The Financialization of the Firm

The Financialization of the Firm

Managerial and Social Implications

Alexander Styhre

The term ‘financialization’ denotes the general tendency in the advanced Western economies to allow a substantial proportion of taxable profits to accumulate in the finance industry. Alexander Styhre discusses the financialization of the firm in the period after 1980 and stresses how key managerial activities have been redefined on the basis of finance theory and free-market ideologies. This book critically examines the literature and the implications of financialization for organizations and the economy as a whole.

Chapter 3: Finance industry prominence: causes and consequences

Alexander Styhre

Subjects: business and management, corporate governance, organisation studies, social policy and sociology, sociology and sociological theory


In 2005, the British Prime Minister Gordon Brown declared in his budget statement before the parliament that he expected the growth of the economy to be between 3 and 3.5 percent during the year, and in 2006 the figure was estimated to be between 2.5 and 3 percent, figures twice or three times as high as what was calculated in the euro area and in Japan. As an effect of this growth, Brown remarked, Britain and North America have “over the last eight years grown at twice the rate of most G7 competitors, our living standard also rising twice as fast” (Prime Minister Gordon Brown’s Budget Statement in 2005, cited in Erturk et al., 2012: 7). In hindsight, this statement was indicative of the “misplaced optimism before 2008” (Erturk et al., 2012: 10) regarding economic growth and employment in the financialized Anglo-American economies. On 15 September, 2008, Lehman Brothers, one of the “Big Five” on Wall Street, filed for bankruptcy. This event had repercussions throughout the entire global financial system and during a few dramatic weeks the financial market ended up in a stalemate when it became clear that the finance industry would be unable to stabilize itself without the support and primarily the capital provided by national states (Blinder, 2013; Barofsky, 2012; Friedman and Kraus, 2012; Stiglitz, 2010; Sorkin, 2009).

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