The New Finance Capital: Corporate Governance, Financial Power, and the State

Abstract

We argue that a new form of finance capital has been consolidated in the United States since the 2008 crisis—defined as a fusion of financial and industrial capital. In this regime, financiers have become more entrenched in the governance of nonfinancial corporations while, reciprocally, industrial firm managers have increasingly become financiers. Indeed, this fusion has taken place on two interconnected levels: (1) within the nonfinancial corporation itself, and (2) between the nonfinancial corporation and the financial sector. Internal diversification and internationalization over the postwar era led to the reorganization of the industrial corporation as a financial group, managing not concrete production processes, but portfolios of financial assets. This was reinforced by the increasing power of outside investors over the neoliberal period. However, new forms of financial organization that emerged after 2008 produced tighter and more direct linkages between external financiers and the nonfinancial corporation, constituting the new finance capital.

Can Global Capitalism Endure?

“…Hence, value does not park itself in Apple as a corporation. It moves on to global investors managed by the outsized asset management conglomerates such as BlackRock, State Street and Vanguard, that in the wake of the 2008 financial collapse have become lodged at the very core of global capitalism, as Maher and Aquanno (2021) among others have discussed. Institutional investors came to own in the wake of 2008 as much as 70…”

“…Revista de Estudios Globales. Análisis Histórico y Cambio Social, 1/2021 (1), 13-41 percent of the S&P 500, and among these, Vanguard, BlackRock or State Street became the largest shareholder in 438 of the 500 (Maher and Aquanno, 2021). The enormous concentration of power and control in these global financial management conglomerates is crucial to exponential expansion of fictitious capital.…”

Investing for the state

“…More broadly, the significance of this article for financialisation studies has been to articulate a specific set of practices, institutional configurations and network properties, and to demonstrate empirically, how the imperative to financialise infrastructure development is emergent from and contingent upon the productivist mode of capitalist development. In doing so, we build upon the work of economic geographers who have expressed reticence in embracing the conceptual and geographical expansiveness of financialisation in transforming wholesale economic and social life (Christophers, 2015a; Furlong, 2020;Maher & Aquanno, 2021;Pike & Pollard, 2009).…”

“…The capital that derives from financial channels i.e. interest-bearing or rent-seeking capital, is fictitious as it does not derive from circuits of commodity production or 'the real economy' (Fine, 2013;Maher & Aquanno, 2021). Lastly, proponents of shareholder value demonstrate through the evolution of corporate governance that financialisation has proliferated a widespread belief in the value of maximising shareholder value such that firm profits are increasingly channelled into financial markets over reinvestment in corporate expansion through production (Aglietta & Rebérioux, 2005;Lazonick & O'Sullivan, 2000).…”

“…Some accounts have gone so far as to claim a wholesale usurpation of production by finance, depicting a 'hollowing out' process where unproductive financial institutions redirect earnings away from productive reinvestment (Maher & Aquanno, 2021, p. 2;Pike & Pollard, 2009). It thus becomes worthwhile to raise the objection that 1) drawing on the shareholder value conception of financialisation, that it was a process that evolved from within the industrial firm, beginning in the managerial era of the post-war 60s when US firms sought to internationalise and diversify in the face of declining rates of profitability, precipitating the transformation of the managerial firm as a system of production controlled by insiders (corporate managers) to a system of investment subject to the power of outside investors (Dunford, 2021;Knafo & Dutta, 2020;Maher & Aquanno, 2021) and 2) drawing on the Marxist definition of financialisation, that we are yet to observe in the real world capital accumulation whereby profits accrue only through financial channels, circumventing the generation of surplus value from commodity production.…”