Financialization revisited: the rise and fall of finance-led capitalism

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.

Whither corporate financialization? A literature review

“…Corporations might grant or receive greater levels of credit, increase their holdings of short‐term liquid assets, or move toward long‐term investments, all of which result in a greater share of non‐fixed assets in relation to fixed assets and potential for non‐operating income. At the same time, corporations might increase their leverage by replacing equity with debt that facilitates further growth of financial instruments, especially in times and places of low interest rates (Guttmann, 2017; Hudson, 2010). The second element is the rising relevance of intangible assets.…”

“…Furthermore, the authors identified a strong correlation between the acquisition of financial investments and debt by US firms, underscoring that because of available credit, no actual diversion of profits may have occurred. In effect, they made the case to study debt and leverage (see also Baines & Hager, 2021; Foster et al., 2021; Guttmann, 2017). Along similar lines, several generations of monopoly capital theorists defended the notion that falling investment shares were not caused by more attractive financial investments, but that the actual causality ran the other way (Despain, 2015; Foster & Magdoff, 2009; Magdoff & Sweezy, 1987).…”

Why has the Brazilian economy stagnated in the 2010s? A Minskyan analysis of the behavior of non-financial companies in a financialized economy

“… 9 Under high uncertainty and cash restriction, companies tend to prioritize short term return investments, such as financial applications (Hein and Van Treeck 2008 ). Guttmann ( 2017 ) understands that the financial boom contributed to an industrial stagnation, directing a large volume of resources from fixed assets, i.e., productive investments, to short-term speculation. The author adds that financial assets are inherently attractive not only for their liquidity but also for their mobility.…”

“… 28 See, for example, Guttmann ( 2017 ). The financial explosion fueled an industrial stagnation directing a large volume of resources from investments in fixed assets, that is, productive, to short-term speculation.…”