Financialization of the Economy

GF Davis, S Kim - Annual Review of Sociology, 2015 - annualreviews.org
Annual Review of Sociology, 2015annualreviews.org
Financialization refers to the increasing importance of finance, financial markets, and
financial institutions to the workings of the economy. This article reviews evidence on the
causes and consequences of financialization in the United States and around the world, with
particular attention to the spread of financial markets. Researchers have focused on two
broad themes at the level of corporations and broader societies. First, an orientation toward
shareholder value has led to substantial changes in corporate strategies and structures that …
Financialization refers to the increasing importance of finance, financial markets, and financial institutions to the workings of the economy. This article reviews evidence on the causes and consequences of financialization in the United States and around the world, with particular attention to the spread of financial markets. Researchers have focused on two broad themes at the level of corporations and broader societies. First, an orientation toward shareholder value has led to substantial changes in corporate strategies and structures that have encouraged outsourcing and corporate disaggregation while increasing compensation at the top. Second, financialization has shaped patterns of inequality, culture, and social change in the broader society. Underlying these changes is a broad shift in how capital is intermediated, from financial institutions to financial markets, through mechanisms such as securitization (turning debts into marketable securities). Enabled by a combination of theory, technology, and ideology, financialization is a potent force for changing social institutions.
Annual Reviews