Abstract
Abstract Financialization, expressing the growing importance of finance in the modus operandi of our capitalist system, has emerged as a key concept in various heterodox approaches over the last dozen years - be they Post-Keynesians (E. Stockhammer, E. Hein), American Radicals (G. Epstein, G. Krippner), Marxists (J. Bellamy Foster, G. Dumenil) or French Régulationists (M. Aglietta, R. Boyer). But until now those various analysts have each looked at this very complex phenomenon from one or the other specific angle. In this article, I am trying to provide a more comprehensive analysis of financialization by tracing its two primary drivers - structural changes making non-financial actors more dependent on debt-financing as well as financial-income sources (“financial centralization”) while also giving increased weight to the financial sector in the economy (“financial concentration”). The complex interaction between financial centralization and financial concentration has yielded a financialized growth dynamic fueling consecutive debt-financed asset bubbles in the center, the United States, that spurs export-led growth in the periphery. Framing this financialized growth dynamic in the Régulationist context as a historically conditioned accumulation regime, finance-led capitalism, I analyze its rise (1982 - 2007) in the wake of key changes in finance and its subsequent structural crisis (2007-2012) to provide a more complete approach to the crucial phenomenon of financialization.
Highlights
Financialization, expressing the growing importance of finance in the modus operandi of our capitalist system, has emerged as a key concept in various heterodox approaches over the last dozen years – be they Post-Keynesians
Amidst overwhelming evidence that our capitalist system has become increasingly shaped by financial institutions and markets, heterodox economists of different stripes (e.g. Post-Keynesians, American Radicals, French Régulationists) have in recent years made increasing reference to the term “financialization” to analyze the modus operandi of contemporary capitalism
In the run-up to the crisis of 2007/08 the dominant position of financial institutions and markets had become so unmistakable that it prompted several heterodox economists to push their critical analyses of capitalism a bit further by invoking the notion of its growing financialization
Summary
In the run-up to the crisis of 2007/08 the dominant position of financial institutions and markets had become so unmistakable that it prompted several heterodox economists to push their critical analyses of capitalism a bit further by invoking the notion of its growing financialization. Financialization revisited: the rise and fall of finance-led capitalism crisis leading European Post-Keynesian economists Eckhard Hein and Engelbert Stockhammer embedded financialization in growth and distribution models They both pointed out how the financial explosion of recent years has made income distribution more unequal while feeding industrial stagnation by diverting so many resources from productive investments to short-term speculation. Since the term has made it into the mainstream, being adopted by such ruling-elite institutions as Forbes Magazine, New York Times, or Investopedia.com1 This elaboration of the notion of “financialization,” starting with Epstein’s rather broad definition of the phenomenon in 2005, has included a host of different manifestations of finance’s growing importance, including a disproportionate increase of the financial-services sector, the explosion in the size and variety of financial markets, the dominance of financial motives, and the heavy accumulation of financial assets and liabilities among a wide range of actors. Even before the Great Recession of 2007/8, the world faced many incidences of financial instability
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