The International Division of Finance: a structural threat to democracy in the global periphery
by Bruno De Conti
30.07.2026
Drawing on Karl Polanyi’s insights, Bruno De Conti argues that contemporary financialisation undermines democracy, particularly in the global periphery. Analogous to the international division of labour, which relegates peripheral countries to the production and export of low-value-added goods, De Conti identifies an International Division of Finance. By strengthening the political power of global financial actors at the expense of governments’ policy autonomy, this division creates conditions in which far-right and authoritarian forces can thrive. Reclaiming democratic control over global finance is therefore essential if governments are to restore their ability to pursue the economic and social programmes for which they were elected.
The Transformation of Finance in the 20th Century
Finance lies at the heart of capitalism. Financial markets and instruments have enabled large-scale investment, technological innovation, and the spread of consumption patterns that have underpinned unprecedented economic growth. At the same time, finance has generated chronic instability and recurrent crises with profound socioeconomic consequences. Although finance is intrinsic to capitalism, its forms, functions, and effects vary across time and space. Historically, it has evolved alongside capitalism itself, while its manifestations differ markedly between of the global economy.
To understand how finance shapes today’s global economy and processes of fascistization, it is necessary to briefly examine the historical evolution of finance over the course of the last century. At the turn of the twentieth century, the international financial system was organised around the gold standard. According to Karl Polanyi, the latter constituted one of the four institutional pillars of the nineteenth-century liberal order, providing the monetary discipline that sustained an integrated world economy. Britain occupied the system’s commanding position, and the Bank of England acted as its chef d’orchestre.
The Great Depression and two world wars exposed the fragility of this order. In response, policymakers sought to redesign the international monetary and financial system to promote peace and revive international trade. Despite opposition from financial interests centred on Wall Street, in 1944, the Bretton Woods Agreement established a framework that restricted international capital mobility and reduced exchange-rate volatility. This system proved short-lived. By the 1960s, the emergence of the Euromarkets (with US dollar deposits in London) marked the beginning of a new phase of financial deregulation.
The collapse of the Bretton Woods system in 1971/73 paved the way for what is now widely known as financialisation, understood here as a regime of accumulation in which finance assumes a dominant role. While finance has always been central to capitalism, advances in information and communication technologies (ICT), together with deliberate political decisions to deregulate domestic and cross-border finance, profoundly transformed its scale and influence in the neoliberal era. New financial instruments proliferated, speculative activity expanded, the financial sector grew faster than the productive economy, and financial operations became increasingly important within non-financial corporations. Internationally, these changes were accompanied by an extraordinary expansion of cross-border financial flows and a deepening of financial integration across most of the world economy. The 2008 financial crisis showed the extent to which the world population is vulnerable to the volatilities of global financial markets, yet it did not lead to structural transformations or stronger regulation.
How Financialisation Undermines Democracy
Given the centrality of finance to contemporary capitalism, a vast literature has examined the socioeconomic consequences of financialisation. Some studies associate it with lower levels of productive investment, while others analyse its effects on individual behaviour, education, and even professional football. Lionel Messi’s transfer to Inter Miami, for example, increased the value of the club’s shares, from which he himself benefited as a shareholder.
This essay takes a different approach, arguing that one of the most harmful consequences of deregulated finance is its erosion of fundamental democratic principles. Financial actors frequently seek to depoliticise finance and financial institutions by portraying economic decisions as purely technical rather than political. Yet claims of technical neutrality invariably serve particular interests. This logic is perhaps most clearly reflected in debates over central bank independence. The argument that monetary authorities should be insulated from political influence in order to ensure price stability and financial credibility serves to remove a key public institution from democratic control. Given the pivotal role central banks play in contemporary economies – and the far-reaching consequences of their decisions, from inequality to the green transition – it is difficult to justify preventing elected governments from using monetary policy to pursue the development projects for which they were democratically elected.
A similar logic underpins the widespread belief that senior positions in central banks and finance ministries should be occupied by supposedly apolitical experts. In practice, many of these officials come directly from private financial institutions through the well-known “revolving door” between the public and private sectors. Their policy preferences inevitably reflect both a particular theoretical outlook and the interests of the financial sector, often privileging speculation and financial returns over broader social objectives.
Financialisation has also elevated credit rating agencies (CRAs) to a central position in global finance. Three agencies – not by chance, all headquartered in New York or London – dominate this market, assessing not only corporate debt but also the sovereign debt of national governments. Although their evaluations are presented as objective technical assessments, they are based on specific assumptions about what constitute “sound” economic policies. Governments may therefore find themselves unable to implement the programmes on which they were elected for fear of a downgrade that could trigger capital flight, currency depreciation and inflation. As my colleagues and I argued in a 2022 paper [1], CRAs have effectively become policymakers, exercising significant influence over national economic policy without any democratic accountability. This constitutes a profound contradiction of democratic governance.
