Derivatives and the Transformation of Capitalism

This book discusses the astonishing rise of so-called derivatives, economic instruments related to different types of risks, and the changes this has imposed to the functioning of advanced capitalist economies.

This book discusses the astonishing rise of so-called derivatives, economic instruments related to different types of risks, and the changes this has imposed to the functioning of advanced capitalist economies. The market for derivatives has grown exponentially since the 1980s, dwarfing today's traditional financial markets. The conventional view claims that derivatives perform a crucial function in corporate risk management, providing a hedge against undesirable movements in prices. Yet, most transactions considered to be part of derivatives are inherently speculative and significantly increase the levels of risks and occurrence of crises in an economy: for example, instruments known as CDS (credit default swaps) played an important role in the 2007-2008 subprime debacle. Thus, it is necessary to understand the role of these transactions in present-day advanced capitalist economies. Do they add more instability to the economy, including speculative and non-speculative activities, enhancing macroeconomic crises and contributing to destroying income, production, jobs and wealth? Do they provide effective hedging against measurable risks to the operation of capitalist firms, thus allowing corporations to engage in more transactions and expand capital accumulation domestically and internationally, in an environment characterised by increased volatility and uncertainty caused by derivatives themselves?The book addresses these questions and many others, going beyond an emphasis on operational and technical aspects of contracts, and providing a historical, analytical and critical interpretation of the qualitative and quantitative workings of so-called derivatives markets and their role in the financial dynamics of modern advanced capitalist economies. This book is vital reading for those interested in financial markets, risk management, financial history, speculation and instability, regulation and alternative economic theories.