Casino Capitalism 4.0

Last week, we discussed the concept of Casino Capitalism by the great political economist Susan Strange. To fully understand the fund crisis we are experiencing today, we must first grasp this concept and the scale that finance capital has reached. First proposed in 1986, this concept defines the risk of finance expanding uncontrollably beyond the rational functioning of the market, taking on an unpredictable form and effectively turning the economic structure into a casino. Forty years later, among the four structural power elements (security, production, finance, knowledge), finance—pushed by the era of globalization—is truly exerting this effect all over the world.

It is useful to look at some data to concretize the level finance has reached today. According to IMF figures, the total world economic size in 2023 was at the level of 105 trillion dollars in current (nominal) prices. In other words, this number represented the total value of real economic activities calculated across the globe within one year. In contrast, according to data from the Bank for International Settlements (BIS) based in Switzerland, as of the end of 2023, against 18 trillion in tangible assets, the total contract value of derivative products traded in over-the-counter markets was an abstract 667 trillion dollars! This means we are talking about a virtual finance economy more than 6 times the size of the real economy in the world. Another piece of data that should be noted was published by the Institute of International Finance. According to this, the total world debt reached 313 trillion dollars in 2023. This debt included the debts of states, companies, financial sectors, and households. Furthermore, again according to the BIS report, the total daily foreign exchange transactions in the world exceeded 7 trillion dollars in April 2022.

The world economy, which produces roughly one unit of concrete value, is witnessing 3 times that amount in debt, 25 times that amount in foreign exchange transactions, and operating with 6 times that amount in abstract volume! These ratios are similar today. What is unhealthy is that finance occupies a volume far above the real economy. Although this value is virtual, it is at an undeniable scale. In other words, a kind of Surreal Reality (SR) has been created! Indeed, prices have long been determined in financial markets rather than by physical supply and demand. It is obvious that such a world is in a much worse state than what was defined as "Casino Capitalism" forty years ago, and that this order, which facilitates exploitation, is not in the interest of societies.

Finance capital, which initially concentrated through small-scale and primitive methods, is dragging the world economy into disaster with its increasingly parasitic structure in recent times. With ETFs (exchange-traded funds), financial leverage, layered trading, warrant transactions, over-the-counter/off-exchange market transactions, crypto assets, incessantly developed derivative instruments, and Fin-Tech applications in the digital age, financial assets are inflating more and more. The heart of global finance capital beats in the USA and the UK. In particular, London City is a region within the city of London where financial institutions are granted broad powers, and there is a tax advantage for dollar-based transactions conducted there. It is clearly seen that the Anglo-Saxon financial sector is the true owner. However, since production has now passed into the hands of Asian countries, a duality is emerging in the world: a fierce competition of varying dimensions is taking place between the productive forces and the financial sector. For this reason, it is now necessary to add the definition of Casino Capitalism 4.0 alongside the definition of Industry 4.0, which describes the transition of production technology to a higher level. It is unknown who will prevail over the other, but the resulting outcome seems likely to play an important role in the shaping of values.

The role of making various financial products/games attractive to the masses is undeniable in finance growing like a virus in the world economy and occupying a more important position than the real sector. Indeed, keeping this system in vogue is only possible by involving more people. For this, the desire of people to reach wealth in a short time, that is, to "hit the jackpot," is fueled in markets where massive volumes circulate. Risk appetite is whetted. A fake paradise is promised to the small investor who wants to get rich. The power of communication is also brought into play to elevate perceptions over facts in this direction. Since this virtual system has become the engine of the world economy, the mechanism works in an intertwined manner with media/social media and other sectors. Even if the prosperity based on stock markets and other financial games is not real, it is maintained in some way. What happens is to the small investors who are dizzy from the promises but are actually just a drop in the ocean in this system.

The recent fund crisis actually shows the projection of this system in our country. In places where regulatory and supervisory mechanisms are not supported by a transparent legal infrastructure, profiteers have more of a field day than ever. The Banker Kastelli scandal in the 80s and the İmar Bank scandal in the 90s are mere drops in the bucket compared to today's volumes. It is, of course, impossible for this situation to be independent of politics. It is also clear that politics is not producing solutions. While those responsible should be seriously punished for trust to be regained, one should not be surprised that the process, which starts with the question of where the thread might lead, gets stuck at the very first end of the thread. It should not be forgotten that correcting crooked systems from within the system is harder than performing the impossible.

Where swindlers roam recklessly, the burden, as always, falls on the small investor. The situation of the small investor who thinks they are clever ends up resembling that of an ambitious gambler addicted to the casino. While they want to keep playing with the hope of winning, it is forgotten that the house always wins in casinos, and eventually, the bitter end is faced. In the Casino Capitalism 4.0 era, the public is being fleeced down to their funds. I would say let these crises be a lesson, but it is unknown how many lessons this is, how many repetitions. All that remains for us as a final word is to warn you: whatever you do, do not fall for these games again. Happy Sunday!