Role of Financialization in the Financial Crisis Assignment

Role of Financialization in the Financial Crisis - Assignment Example The severe turbulence that followed the financial crisis of 2007-2010 has raised concerns regarding the level at which the global financial system is ready to face critical failures. Moreover, the question of whether the financialization process, which has been promoted worldwide more than a decade, has been related to the above crisis has not been avoided. In fact, there are many indications that the specific process had a major role in the financial crisis of 2007-2010. Its potential involvement in a new crisis of such kind cannot be rejected. The current paper examines the role of the financialization process in the banking crisis of 2007-2010. Moreover, the potential relationship of the pursuit of shareholder value and the ‘new economy boom’ with the process of financialization is also explored. The examination of the literature published on the specific field has led to the assumption that the relationship between the above-mentioned events and frameworks is strong. At the next level, another issue is also discussed: the level at which investor behavior can influence corporate strategy and performance. It is proved that the involvement of shareholder value in corporate strategy and performance can be significantly influencing the corporate decisions on critical issues, as for example the strategies that the firm will follow for facing the expansion of financialization, as a global economic trend. Financialization, as a sociological and economic trend, is not a recent phenomenon. In fact, in accordance with Orhangazi (2008), three phases can be identified in the development of financialization: the first one represents the pre-1980 period during which financialization was based on a ‘long waves approach’ (Arrighi 1994 in Orhangazi 2008, p.41). In the years that followed in 1980, the financialization was related to the concept of neoliberalism (Orhangazi 2008). Recently, financialization has been related to the global financial mark ets (Orhangazi 2008). The view of Lucarelli (2011) that â€Å"financialization is related to the capitalism’ (Lucarelli, 2011, p.111) seems to be the most effective description of financialization, as a trend influencing the performance of the global financial system. On the other hand, Krippner (2011) refers to financialization as the ‘growing importance of financial activities as a source of profits in the economy’ (Krippner 2011, p.27). 2.2 The relationship between financialization, the banking crisis, the pursuit of shareholder value and the ‘new economy’ boom. As noted above, the financialization focused on the use of financial activities as the main source of profit. At the next level, financialization is an economic trend accepted and promoted globally, which means that it can affect the global financial system. The role of the financialization in the structure and the development of financial transactions worldwide has been revealed through the banking crisis of 2007-2010 (Foster, 2007). It was because of that crisis that the role of financialization for financial systems internationally has been set under consideration (United Nations, 2009). Financialization should be considered as a key cause of the appearance and the expansion of the 2007-2010 crisis, because of the following reasons: a) in the context of financialization the accumulation of profit worldwide has been related to financial activities; the exchange of money in its various forms has become a key method for achieving profit. In this way, the traditional method for gaining money, the work as physical activity has lost its value.

Negative Consequences of Economic Growth in Bangladesh Essay

Negative Consequences of Economic Growth in Bangladesh - Essay Example Environmental damage is also inextricably linked to two widening gaps that go hand-in-hand: the gap between rich and poor and the gap between developed and developing countries (Stenzel, 2002). This is commonly referred to as the imbalance in a nation's income distribution. Economic growth is seen to widen the gap between the income of rich and poor. Kuznets (1971) cites that one intriguing aspect of structural change brought by economic growth is that it represents shifts in the relative shares in the economy of the specific population groups attached to particular production sectors. Economic growth perforce brings about a decline in the relative position of one group after another - of farmers, of small scale producers, of landowners - a change not easily accepted, and, in fact, as history teaches us, often resisted. The continuous disturbance of pre-existing relative position of the several economic groups is pregnant with conflict - despite the rises in absolute income or product common to all groups.3 In the case of less developed countries, Kuznets quotes, may require modifications in the available stock of material technology, and probably even greater innovations in political and social structure.4 Also, Stenzel cites that despite increasing wealth on a global scale, about half of the world's people live on $2 a day or less, and at least 1.2 million people live on less than $1 a day. The Case of Bangladesh The table below shows economic growth as production of goods and services within the Bangladesh's boundaries is growing positively since 1990-2005. It should be noted that in 2005, the country's GDP represents a 110% change from the 1990 level. However, Landesman (1994) cites that intensive shrimp culture in Bangladesh5 might lead to the loss of mangrove habitat as most shrimp farming in Southeast Asia takes place on reclaimed mangrove forests. It must be noted that mangrove forests are critically important habitats for the reproduction and growth of shrimp postlarvae and juveniles and their replacement by shrimp ponds will adversely affect the recruitment of larval fish and shrimp in the areas concerned. Also, as Bangladesh is still dependent on collecting wild shrimp post-larvae to stock shrimp ponds, depletion of local populations of shrimp postlarvae can occur due to this collecting (Bashirullah 1989, Turner 1986). In Bangladesh, collectors of shrimp postlarvae also catch fish larvae and small invertebrates. This bycatch is allowed to die on the beach. Practices such as this may adversely affect populations of other fish and invertebrates in the Bay of Bengal. In terms of income distribution, we can see that Bangladesh bulk of the country's wealth is concentrated in the hands of the upper class. The most recent data on income distribution cites that during 2006, which the highest 10% in the population accounts for almost 28.96% of the total income while the lowest 10% holds a meager 3%. This is further aggravated by the recent economic development which puts a high concentration of growth in income in the hands of elite (Economy of Bangladesh, 2006). Eutrophication of surrounding coastal areas from nutrients discharged in shrimp pond effluents is a looming problem on the water areas concerned in Bangladesh, which is especially true for intensive shrimp culture systems for the high feeding, fertilization and water exchange rates require frequent discharge