Nearly 40% of S&P 500 earnings came from financial activities by 2000

Evidence

These cases represent a striking trend in non-finance-sector business activity. A Wall Street analyst estimates that almost 40% of the earnings of the companies in the Standard & Poor’s 500 stock index in 2000 were from lending, trading, venture investments, and other financial activities, a third of which were earned by nonfinancial companies ðIp 2002Þ. For top executives with financial backgrounds, investment in the financial market is functionally equivalent to investment in production and sales but with the advantages of higher capital liquidity, lower transaction costs, and more flexible labor costs. — Ken-Hou Lin & Donald Tomaskovic-Devey, Financialization and U.S. Income…, 49

A Wall Street analyst estimates that almost 40% of the earnings of the companies in the Standard & Poor’s 500 stock index in 2000 were from lending, trading, venture investments, and other financial activities, a third of which were earned by nonfinancial companies ðIp 2002Þ. For top executives with financial backgrounds, investment in the financial market is functionally equivalent to investment in production and sales but with the advantages of higher capital liquidity, lower transaction costs, and more flexible labor costs. — Ken-Hou Lin & Donald Tomaskovic-Devey, Financialization and U.S. Income…, 49

Categorization

• SEED: The claim that executives view financial investment as ‘functionally equivalent’ to production because of flexible labor costs is an angle for an essay on how financialization weakened labor bargaining power.
• DEFINE: This effectively defines the core concept of financialization as the shift of nonfinancial firms toward financial income sources.
• corroborated: 2 independent passages support this claim — Ken-Hou Lin & Donald Tomaskovic-Devey, Financialization and U.S. Income…, 49
• 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; Finance produced 41 percent of U.S. corporate profits in 2007 — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 748; Nonfinancial firms’ portfolio income relative to cash flow surged by the late 1980s — Greta R. Krippner, The Financialization of the American…, 56 (+2 more)

Related

• Nonfinance firms increasingly derived income from financial markets (similarity 0.87)
• Financialization comprises both finance-sector dominance and nonfinance firms’ financial investing. (similarity 0.86)
• Finance produced 40 percent of US corporate profits despite being only an information system (similarity 0.85)
• Finance produced 41 percent of U.S. corporate profits in 2007 (similarity 0.84)
• Nonfinance firms’ financial gains are funded by production-derived cash flows, not new productivity (similarity 0.84)
• Financialization does not measurably raise firm profits or financial-asset productivity. (similarity 0.83)
• Financial profits relative to non-financial profits rose three to fivefold by the late 1990s. (similarity 0.83)
• Financialization both derives profits from finance and drains capital from productive investment (similarity 0.83)
• Financialization can be measured by comparing non-financial firms’ portfolio income to their cash flow. (similarity 0.83)
• Nonfinancial firms’ portfolio income relative to cash flow surged by the late 1980s (similarity 0.83)
• Major nonfinancial corporations shifted their earnings toward financial operations (similarity 0.83)
• Financialization must be measured by profit generation, not employment or output (similarity 0.81)
• Financialization cannot be reduced to stock market developments. (similarity 0.81)
• Financialization independently explains over half of labor’s falling income share since 1970. (similarity 0.81)
• Financialization shifted corporate power from manufacturing and marketing executives toward financial executives. (similarity 0.81)

Broader Connections

• Finance produced 41 percent of U.S. corporate profits in 2007 #corroborates (0.90) — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 748
• Major nonfinancial corporations shifted their earnings toward financial operations #corroborates (0.90) — Ken-Hou Lin & Donald Tomaskovic-Devey, Financialization and U.S. Income…, 45
• Nonfinancial firms’ portfolio income relative to cash flow surged by the late 1980s #expands (0.85) — Greta R. Krippner, The Financialization of the American…, 56
• Nonfinance firms increasingly derived income from financial markets #expands (0.80) — Ken-Hou Lin & Donald Tomaskovic-Devey, Financialization and U.S. Income…, 18