What is financialization in simple terms?

Financialization is a process whereby financial markets, financial institutions, and financial elites gain greater influence over economic policy and economic outcomes. Financialization transforms the functioning of economic systems at both the macro and micro levels.

How does financialization affect the economy?

The consequence of financialisation include the possibility that: Financial markets have greater influence over firms and the real economy. The economy is more dependent on the strength of the finance sector. Widening inequality as the finance sector is often able to capture relatively higher salaries and profits.

How does financialization lead to income inequality?

The authors posit that there are two key mechanisms that link financialization to increasing inequality: the shareholder value model of corporate governance and the rising demand for financial professionals. The first mechanism drives disproportionate income growth for the top 1 percent of income earners.

What is financialization development?

Daniela Gabor: Understanding the financialisation of international development through 11 FAQs. Financialisation is a contested term and historical phenomenon. Its driving force is the creation of new asset classes and the preservation of their real value to facilitate financial profits.

What are the benefits of financialization?

Raising investment directly. Allows foreign flows of capital – Inward investment creates jobs and helps a developing economy to catch up. A strong, well functioning banking sector can play an important role in promoting economic prosperity. Firms need banks and financial markets to finance investment.

What are the impacts of financialization?

Financialization distorts economic investment and reduces the mutual dependence of capital and labor, eroding the social contract in which capitalism delivers profits to the owners of capital and a growing standard of living to citizens.

What is financialization its role towards business and society?

Financialization is the increase in size and importance of a country’s financial sector relative to its overall economy. The financial industry, with its emphasis on short-term profits, has played a major role in the decline of manufacturing in the U.S.

What has caused financialization?

While the beginnings of financialisation can be traced back to the 1950s, it was the fall of the Bretton Woods monetary system in the early 1970s that accelerated growth in global liquidity and prompted a surge of financial liberalisation and deregulation.

What is an example of financialization?

Financialization also can refer to the increasing participation of nonfinancial businesses in financial activities. General Electric Company, for example, a company most people associate with manufacturing and innovation, earned 43 percent of its profits from financial activities as recently as 2014.

How does globalization influenced by financialization?

Globalisation and financial stability. One specific mechanism through which globalisation can affect economic growth, poverty and inequality is its impact on financial stability. Financial crises can result in a permanent loss of income, have a devastating effect on poverty and increase inequality.

What are some of the consequences of the financialization of global capitalism?

Who coined the term financialization?

Page 3. (2012) cite de Bernis (1988) as the earliest author to draw attention to the rising dominance of finance. The most widely cited definition of the term ‘financialisation’ is probably that given by. Epstein (2005) in his introduction to his edited book Financialization and the World Economy. 2.

What is financialization of capitalism?

Financialization (or financialisation in British English) is a term sometimes used to describe the development of financial capitalism during the period from 1980 to present, in which debt-to-equity ratios increased and financial services accounted for an increasing share of national income relative to other sectors.

What is financialization in sociology?

Financialization refers to the increasing importance of finance, financial markets, and financial institutions to the workings of the economy.