One would be ignorant to assume that politics do not have a direct influence on global finance. Merely opening a history book shows that significant financial occurrences trigged large-scale societal events. Consider the stock market crash of 1929 – an event that spurred havoc and frenzy in the United States, leading to the Great Depression, which would last ten years. Given that the concept of global and domestic finance is so complex, even renowned economists have yet to uncover the exact culprit behind the ripple effect.
Global Finance and the Power Families and Institutions in Control
A common conspiracy is that a small group of individuals own most of Earth’s wealth, giving them the master key to communistic economic control. Independent researchers speculated for years that a handful of powerful and mercenary families controlled the Central Bank. Dubbed the “The Federal Reserve Cartel” in a book by Dean Henderson, these families include the Rothschilds, Goldman Sachs, and Kuhn Loebs, to name a few. All spectrums of the political spectrum hold this viewpoint – the far right and the far left, with differing opinions on both sides.
Albeit much associate money with success, fortune, and luck, the masses often overlook an eerie dark side. Throughout history, well-known tycoons often exerted control over their government or could influence their government in such a way that the average citizen could not. Such monopolistic control was not always rampant, but the plague of private financial influence over the government reached its highest point in the late 19th century.
Simply put, in the 19th century, persuasive families such as the Rothschilds could determine the fate of a country. Such families’ financial transactions had a global impact with the power to turn allied nations into foes. Thus, historians often debate how much power independent governing bodies had upon their citizens and international relations.
Governments Did Not Give Up All the Power
Although there is clear evidence of banker influence over governments, not all countries went along with it. In certain Western European countries, political powers had the final say over prominent families and institutional bankers' transactions. Governments with a one-up over families such as the Sachs and Kuhn Loebs could better control foreign policy. The inner workings of a country’s financial system could serve as a weapon. Thus, those in control could make a significant impact on the world.
Today, influential investors and brokers continue to influence monetary policy and, subsequently, foreign affairs. However, the extent to which these individuals and institutions exert their influence depends on the political and economic ideology of the country. In democratic countries, a small group of individuals exerting control over international affairs is not as expected. Even if such control does happen, both local and federal governments will hide it, as it’s a clear sign of corruption.
Monetary Policy in Communist and Dictatorship Nations
The story is different in communist countries, such as Cuba and North Korea. In these present-day dictatorships, prominent individuals do assert control over the country’s financial transactions and its interactions with other countries. A clear example of such power is the Castro family in Cuba and those closely associated with the family. In fact, there are rumors that there’s a secret society of multi-millionaires on the Pearl of the Antilles.
In both first-world and developing countries, governments are increasingly pressured to implement controls over the banking system. Various countries are still hesitant to push restrictions on private industry to avoid hindering the free market. Moreover, governments are continuing to push efforts to remove embargos and regulations with other countries.
The Elite and Its Decline in Power
Unlike the 19th century, it’s much more difficult for private bankers and powerful families to exert influence over modern-day international relationships. Even so, there are still a few examples of private citizen influence over foreign affairs. The Former Secretary of State for India and Burma, Sir Austen Chamberlin, is one such example. Previously the Chancellor of the Exchequer, Sir Austen Chamberlin, helped lighten Britain’s attitude toward Germany. The extent to which his power impacted the two countries’ relationship is marginal, given that both were very similar in terms of their economic and foreign policy environments.
As made clear, bankers do not have the same level of power that they held in the 19th century. Because of modern-day legislation in developed countries, even the powerhouses JPMorgan Chase, Bank of America, and Wells Fargo lack the authority they once had. For example, the United States government subjected Wells Fargo to various congressional hearings for its dishonest business practices.
However, one could ask if wealthy financial institutions passively impact both their home countries and countries around the globe. Today, the answer is not as evident. Though, there are signs pointing towards “yes” from the 20th century. Many believe that the German Government carried out an attack against the French franc in the 1920s, devaluing the currency. After the attack, the parties responsible went on to receive preferential treatment from the German government.
The Effects of Twentieth-Century Politics in Western Europe
A further look into the 20th century shows us a pattern of financial retaliation by European countries that later backfired. France was the primary offender when the government refused to support Austria, a country on the brink of economic collapse. However, Austria stood firm and refused to let France sway the country’s monetary decisions. Eventually, the plan went south for France. The Western European nation began to suffer the same issues that Austria faced. At the same time, Austria climbed out of the hole. Other countries noticed, such as Germany, which led to a deepening financial crisis in France.
A handful of European countries could survive without any financial dependency on other countries. Many of these countries, including Italy and Germany, had developed a robust yet self-sufficient economy. Such countries could spend millions improving their infrastructure, advancing their manufacturing environments, and building their militaries without needing foreign assistance. This is not to say that these countries did not accept foreign loans; however, most of the money they spent returned to the country’s treasury system.
