Finacialization is a process by which financial markets, financial institutions and its actors have gained a major influence, or indeed Hegemony, over economic policies, economic outcomes, and the social field. It mainly impacts the behavior between financial sector and real sector, promoting the first, through numerous phenomena: Deregulation of the financial sector and the development of new instruments, capital flow liberalization as well as exchange rate instability, the emergence of new powerful institutional investors, shareholder-Value-orientation and changes in the enterprises’ corporate governance, an easier access to credits for the underbanked social groups, a higher level of real interest rate in comparison to the post-war period.
Income transfer from the real sector to the financial sector as well as an increased debt, increasing income inequality and wage stagnation are among financialization’s consequences.
Additionally, the financial process operates through changes in the operation of financial markets as well as in the behavior of non-financial corporations, and through changes in economic policy.
But where does this financialization process come from? We can argue that its roots are to be traced back in the U.S. after the collapse of the Fordist compromise in the early 1970s, but it clearly develops throughout the 1980s and 1990s. On the other hand some intellectuals argue that it has been brought by the emergence of Neoliberalism at the end of the 1970s and the beginning of the 1980s, which, by advocating free trade, deregulation, liberal economy, privatization as well as an overall reduction in government control of the economy, set the stage for Financialization’s growth.
Inhaltsverzeichnis (Table of Contents)
- Overview of Financialization
- Financialization within the financial sector
Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)
This text aims to provide an overview of financialization, a process by which financial markets and institutions have gained significant influence over economic policies and social structures. The text explores the origins, characteristics, and consequences of this phenomenon.
- The emergence and development of financialization
- The impact of financialization on economic outcomes
- The role of the state in promoting financialization
- The rise of shadow banking and its implications
- The consequences of financialization for different sectors of the economy
Zusammenfassung der Kapitel (Chapter Summaries)
Overview of Financialization
This chapter introduces the concept of financialization, defining it as the increasing influence of financial markets and institutions on economic policies, outcomes, and the social realm. It outlines the key characteristics of financialization, such as deregulation, the emergence of new financial instruments, and the rise of powerful institutional investors. The chapter also discusses the consequences of financialization, including income transfer from the real sector to the financial sector, increased debt, and growing income inequality.
Financialization within the financial sector
This chapter explores the phenomenon of shadow banking, which refers to non-bank financial institutions providing services similar to traditional commercial banks but outside of regulated systems. It discusses the role of shadow banking in the financialization process and its implications for financial stability. The chapter also highlights the interconnectedness of shadow banking and financialization, arguing that the latter sets the stage for the former.
Schlüsselwörter (Keywords)
Key terms and concepts explored in this text include financialization, shadow banking, deregulation, institutional investors, income inequality, debt-led growth, export-led growth, and financial globalization.
Frequently Asked Questions
What is "financialization"?
Financialization is the process where financial markets, institutions, and actors gain dominant influence over economic policies, outcomes, and social structures.
Where did the financialization process originate?
Its roots can be traced back to the U.S. in the early 1970s following the collapse of the Fordist compromise, developing further in the 1980s and 1990s.
What are the main consequences of financialization?
Consequences include increased income inequality, wage stagnation, rising debt levels, and the transfer of income from the real sector to the financial sector.
What is "shadow banking"?
Shadow banking refers to non-bank financial institutions that provide services similar to commercial banks but operate outside of traditional regulated systems.
How does neoliberalism relate to financialization?
Neoliberalism's advocacy for deregulation, free trade, and privatization set the stage for the growth and hegemony of the financial sector.
- Quote paper
- Pablo Bernardino Sanchez Arias (Author), 2014, Financialization. The power of the financial market and its actors, Munich, GRIN Verlag, https://www.grin.com/document/275718
