【IMI Working Paper No. 1707 [EN]】The Monetary Root of Financialization
Marxism has a strong influence on Western left-wing economists’ understanding of financialization, in that they regard financialization as the consequence of the transformation of capitalism. Neoclassical economics and finance scholars tend to think of financialization (financial development) as not exclusively occurring within the economic system of capitalism but as existing throughout an entire human history filled with numerous financial innovations. The unprecedented change of the monetary system ascribed to the collapse of the Bretton Woods System, among all historical and systemic changes, is the strongest underlying impetus to financialization. Financialization is the unintended consequence of a change in the monetary system from commodity money to credit money. Taking a more in-depth point of view, financialization is philosophically a means for human beings to cope with the advent of a risk society, reflecting the advance of instrumental rationality, and hence is the embodiment of late modernity.
financialization; monetary root; risk society; instrumental rationality
Luo Yu, IMI Research Fellow, School of Finance, Renmin University of China.