Major nonfinancial corporations shifted their earnings toward financial operations

Evidence

Sears, one of nation’s largest retailers, entered the real estate brokerage and securities businesses in 1981. It issued the Discover Card in 1985, a one-stop financial services credit card that also offered savings accounts. Some of these financial services were later sold in the 1990s when profitability dipped. Yet this does not mean that the retailer returned to the “one-big-store” business model. After its merger with Kmart, Sears and Kmart stores became a retail business that generated cash flow to be diverted to financial investments. A year before the 2008 financial crisis, a third of Sear’s pretax income was generated by high-risk financial trades ðCho 2007Þ. AT&T started its financial arm in 1985, entered the smallbusiness loan market in 1992, and soon became one of the largest nonbank lenders. In the early 2000s, Target earned about 15% of its profit from credit card operations ðHenry 2005Þ. — Ken-Hou Lin & Donald Tomaskovic-Devey, Financialization and U.S. Income…, 45

Categorization

• XREF: Connects directly to the financialization literature (Krippner, Davis) and the author’s own quantitative analysis later in the book. — connects to: Nonfinance firms increasingly derived income from financial markets — Ken-Hou Lin & Donald Tomaskovic-Devey, Financialization and U.S. Income…, 18; Deregulation let non-finance firms pursue financial activities, fueling debt expansion — Ken-Hou Lin & Donald Tomaskovic-Devey, Financialization and U.S. Income…, 40; Nearly 40% of S&P 500 earnings came from financial activities by 2000 — Ken-Hou Lin & Donald Tomaskovic-Devey, Financialization and U.S. Income…, 49 (+8 more)
• SHARE: The detail that a third of Sears’ pretax income came from high-risk financial trades just before 2008 is worth sending to anyone writing on retail-sector financialization.

Related

• Nonfinance firms increasingly derived income from financial markets (similarity 0.85)
• Nearly 40% of S&P 500 earnings came from financial activities by 2000 (similarity 0.83)
• Nonfinancial firms’ portfolio income relative to cash flow surged by the late 1980s (similarity 0.81)
• Financialization can be measured by comparing non-financial firms’ portfolio income to their cash flow. (similarity 0.80)
• Financial profits relative to non-financial profits rose three to fivefold by the late 1990s. (similarity 0.80)
• Financialization comprises both finance-sector dominance and nonfinance firms’ financial investing. (similarity 0.80)
• Firm financial income diverts resources from core production and shifts bargaining power upward (similarity 0.80)
• Financialization shifted corporate power from manufacturing and marketing executives toward financial executives. (similarity 0.78)

Broader Connections

• Non-financial firms increasingly resemble financial corporations through revenue reliance #corroborates (0.90) — Greta R. Krippner, The Financialization of the American…, 136
• Outsourcing trade receivables shifts interest income out of nonfinancial firms into the financial sector #exemplifies (0.85) — Greta R. Krippner, The Financialization of the American…, 84
• Nonfinancial firms’ portfolio income relative to cash flow surged by the late 1980s #corroborates (0.80) — Greta R. Krippner, The Financialization of the American…, 56
• Financialization marks a decisive shift from production-based to finance-driven accumulation. #corroborates (0.80) — Gerald F. Davis & Suntae Kim, Financialization of the Economy, 19
• Industrial corporations transformed into financial hedge funds before their collapse #exemplifies (0.72) — Yanis Varoufakis, Technofeudalism, 901