The Outcome of Aggressive Spending
When one considers a country’s aggressive spending, such as Germany and Italy, one often thinks of the associated inflationary risks. Venezuela is a prime example of a country that experienced one of the most significant episodes of hyperinflation in the 21st century. Nicolás Maduro, the Venezuelan President, severely inflated the country’s economy by overspending and printing money, resulting in the devaluation of the Venezuelan Bolívar.
The reason that Germany and Italy did not suffer the same fate as Venezuela is evident. Venezuelans did not have trust in the system or their leadership. Not to mention the crippling violence that overshadowed the nation’s two largest cities, Caracas and Maracaibo. Contrarily, Italians and Germans had faith in the economic system of their respective countries. Although many thought that Italy and Germany would follow the footsteps of France, it has yet to happen.
Italy’s Short-Lasting Quest for World Domination
Not every country in the 20th century carried the same level of self-sufficiency when it came to their involvement with world domination. Italy gladly claimed ownership of the Ethiopian Empire from 1936 to 1941, a land with nearly 9.5 million inhabitants. At the time, Italy did not want to rely financially on another European nation; however, Italy quickly extracted precious resources from its Eastern Africa empire, further powering the fascist country that faced no genuine contenders.
The Spread of Monetary Policy Outside Europe
Both economists and everyday citizens do not yet have a firm grasp of finance’s power throughout the globe. Many still refer to the old-fashioned days in which families such as the Rothschilds and Goldman Sachs could determine the fate of a country with the stroke of a pen.
The phenomenon of money and influence did not contain itself within the borders of Europe. National leaders eventually made their way east to China to share their abundance of financial knowledge. Great Britain worked with China to persuade the East Asian country to change its fiscal policy. Surrounding countries did not welcome China’s changes with warm smiles. Albeit the two nations worked together harmoniously, there was more to come for China’s future.
The Darker Side of Global Finance
One could go on for days describing real-life scenarios in which money impacted politics (politics within a country and the foreign affairs between one or multiple countries). However, as with every impactful facet of government and international relationships, there are always those that criticize. Even today, many associate the Rothschilds with an uncanny evil. Nevertheless, finance always seemed to have advantages when a country executed its strategies correctly, especially when attempting to influence the actions of another country.
Countries can use finance in sinister ways, such as in economic warfare. While there is no direct bloodshed, economic warfare has direct and indirect impacts on citizens around the globe. The most infamous example of economic war is the United States’ sanctions on Cuba – notably the trade embargo.
The United States’ Economic Revolution Against Castro-Led Cuba
As evidenced by the Vietnam War, the United States has always fought against communism. In January of 1959, the 26th of July Movement, led by Fidel Castro, overthrew the Batista-ran Cuban government. Cuba’s quick shift from a unitary republic to a dictatorship caused the United States to end all ties with the Caribbean nation. As a result of the economic warfare used against Cuba, the citizens live in poverty and despair. After the embargo, Cuba relied heavily on the USSR (now Russia) for financial assistance.
Monetary Policy and Its Impacts on Word War II
Now, consider the aforenoted success of Germany and its monetary policy. As Hitler gained popularity in post-World War II Germany, The Country of Poets and Thinkers quickly implemented changes to secure its economy. Such changes ultimately led to a devalued currency and unemployment at record levels. The unemployment became a domino effect that increased the popularity of Hitler’s regime. Perhaps if Germany had taken a different approach to its economic policies, today’s history books would not read the same story.
In fact, finance had a significant impact on those involved in World War II. To avoid another economic collapse driven by the fall of the Franc, France did not initially defend itself against Hitler. Many also blame France’s monetary policy for causing the Spanish Civil War. The example of France and its role in World War II is just one of the many examples of how finance has impacted a country’s involvement in combat.
An Unclear Blend of Fiscal and Foreign Policy
Countries, no matter the size, must have a balance of both fiscal and foreign policy. Many countries mistakenly strategize their fiscal policy without giving much thought to their country’s international relationships. Doing so is often a mistake for many countries, an error often realized too late.
Although many countries are aware of changes, they need to make monetary policy. They are afraid to make them because of the political consequences. For example, suppose one political party makes an unpopular yet needed monetary policy change. In that case, the party may not win the upcoming election. This often turns into a cycle in which no party wants to implement the changes, leading to a bubble that is inventible to pop and has a more significant impact on the country's citizens.
The Residue: Those Who Have the Most Influence Over Global Finance Today
In first-world nations, financiers no longer actively influence a country’s financial involvement with other countries. However, one should not misinterpret that finance still cannot strongly influence politics.
Large intuitions – both private and public – can significantly impact a country's economy and interactions with foreign nations. Large banks could refuse loans, as long as they do not breach regulations, for example. The actions of these institutions have a downstream impact that affects the daily lives and spending habits of a country’s citizens. Although much has changed since World War II, it’s clear that the government is not the only body that impacts global finance.
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