth rate of the total amount of reserve currency created a new historical record. Before the financial crisis, the total amount of global reserve currencies was less than $7 trillion, and in the five years since the crisis, the net growth has been nearly $6 trillion.
An in-depth analysis of the rise and crisis of global financial capitalism and an exploration of future-oriented redemption strategies. An important fundamental argument is that the Era of Floating Exchange Rates collapsed in 1971 with the collapse of the International Monetary System, which dominated the Western world. The collapse of Breton's fixed exchange rate system is not only the historical starting point of the continuous opening and globalization of financial markets, but also the historical starting point of the continuous turmoil in global finance and the frequent outbreak of financial crises, the historical starting point of the accelerated divergence between the global virtual economy and the real economy, and the historical starting point of the rapid rise of global financial capitalism. Among them, the rapid growth of global reserve currencies in the era of anchorless currencies is one of the key factors stimulating the rapid rise of global financial capitalism. Eleventh, when global financial assets, especially global liquid financial assets, are growing at a high speed, the growth rate of the global real economy is gradually decreasing. Real GDP growth in the United States was 4 percent from 1950 to 1973, to 3 percent in 1974 to 2002, to 2.7 percent in 2003 to 2007, and only 0.5 percent in 2008 to 2012. Japan's real GDP grew at a rate of 9 percent from 1950 to 1973, fell to 3 percent from 1974 to 2002, to 1.8 percent from 2003 to 2007, and shrank (negative growth) by 0.3 percent in 2008-2012. Germany's real GDP growth rate reached 5.8% from 1950 to 1973, fell to 1.8% in 1974-2002, fell to 1.7% in 2003-2007, and only 0.6% in 2008-2012. Similar trends are occurring in other advanced economies. Globally, the growth rate of global real GDP was 4.3% from 1950 to 1973, fell to 3% from 1974 to 2002, rebounded to 3.5% from 2003 to 2007 (mainly due to the rapid growth of emerging market countries led by China), and fell to only 1.7% after the financial crisis in 2008-2012. In contrast, in the same period, the real GDP growth of emerging market countries such as Africa, Latin America, and Asia did not show the long-term sustained downward trend of the above-mentioned developed countries. China in particular - one of the most important exceptions.
However, on the whole, the global divergence between the virtual economy and the real economy is one of the most significant facts and most striking features of the contemporary human system. An important task of this book is to deeply understand the internal mechanisms of serious divergence or disconnection between the simulated economy and the real economy on a global scale. Only by deeply understanding this intrinsic mechanism and internal law can we truly understand the general causes of the operation of global financial capitalism, the financial crisis and the outbreak of economic crisis.
The core theme is: the global financial capitalism economic system, characterized by the global monetary financial market, the global liquid financial assets, and the global virtual economy and the real economy, has become an economic system that dominates the entire human society.
The first to gain insight into and deeply participate in the global financial market system are mainly senior executives of multinational corporations and investors or speculators in global monetary and financial markets. They are not only participants in the global market, but also creators of the global market themselves. They take the head action one. Macroeconomic policymakers and economists are reminded and admonished that the basic architecture and operating mechanisms of the human economy, finance and monetary system have undergone revolutionary changes, but economists and political decision-makers have always struggled to keep up with the times. The global economic system, especially the global monetary and financial system, has increasingly restraining power, influence and control over governments, while sovereign countries have less and less control and influence over the global financial and monetary market.
The Latin American debt crisis of the early 1980s, the Asian financial crisis of 1997, the global financial crisis of 2007-2008, and the various financial, currency and banking crises of more than 100 times in between, have increasingly revealed a major fact: the increasingly weakened influence and control of sovereign states over key economic indicators such as interest rates, exchange rates, money supply, and price levels. Many countries have been forced to reintroduce capital controls in an attempt to regain dominance and control of their own economic policies. The re-imposition of capital controls has some effect in the short term, but has little effect or even backfired in the long run.
In the era of global financial capitalism, how to formulate a sound macroeconomic policy and an international economic and financial strategy, which can effectively use the historical opportunities created by economic and financial globalization to promote the sustained growth of their own economy and national welfare, and effectively prevent global financial turbulence from causing a huge impact on their economy and financial security, is one of the primary issues facing governments and political elites.
As the global liquid financial assets and virtual economies become increasingly large, it is becoming increasingly difficult for central banks to predict and grasp key economic indicators such as interest rates, exchange rates, money supply, inflation, etc., or even fundamentally unable to define and measure these indicators. Foresaw economists more than 20 years ago that with the rapid consolidation and growing size of global financial and money market systems, we simply could not know or measure the supply of our own money and the supply of global money. The classical quantitative theory of money is not only no longer applicable to the economy, but also difficult to apply to the global economic system.
In the era of global financial capitalism, improving operating procedures, properly responding to the impact of global capital flows on the domestic goods market and financial market, ensuring the relative independence of domestic monetary policy, maintaining the relative stability of the national monetary market and financial market, and avoiding the fluctuation of domestic interest rates, exchange rates and inflation levels, especially avoiding passive import of inflation or deflation, has become the number one problem faced by central banks. Another fundamental problem facing the contemporary human economic system is the contradiction between the increasing internationalization of the industrial division of labor system, the trading system, the monetary and financial system, and the attempts of sovereign states to uphold and defend the independence and dominance of macroeconomic policies. In other words, the contradiction between the increasing internationalization of the monetary and financial system and the increasing nationalization of the economic policies of various countries is the contradiction between the autonomy and independence of the economic policies of various countries and the coordination and coordination of global economic policies. Mainstream economics is based on a closed economic model, which assumes that sovereign states have completely independent control over macroeconomic policies and can fully regulate their own interest rates, exchange rates, money supply, and other macroeconomic indicators. In the face of an increasingly globalized monetary and financial system, mainstream economics is unable to propose appropriate policies and strategies.
In the era of global financial capitalism, the fiscal policy of various countries is no longer a completely independent sovereign policy, and the turmoil in the international financial market will not only affect the scale and interest rate of foreign debt issued by various countries, but also affect the interest rate level and liquidity of their own bond markets, thus affecting the scale and cost of domestic government bonds issued by various governments. How to properly manage their own fiscal deficits, strengthen international fiscal policy coordination, establish and improve the treasury bond market with a high degree of liquidity and good reputation, and prevent the outbreak of sovereign debt crises from destroying the national and international financial systems has become the top priority of the macro-fiscal policies of various governments and the number one task of the G20 and other international economic and financial coordination organizations. The European debt crisis and the US "fiscal cliff" have not yet been resolved safely and satisfactorily, and the possibility of debt crises in other countries continues to rise. The sovereign debt crisis will be a long-term and huge hidden danger that threatens the recovery and stability of the global economy.
However, it was not until the global financial tsunami of 2008, and especially after the crisis, that economies experienced a long and painful period of imbalances, unemployment, recession, stagnation, and deflation that forced economists and political policymakers to begin to pay real attention to the profound changes that have taken place and are taking place in the human economic system.
Years after the 2008 financial tsunami, a growing number of economists and political policymakers are finally waking up to the fact that the theoretical models and ways of thinking they took for granted are outdated. The global financial capitalist economic system is violently impacting closed economic models and old ways of thinking. If we do not stand at a new perspective and new height of the global industrial division of labor system, the global goods and services market, and the global monetary and financial market system, we will be completely unable to understand the fundamental problems facing today's human economic system, let alone find the correct strategy for reforming global economic governance and achieving lasting global economic recovery.