The Race to the Bottom Amid Global Financialization
There are two main reasons why nation states have lost their ability to shape the future of the society they represent. First, the internationalisation of production gave rise to the process of global value chains, enabling large firms to choose where to establish their production units. In order to become more attractive to transnational corporations, many emerging and developing countries initiated a race to the bottom of labour market deregulation and tax cuts that, in the end, thwarted any attempt to deploy a national development strategy.
Second, the liberalisation of financial flows at a global scale, facilitated through financial market deregulation in both developed and developing countries gave global banks the possibility to enter and withdraw billions of dollars from a country in a matter of seconds. As a result, the local monetary scenario (such as credit available to finance productive entrepreneurship) in peripheral economies has become strongly subordinated to the monetary conditions in the big financial centres. The massive amounts of liquidity that flowed down from the US, Europe and Japan to Latin America in the context of the Quantitative Easing programmes and their impact on the exchange rate (appreciation) and production (reprimarisation, bankruptcy of industrial firms) are just one of the many manifestations of the consequences of the current working of the international monetary system and the effects it produces on most countries in the world.