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The Globalization and Development Reader: Perspectives on Development and Global Change, 2nd Edition by Nitsan Chorev, Amy Bellone Hite, J. Timmons Roberts

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17 The Financialization of the American Economy (2005)

Greta R. Krippner

Introduction

It is difficult to escape the impression that we live in a world of finance. Financial news dominates the business press. The management of American corporations, large and small, moves to the rhythm of Wall Street. In recent years, a series of corporate scandals have dramatized the degree to which financial machinations have superseded productive enterprise in the US economy. Consumers are confronted daily with new financial products and financial ‘literacy’ is touted as a core competency. For many Americans, the leading stock market indices act as a kind of barometer for the economy as a whole. Gains in the market generate surges in consumer spending even where more tangible indicators of economic vitality, such as job growth or wage levels, lag behind.

While many commentators in both popular and scholarly accounts have noted these and related developments, there have been few attempts to explore the meaning of such phenomena for the nature of the economy, considered broadly. In large part, this omission reflects the fact that the data that would allow a macro-level examination of the growing weight of finance in the American economy – a development that I refer to as financialization – raise a host of difficult methodological issues. As a result, even those accounts that are concerned with understanding the rise of finance in structural terms typically assert the presence of this phenomenon ...

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