The International Division of Finance
Although the previous arguments apply broadly, they must be qualified by the unequal position that countries occupy in the global economy. The classical distinction between a core and a periphery in the world economy remains highly relevant and has been reinforced by financialisation. Drawing an analogy with the international division of labour, my colleagues at the University of Campinas and I propose the concept of an International Division of Finance [2]. It alludes to the configuration in which core countries issue liquid, low-yield assets and low-cost liabilities, whereas peripheral countries offer less liquid assets with higher returns.
Just like the international division of labour, this hierarchy is neither accidental nor the result of underdeveloped financial markets in peripheral economies. Rather, it reflects the structural role these countries play in the global financial system by offering international investors opportunities for higher (and often quick) returns, for example through public bonds with high interest rates. Yet investors’ appetite for such assets fluctuates with changing perceptions of global risk. Peripheral economies are therefore repeatedly exposed to waves of capital inflows and sudden reversals over which they have only limited control. The International Division of Finance thus reproduces and deepens their dependency on the core while increasing their vulnerability to external shocks.
This structural dependency significantly constrains policy autonomy in the periphery, reinforcing the antidemocratic character of financialisation. Brazil provides a telling example. Dilma Rousseff was re-elected president in 2014 on a platform of stronger social policies. However, amid a deep political crisis and growing concerns about the possible loss of Brazil’s investment-grade status, she appointed a highly orthodox finance minister who implemented a stringent fiscal adjustment programme. Many voters perceived this shift as a betrayal of the electoral mandate, contributing to the president’s declining popularity and paving the way for the parliamentary coup d’état that removed her from office in 2016. The subsequent political crisis paved the way for the far-right government led by Jair Bolsonaro.
This sequence of events illustrates two broader dynamics. First, governments (especially in the periphery) are often compelled to conform to the imperatives of global finance rather than the preferences expressed by their electorates. Second, when democratic mandates cannot be translated into public policy due to externally imposed fiscal constraints, trust in democratic institutions erodes, creating fertile ground for authoritarian and far-right political forces.
Moving Forward: Subjecting Finance to Democratic Control
Inspired by Polanyi, many contributions to this blog have highlighted the historical relationship between (neo)liberalism and the rise of the far right. This relationship is not automatic, but reflects a recurring historical pattern in which the social dislocations produced by (neo)liberalism generate countermovements that may strengthen authoritarian and fascist forces. In the contemporary era, finance is one of the principal mechanisms through which neoliberalism undermines democracy and creates favourable conditions for the far right.
The growing power of liberalised finance has produced the paradox in which governments often prioritise the demands of financial markets over the well-being of their populations. This was evident during the COVID-19 pandemic, when CRAs continued to press governments in the periphery to reduce public spending despite the massive deaths resulting from an unprecedented public health emergency.
There are no simple solutions to these challenges. Yet one conclusion is clear: finance must be repoliticised, especially in the global periphery. If liberalised finance threatens democratic sovereignty, the response must be to restore democratic control over finance. At the national level, this requires measures such as capital controls and other forms of financial regulation. Internationally, this requires renewed efforts to reform the international monetary and financial system so that it serves democratic development rather than the imperatives of global finance. Unless we fundamentally transform the financial system now, we should be prepared to use the next financial crisis for expanding democratic policy space.
Bruno De Conti is Associate Professor at the University of Campinas, Brazil and researcher at Transforma Project at the same university.
References
- De Conti, Bruno, Pietro Borsari, and Manuel Martínez. 2022. “Credit rating agencies as policymakers: the different stances in regard to core and peripheral countries during the pandemic.” Texto para Discussão. Unicamp. IE, Campinas, n. 438. https://www.eco.unicamp.br/images/arquivos/artigos/TD/TD438.pdf
- Oliveira, Édivo de Almeida, and Bruno De Conti. 2025. “The International Division of Finance: Reassessing the Peripheral Condition in a Financialised Capitalism.” New Political Economy30 (2): 163–77. doi:10.1080/13563467.2024.2405522.; Lima, Humberto. 2013. Dependência Econômica sob a Hegemonia do Capital Financeiro. University of Campinas: PhD thesis. https://repositorio.unicamp.br/Busca/Download?codigoArquivo=491092&tipoMidia=0