Legislative deregulation drove the US financial sector’s postwar expansion

Evidence

In the US, the weight of the financial sector within the economy skyrocketed: in the sixty years since the 1950s, it increased from 2.3 to 7.7 percent of American GDP, and its share of the total profit in the US economy doubled between the 1980s and the 2000s to reach 40 percent. This was not a purely “natural” evolution of capitalist preferences, however, but driven by legislation designed to deregulate financial activities. Crucial to this was, for instance, the Gramm-Leach-Bliley Financial Services Modernization Act (1999) that abolished the separation between commercial and investment banking that had existed since the Glass-Steagall Act, adopted in 1933 as a response to the 1929 Wall Street crash. Together with other blunt deregulation measures, it facilitated the access to credit for households and edged out the banks from their central position as intermediary bodies for loans: between the 1980s and the 2000s, their share in the total amount of financial assets plummeted from 50 to 25 percent. — Arthur Borriello and Anton Jäger, The Populist Moment, 100

Categorization

• SEED: The financialization numbers (2.3 to 7.7% of GDP; banks’ asset share halving) offer concrete data points for an essay on how deregulation, not market evolution, remade American credit.
• XREF: Echoes the ‘Financialization and U.S. Income Inequality’ claims about financial profits diverting from productive activity. — connects to: Financialization accelerated through 1970s-80s deregulation and state support — Andrew deWaard, Derivative Media: How Wall Street…, 488; US financialization accelerated sharply after 1980 deregulation — Aris Komporozos-Athanasiou, Speculative Communities: Living With…, 71; A bipartisan deregulatory wave dismantled US financial separation statutes — Andrew deWaard, Derivative Media: How Wall Street…, 78 (+8 more)

Broader Connections

• Financialization accelerated through 1970s-80s deregulation and state support #corroborates (0.95) — Andrew deWaard, Derivative Media, 488
• US financialization accelerated sharply after 1980 deregulation #corroborates (0.92) — Aris Komporozos-Athanasiou, Speculative Communities, 71
• The US economy became increasingly financialized in the post-1970s period. #corroborates (0.90) — Greta R. Krippner, The Financialization of the American…, 5
• Stagnating growth plus deregulation pushed firms from production into financial investment #corroborates (0.88) — Ken-Hou Lin & Donald Tomaskovic-Devey, Financialization and U.S. Income…, 41
• Deregulation let non-finance firms pursue financial activities, fueling debt expansion #corroborates (0.87) — Ken-Hou Lin & Donald Tomaskovic-Devey, Financialization and U.S. Income…, 40
• A bipartisan deregulatory wave dismantled US financial separation statutes #expands (0.85) — Andrew deWaard, Derivative Media, 78
• Deregulation in the 1980s pushed corporations to bypass banks entirely #corroborates (0.85) — Mark Blyth, Austerity, 78
• US financialization emerged from state responses to 1970s governance crises. #corroborates (0.80) — Gerald F. Davis & Suntae Kim, Financialization of the Economy, 32
• Neoliberal deregulation replaced social protection with credit and indebtedness #expands (0.80) — Wendy Brown, Undoing the Demos, 746
• Hostile-takeover markets and Reagan politics, not finance theory, drove 1980s financialization #qualifies (0.78) — Donald MacKenzie, An Engine, Not a Camera, 1175
• Financial innovation rhetoric frames new financial instruments as technological progress to legitimize deregulation #qualifies (0.75) — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 953