Financialization and the US Economy

Financialization and the US Economy

New Directions in Modern Economics series

Özgür Orhangazi

Özgür Orhangazi brings together a comprehensive analysis of financialization in the US economy that encompasses the historical, theoretical, and empirical sides of the issues. He explores the origins and consequences of the dramatic rise of financial markets in the US economy and focuses on the impacts of this process of ‘financialization’ on the operations of the non-financial corporate sector.

Chapter 4: Perspectives on Financialization

Özgür Orhangazi

Subjects: economics and finance, financial economics and regulation, political economy, politics and public policy, political economy


4. Perspectives on financialization As documented by the empirical trends presented in Chapter 2, fundamental transformations have taken place that, in the post-1980 era, placed finance in a more prominent position than in the earlier post-World War II period. These changes provoked a number of scholars to pay specific attention to issues related to these transformations. Now, there is a growing literature that deals with different aspects of the financialization phenomenon and includes contributions from a variety of perspectives. In this chapter, I use these contributions in an attempt to uncover how much we know about financialization and how our conception of the phenomenon can be enhanced. Building on the insights of these contributions, I then construct an initial framework to understand the main aspects of the financialization process in the light of the historical discussion of the previous chapter. Broadly, I identify three types of approach to the financialization phenomenon.1 The first can be called the ‘long-waves approach’, best represented by the works of Arrighi (1994, 2003 and 2005) and his co-authors who evaluate the financialization era within a context of recurring long waves of capitalist history. According to this literature, each long cycle of capitalism consists of two segments: an increase in material production followed by a crisis due to overaccumulation and a financial expansion cycle. The post-1980 era represents this financial expansion cycle of the latest long wave of the capitalist system. Second, a diverse set of works analyse financialization as part of the structural...

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