As capitalism in all its forms turned to financial operations to complement productive operations from the early 1970s, governments came under pressure to abandon controls imposed on financial transactions. For a time governments still committed to the state capitalist or Keynesian notions of the previous period attempted to hold the line against the way finance could well over national borders. But one by one they gave up the attempt, partly because they saw old controls of currency and capital movements as ineffective, partly because, accustomed to adjusting their horizons to what capital said was possible, they were won over to the idea that this was the only way to achieve a new cycle of capital accumulation. The approach of those who had started off on the social democratic left was that if you could not beat them, then join them.
Usually the speculation was in non-productive spheres-repeated stock exchange and real estate bubbles. But occasionally it focused on some area where they believed there was profit to be made by productive investment. As the Financial Times told of the late 1990s:
Spending on telecoms equipment and devices in Europe and the US amounted to more than \$4,000 billion. Between 1996 and 2001 banks lent \$890 billion in syndicated loans . . . Another \$415 billion of debt was provided by the bond markets and \$500 billion was raised from private equity and stock market issues. Still more came from profitable blue chips firms that drove themselves to the brink of bankruptcy or beyond in the belief that an explosive expansion of internet use would create almost infinite demand for telecoms capacity. The global financial system became addicted to fuelling this bonfire. Nearly half European bank lending in 1999 was to telecoms companies . . . about 8 0 percent of all the high-yield, o r junk, bonds issued in the US were to telecoms operators. Five of the ten largest mergers or acquisitions in history involved telecoms companies.21
The fact that there was a productive element to this boom added to the great illusion that it could go on forever. But the boom was based on speculation, ascribing massive exchange value to products for which the current use value was very limited. So much "band width" had been created, the Financial Times said, that:
Financialisation and the Bubbles That Burst
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