Stagnating growth plus deregulation pushed firms from production into financial investment

Evidence

The combination of a growing demand to maximize profits and minimize fixed capital investment and the increasing profit opportunities born of financial deregulation steered nonfinance firms to look into financial markets as an alternative channel to “grow fast in a slow-growth economy” (Welch and Byrne 2003, app. A). Instead of investing in physical capital to expand production, executives increasingly allocated their resources into financial venues. The result was a growing number of nonfinance firms participating in financial services and investment. — Ken-Hou Lin & Donald Tomaskovic-Devey, Financialization and U.S. Income…, 41

Categorization

• DEEPTHINKING: The ‘grow fast in a slow-growth economy’ mechanism — firms choosing financial returns over productive reinvestment as a systemic shift in accumulation logic — is a dense, paradigm-level point undergirding the whole financialization-literature tradition.
• XREF: connects to: Deregulation in the 1980s pushed corporations to bypass banks entirely — Mark Blyth, Austerity: The History of a Dangerous…, 78; 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 (+11 more)

Related

• Deregulation let non-finance firms pursue financial activities, fueling debt expansion (similarity 0.89)
• Financialization comprises both finance-sector dominance and nonfinance firms’ financial investing. (similarity 0.87)
• Nonfinance firms increasingly derived income from financial markets (similarity 0.86)
• Financialization accelerated through 1970s-80s deregulation and state support (similarity 0.84)
• Legislative deregulation drove the US financial sector’s postwar expansion (similarity 0.83)
• Nonfinancial firms’ portfolio income relative to cash flow surged by the late 1980s (similarity 0.83)
• Financialization both derives profits from finance and drains capital from productive investment (similarity 0.83)
• Financialization marks a decisive shift from production-based to finance-driven accumulation. (similarity 0.82)
• Financialization is a pattern of accumulation dominated by financial channels over trade and production (similarity 0.81)
• US financialization accelerated sharply after 1980 deregulation (similarity 0.81)
• Nearly 40% of S&P 500 earnings came from financial activities by 2000 (similarity 0.81)
• Nonfinance firms’ financial gains are funded by production-derived cash flows, not new productivity (similarity 0.80)
• Financial profits relative to non-financial profits rose three to fivefold by the late 1990s. (similarity 0.80)
• Financialization can be measured by comparing non-financial firms’ portfolio income to their cash flow. (similarity 0.80)
• Financialization is integral to capitalism, not a product of deregulatory excess (similarity 0.80)

Broader Connections

• Deregulation let non-finance firms pursue financial activities, fueling debt expansion #expands (0.90) — Ken-Hou Lin & Donald Tomaskovic-Devey, Financialization and U.S. Income…, 40
• Financialization accelerated through 1970s-80s deregulation and state support #corroborates (0.90) — Andrew deWaard, Derivative Media, 488
• Financialization both derives profits from finance and drains capital from productive investment #corroborates (0.88) — Natascha van der Zwan, Making Sense of Financialization, 29
• Financialization marks a decisive shift from production-based to finance-driven accumulation. #expands (0.85) — Gerald F. Davis & Suntae Kim, Financialization of the Economy, 19
• Financialization means accumulation through financial channels rather than production #expands (0.85) — Greta R. Krippner, The Financialization of the American…, 11
• Financialization is a pattern of accumulation dominated by financial channels over trade and production #expands (0.85) — Greta R. Krippner, The Financialization of the American…, 42
• Nonfinancial firms’ portfolio income relative to cash flow surged by the late 1980s #exemplifies (0.75) — Greta R. Krippner, The Financialization of the American…, 56
• Outsourcing trade receivables shifts interest income out of nonfinancial firms into the financial sector #expands (0.72) — Greta R. Krippner, The Financialization of the American…, 84