J.Pozuelo-Monfort, MSc candidate in economic development at LSE.
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Hedge funds: the economic power nobody sees
The globalized world of the XXIst century is a world of increasing complexity, in which the freedom of movement of goods and services, of human capital, and of monetary flows, in a phenomenon known as liberalization, has accelerated, to an even larger extent, the interconnection among the different pieces of that puzzle known as globalization.
The experts say that the globalization phenomenon is not recent. The fact of the matter is that the world experienced a first episode of globalization between 1870 and 1914. A globalization intrinsicly related to a considerable increase of international trade, a phenomenon that in the aforementioned first episode took place among the European powers and their colonial empires and ex-colonies (as it was the case of North America)
spread out across the globe. A first episode of a series that continues today.
There is a key difference between the first stage of globalization and the second we live nowadays that started in 1971 when the United States decided unilaterally to abandon the fixed exchange rate system. In both episodes international trade has increased notably. However in the first there were important migratory flows between Europe and its (ex) colonies, whereas in the second migration has been substituted for monetary flows.
The rich societies of the north have closed their borders to the migrants from the south, simultaneously imposing the elimination of tariffs to the developing economies, utilizing their voting power, instead of their persuasion, in the International Economic Institutions (International Monetary Fund, World Bank and World Trade Organization). Consequently an artificially natural sensation is created, a sensation that every country plays the same game based upon the same rules of transparency, a set of rules established thanks to the consensus and the savoir faire of our political representatives.
Who sustained the economic power in the first episode of globalization? Who sustains the economic power during the current stage of globalization? We have moved from a scenario in which the European powers determined the economic fate of the world, to a complex scenario characterized by the ever-growing sophistication of the financial industry. A growing sophistication that seems to escape from the understanding of a majority of the population, incapable of taking advantage of a new trend that grows in importance as time passes by.
Continue reading Decem 04
About Decem: Series of articles fundamentally innovative that aim at the proposal of alternative financial mechanisms to considerably raise the amount of funds available for development in the third world. Throughout the series of 10 articles, J.Pozuelo-Monfort will stress the implementation aspects of the suggested ideas and will propose arguments for and against.


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