Full text: Effective Demand in the Short Run and in the Long Run

usefulness will be exhausted and the situation will have to be 
In the course of the postwar decades in all industrial countries 
the financial sector has gained in importance in relation to the 
industrial sector ( Bhaduri-Steindl 1986 ). The dynamics, the 
accumulation of wealth, power and prestige of finance has far 
outstripped the general pace of advance. Industry in the sense of 
material production could not keep pace with finance, because its 
share in the national product declined, but more important 
perhaps, because the industrial firms have more and more turned to 
financial activities, they have invested more and more of their 
gains in financial assets or real estate rather than in equipment 
and factories.This shrinking of the main traditional market of the 
banks made it necessary for them to find new fields for their 
activity and new customers for their credits. 
The new fields were first of all abroad. Banking was 
internationalised to a hitherto unknown extent. Taking the 
industrial world as a whole "abroad" meant of course the third 
world. The fortuitous event of the oil crisis made it easy to 
expand in this field. With the Mexican crisis of 1982 this era 
found an end. It was followed by the high time of the merger 
movement, the leveraged buy outs and the stock exchange boom. The 
buy outs meant that a tremendous lot of share capital was replaced 
by credits and bonds. The paradoxical situation was that an 
industry which did not know what to do with its money, which to 
quite a large extent ceased to be a customer for the banks because 
it had a surfeit of funds for real investment got now very highly 
indebted exclusively in connection with its financial 
transactions. A related field was the finance of real estate.Land

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