The Nature of Capitalist Money and the Financial Links Between Debt-Led and Export-Led Growth Regimes

The aim of this article is to develop a consistent theoretical approach to the financial links between the so-called debt-led (DLG) and ‘export-led’ (XLG) growth regimes. Assuming the endogenous supply of money and the unstable dynamics of financial markets, the leveraging process of DLG regimes is taken as an inherent dynamic of developed domestic financial systems, without the need of any external capital inflow. Foreign inflows are not a requisite for such expansions; however, attracted by high expected returns, they can play a key role in fueling DLG cases. Alternatively, current-account imbalances are not an indicator of the international financial flows but rather a side effect stemming from the productive, financial and trade links between DLG and XLG countries. Based on this approach, we study the relationship between changes in credit and current-account balances in several countries before and after the crisis of 2008. Both the observed general relationship of these variables for most of the countries, as well as some specific national cases ‘out of the norm’ are fundamental for understanding the national and international financial links between DLG and XLG models.