The Committee to Destroy the World

CHAPTER 5 Financialization

One of the key economic phenomena of the last three decades has been the United States’ transition from a manufacturer and exporter of goods to a manufacturer and exporter of dollars and other financial products such as financial derivatives. This could not have been achieved without the complicity of the nation’s trading partners, particularly Japan, China, and Middle Eastern countries that needed to invest huge oil surpluses. But the phenomenal growth of finance capital that came to define capitalism over the past 30 years was accompanied by policies that favored financial market deregulation, a diminution of workers’ rights and organized labor power, weakened antitrust enforcement, and corporate governance rules that placed the rights of shareholders ahead of those of all other corporate and societal constituencies. The growing dominance of finance in the world economy was an essential factor in the displacement of productive investment by speculation that culminated in the financial crisis of 2008. Finance became its own raison d’être, and instead of providing credit to fund capital expansion and economic growth, the financial sector’s function became to expand itself.

Money Begetting Money

The term that is used to describe this phenomenon is “financialization.” It is the process of money begetting money, or more broadly of capital begetting capital. Financialization, along with globalization, is arguably the defining economic force of our time. ...