WHAT IS THE ROLE OF FINANCIAL CAPITAL IN
The so-called "laissez faire capitalism" of the 19th century created a huge housing
need for the labour force living in cramped conditions in the cities of the most
industrialized countries. At the same time, colonialism entered a new phase -
imperialism - when the struggle between the colonial powers for territories, raw
materials, markets, and a cheap labour force became stronger and stronger. The
state did not regulate the banks and the financial sector; hence, they became
more and more speculative. This resulted in the collapse of the stock market
(1929) and the banking system, generating the periodical crises of capitalism and
the two world wars of the 20th century.
After the Second World War, under the pressure of the growing and organized
international movement of workers, the structure of accumulation changed and
was tempered through a series of social and economic policies. Housing regulation
and policies started even earlier in some countries. In some cases, state
capitalism came with the nationalization or, at least, regulation of many financial
institutions. Capital accumulation was supported in the non-financial sector: loans
were given to productive firms for big infrastructural projects or for industries but
also to households (at low interest rates) to support their capacity to consume.
Welfare states were created, and they varied tremendously from country to
country. Generally, public services were developed, and markets were regulated.
In the housing sector, social and public or cooperative housing were produced,
and the private market was regulated.
Developmentalism also became a dominant trend in the countries where state
socialism was administering the big transformations (industrialization, urbanization,
nationalization of production, etc.).
National and international political forces within the Bretton Woods system prioritized
the reconciliation of international free trade with domestic welfare policies.
"The Bretton Woods international system was based on an inter-state agreement regarding the
need to regulate the exchange rates between currencies (a system of regulation that was disciplined
by the US dollar tied to gold), to regulate the market and to control the flows of speculative
international finance via central banks, but at the same time to support free trade. It promoted
the investments in the form of foreign direct investment, for example the construction of factories
overseas, rather than the international currency manipulation or bond market. The newly created
International Monetary Fund and World Bank had a big role to play in the control of the international
monetary system. Bretton Woods ended when at the beginning of the 1970s, the US president
announced the 'temporary' suspension of the dollar's convertibility into gold, which led to currency
destabilization, to the free floating of currencies and at the end of the day to their depreciation."
Earlier empires continued their dominance in former colonies through different
forms of neocolonialism. The structural adjustment programs that the International
Monetary Fund and the World Bank administered set conditions for
the loans offered to the so-called "Third World" countries (and to some of
the "Second World" countries) through demands regarding privatization and
The 1970s and 1980s witnessed major waves of systemic crises of capitalism.
The response that the most powerful states promoted/imposed was the neoliberalization
of policies in every domain. This was a way to dismantle the welfare state
and to unleash financial capital from state control or - better said - to place states
at the service of (financial) capital.