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 8: Conclusion

Özgür Orhangazi

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


Recent decades have witnessed an explosion in everything financial. Financial markets have grown enormously in both size and significance. They have started to command ever greater resources and have acquired an important role in the governance of NFCs. The share of income allocated to financial institutions has skyrocketed, while nonfinancial institutions have also increasingly become involved in investments in financial assets and financial subsidiaries. All these developments have been discussed extensively in the ever-growing financialization literature. In the first chapter of this book, I drew attention to the vague and imprecise nature of the concept and after a review of different definitions and usages of it; I offered a clear definition of financialization, suitable for analytical use. Here, financialization was defined at two levels: At the general level, financialization refers to an increase in the size and significance of financial markets, transactions and institutions. At a narrower level, I used financialization to designate changes in the relationship between the nonfinancial corporate sector and financial markets. These latter changes include, first, an increase in financial investments and hence financial incomes, of the NFCs; and second, an increase in financial market pressure on the management of NFCs and an associated rise in transfers made to financial markets in the forms of interest payments, dividend payments and stock buybacks. In the second chapter, I documented various aspects of the rise of finance in the US economy through simple descriptive time-series statistics. The third chapter...

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