Nonfinance firms’ financial gains are funded by production-derived cash flows, not new productivity

Evidence

Previous studies and anecdotal evidence have demonstrated that the financial activities operated by nonfinance firms are often heavily backed by the cash flow and the assets generated by production ðOrhangazi 2008Þ. Thus, the increase in “marginal productivity” of the top executives and financial workers often comes with the price of diminishing investments in the “marginal productivity” and job security of other workers. — Ken-Hou Lin & Donald Tomaskovic-Devey, Financialization and U.S. Income…, 175

Categorization

• XREF: Reinforces the financialization-to-inequality causal chain, tying firm-level financial activities to worker investment and job security. — connects to: Nonfinance firms increasingly derived income from financial markets — Ken-Hou Lin & Donald Tomaskovic-Devey, Financialization and U.S. Income…, 18; Zero-interest cash with crushed consumer demand goes to asset purchases, not production. — Yanis Varoufakis, Technofeudalism: What Killed Capitalism, 394

Related

• Financialization does not measurably raise firm profits or financial-asset productivity. (similarity 0.86)
• 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 0.84)
• Financialization both derives profits from finance and drains capital from productive investment (similarity 0.83)
• Financialization comprises both finance-sector dominance and nonfinance firms’ financial investing. (similarity 0.83)
• Nonfinance-firm financialization has received little research attention. (similarity 0.83)
• Marginal productivity accounts of executive pay are tautological and mask political power (similarity 0.81)
• Stagnating growth plus deregulation pushed firms from production into financial investment (similarity 0.80)
• Financialization can be measured by comparing non-financial firms’ portfolio income to their cash flow. (similarity 0.80)
• Financialization shifts firm investment from core business toward finance, weakening workers’ claims on revenue. (similarity 0.79)
• Financialization must be measured by profit generation, not employment or output (similarity 0.79)
• Financialization cannot be reduced to stock market developments. (similarity 0.79)
• Nonfinancial firms’ portfolio income relative to cash flow surged by the late 1980s (similarity 0.78)
• Financial profits relative to non-financial profits rose three to fivefold by the late 1990s. (similarity 0.78)