New Masters of Capital

In The New Masters of Capital, Timothy J. Sinclair examines a key aspect of the global economy—the rating agencies. In the global economy, trust is formalized in the daily operations of such firms as Moody's and Standard & Poor's, which continuously monitor the financial health of bond-issuers ranging from private corporations to local and national governments. Their judgments affect unimaginably large sums, approximately $30 trillion in outstanding debt issues, according to a recent Moody's estimate. The difference between an AA and a BB rating may cost millions of dollars in interest payments or determine if a corporation or government can even issue bonds.Without bond rating agencies, there would be no standard means to compare risks in the global economy, and international investment would be problematic. Most observers assume that the agencies are neutral and scientific, and that they interpret their role in narrowly economic terms. But these agencies, by their nature, wield extraordinary power and exert massive influence over public policy. Sinclair offers a highly accessible account of these institutions, their origins, and the rating processes they use to judge creditworthiness. Illustrated with a wide range of cases, this book offers a fresh assessment of the role of an often-overlooked institution in the dynamics of modern global capitalism.

"Some people love them, some hate them, but no one would dispute that ratings agencies play an important role in financial markets today. Their influence is clearly evident, particularly with the recent GM and Ford revaluations. When asked the basic question 'What is a rating agency?' the names Moody's, S&P, and Fitch quickly come to mind as entities in the business of rating the investment quality of bonds. But Timothy Sinclair, a professor of international political economy at the University of Warwick, goes much further. He reviews in exhaustive detail who the ratings agencies are, where they came from, how they are regulated and operate in different countries, and how their role has shifted and been strengthened as the financial markets evolve."—Ann Cullen, HBS Working Knowledge, June 2005, "In this volume, Timothy J. Sinclair systematically and thoroughly explores a major but little-known dimension of world affairs. The extensive expansion of international capital mobility in recent years has accorded bond-rating agencies a central place in the dynamics of globalization and Sinclair does a masterful job of explicating the various ways in which these new masters of capital exercise their power and perform their roles."—James N. Rosenau, University Professor of International Affairs, The George Washington University, "In The New Masters of Capital, Timothy J. Sinclair investigates the world of bond rating agencies. These private institutions have immense power, as their judgments can profoundly affect the financial conditions faced by corporations, cities, and countries. Their ratings can determine whether or not poor countries or struggling municipalities can borrow on private markets, a consideration of profound importance to their economic success. Sinclair explores how the bond rating agencies function, and how they can malfunction, as part of the broader international political economy. The New Masters of Capital will be interesting and informative for all those concerned to understand the operation of today's global financial markets. James Carville once famously said that when he was reincarnated he wanted to come back as the bond market, because 'then you can intimidate everyone.' If Carville had read Sinclair's book, he would have chosen to come back as a bond rating agency, because then he could even intimidate the bond market!"—Jeffry A. Frieden, Stanfield Professor of International Peace, Harvard University, "Timothy J. Sinclair offers an admirably jargon-free account of bond rating agencies. This book will be widely read, as it is the first to systematically tackle this aspect of the politics of economic globalization. The New Masters of Capital makes a strong and intriguing argument about the role of power and authority in the social construction of knowledge in international market settings."—Kathleen McNamara, Georgetown University

Timothy J. Sinclair teaches international political economy at the University of Warwick. He is the coauthor of Approaches to World Order and the editor of Global Governance: Critical Concepts in Political Science, Structure and Agency in International Capital Mobility, and Approaches to Global Governance Theory.