Financialization is, after all, a big fat hard-to-pronounce word and chances are you’ve never heard of it.
Yet. It is one of the most important words you’ll ever want to familiarize yourself with because Financialization is the single reason why the United States economy has changed over the past few decades.
Financialization is the new way that corporations make their money.
Before the Revolution, corporations captured their profits by making a marketable good or service and selling it at a higher price than it cost to produce. Since the Revolution corporate profits are nearly entirely captured through the sinewy web of Wall Street trading and financial markets. Business decisions are no longer based on consumer interests, instead they are based entirely on boardroom interests.
The Financialization Revolution has been building steam since the 1970’s (there is a solid general consensus among economists and sociologists that the Revolution began in this decade). It is quickly reaching its full potential – that is its objective – of cannibalizing a nation’s workforce and other resources for the profit and advance of a very few people. The Revolution isn’t limited to the United States either. All other countries have felt its affects in some way or another, always to the benefit of a few, always to the detriment of the overall population and health of the nation and world economy.
We’ve heard quite a bit about the symptoms of Financialization: slow economic growth, economic ‘bubbles’, stagnate wages, right to work laws, de-regulations, overpaid CEO’s, low interests rates, high unemployment, impotent unions, too big to fail businesses, to name a few.
The underlying cause of each of these is Financialization. The term has existed in small circles of economic academics for at least twenty years. It is high time the rest of us understand what it is because without identifying a solid, tangible cause we cannot hope to find working solutions – and they do exist. Without identifying a cause, we cannot hope to empower ourselves to change – and change we must.
The following are the key characteristics of Financialization (in no particular order):
- Increased debt – both at the national level and the personal/consumer level.
- Nearly infinite influence of the financial sector on national economic policy making to the point that, currently, the financial elite, financial markets and corporations wholly guide and direct this policy making.
- Globalization – which outsources jobs, creates unhealthy national trade deficits, and removes purchasing power from the consumer.
- Erosion and near disappearance of the middle class.
- Inherent economic instability.
As we find our own nation on the road to another presidential election, we must consider our new leader in terms of what he or she will do with the problem of Financialization. Otherwise, the Revolution will continue without resistance, and we will see what many of our leaders see already “…an America plummeted into third world status.” (Taibii, “Griftopia”).
*The following resources were used to inform this article, please see the Resource Page on this site for full bibliographical information:
Epstein, Gerald A., Editor. “Financialization and the World Economy.”
Krippner, Greta. “The Financialization of the American Economy”
Krippner, Greta. “Capitalizing on a Crisis: The Political Origins of the Rise of Finance.”
Palley, Thomas I., Working Paper Number 525,” Financialization: What It Is and Why It Matters”.