Financialization and Economic Development: A Debate on the Social Efficiency of Modern Finance

Servaas Storm*

*Corresponding author for this work

Research output: Contribution to journalArticleScientificpeer-review

66 Citations (Scopus)
177 Downloads (Pure)


The shift in financial intermediation from banks to financial markets, and the introduction of financial market logic into areas and domains where it was previously absent, have not just led to negative developmental impacts, but also changed the 'rules of the game' and facilitated rent-seeking practices of a self-serving global elite. Establishment (financial) economics has helped to depoliticize and legitimize this financialized mode of social regulation by invoking Hayek's epistemological claim that (financial) markets are the only legitimate, reliably welfare-enhancing foundation for a stable social order and economic progress. This article forms the Introduction to a set of 10 articles which assess the logic and consequences of 'financialization' across a range of geographic, economic and social scales, and confront Hayek's grotesque claim - deep down, at the level of 'ideas', but also by providing 'knock-out evidence' on the social inefficiency of a capitalism 'without compulsions' for finance. The authors in the Debate challenge the 'ruling ideas' and expose how establishment economics has been hiding its reactionary political agenda behind the pretence of scientific neutrality. The financial emperor wears no clothes.

Original languageEnglish
Pages (from-to)302-329
JournalDevelopment and Change
Issue number2
Publication statusPublished - 2018


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