Financialization both derives profits from finance and drains capital from productive investment

Evidence

The analysis of financialization by sociologists like Arrighi and Krippner complements research by Marxist and post-Keynesian economists, who empirically examine the centrality of the financial industry in the US economy. Not only do they confirm Krippner’s thesis that non-financial corporations increasingly derive profits from financial activities. They also suggest that a reverse process is taking place: non-financial firms have increased payments to the financial sector through interest payments, dividends payments and share-buy-backs (Crotty, 2005). This dual movement creates an interesting bind for non-financial corporations, as they end up with limited capital available for productive investment despiteincreasedprofitsfromfinancialactivities(the‘crowdingout’thesis).Animportant insight that follows is that financialization has led to ‘a slowdown of accumulation’, a reduced investment in tangible assets, although firm-level data suggest some variation depending on firm size (Orhangazi, 2008). — Natascha van der Zwan, Making Sense of Financialization, 29

Categorization

• corroborated: 2 independent passages support this claim — Natascha van der Zwan, Making Sense of Financialization, 29
• XREF: connects to: Finance produced 40 percent of US corporate profits despite being only an information system — Mark Blyth, Austerity: The History of a Dangerous…, 624; Financialization channels income toward the wealthy and depresses productive investment and wages. — Ken-Hou Lin & Donald Tomaskovic-Devey, Financialization and U.S. Income…, 24; Stagnating growth plus deregulation pushed firms from production into financial investment — Ken-Hou Lin & Donald Tomaskovic-Devey, Financialization and U.S. Income…, 41 (+8 more)

Related

• Financialization does not measurably raise firm profits or financial-asset productivity. (similarity 0.86)
• Financialization marks a decisive shift from production-based to finance-driven accumulation. (similarity 0.85)
• Financialization is a pattern of accumulation dominated by financial channels over trade and production (similarity 0.85)
• Financialization comprises both finance-sector dominance and nonfinance firms’ financial investing. (similarity 0.85)
• Financialization must be measured by profit generation, not employment or output (similarity 0.85)
• Financialization channels income toward the wealthy and depresses productive investment and wages. (similarity 0.84)
• Finance produced 40 percent of US corporate profits despite being only an information system (similarity 0.84)
• Stagnating growth plus deregulation pushed firms from production into financial investment (similarity 0.83)
• Financialization theory links wage-compromise collapse and shareholder value to inequality (similarity 0.83)
• Nearly 40% of S&P 500 earnings came from financial activities by 2000 (similarity 0.83)
• Prior research linked financialization to inequality mostly indirectly, not causally. (similarity 0.83)
• Nonfinance firms’ financial gains are funded by production-derived cash flows, not new productivity (similarity 0.83)
• Financialization shifts firm investment from core business toward finance, weakening workers’ claims on revenue. (similarity 0.83)
• Financialization is integral to capitalism, not a product of deregulatory excess (similarity 0.83)
• Financialization means accumulation through financial channels rather than production (similarity 0.82)