Handbook of Critical Issues in Finance

Handbook of Critical Issues in Finance

Elgar original reference

Edited by Jan Toporowski and Jo Michell

This vital new Handbook is an authoritative volume presenting key issues in finance that have been widely discussed in the financial markets but have been neglected in textbooks and the usual compilations of conventional academic wisdom.

Chapter 17: Financialization

Engelbert Stockhammer

Subjects: economics and finance, financial economics and regulation, post-keynesian economics


Financialization is a term that summarizes a broad set of changes in the relation between the ‘financial’ and ‘real’ sector, which give greater weight to financial actors or motives. The term has been used to encompass phenomena as diverse as shareholder value orientation, increasing household debt, changing attitudes of individuals, increasing incomes from financial activities, increasing frequency of financial crises, and increasing international capital mobility. The debate on financialization covers contributions from different disciplines ranging from economics to sociology, history, political science and business studies and from different theoretical traditions (see Ertu_rk et al., 2008, for a useful collection of seminal contributions). One of the first prominent works to use the term financialization was Arrighi (1994) who identified long waves of economic development in global capitalism that involve hegemonic and geographic shifts. While the upswings of these long waves are characterized by increased manufacturing and trade activity, in the downturns a process of financialization occurs: the leading power had initially established a competitive advantage in terms of production, but it shifts towards financial activities as its growth model gets exhausted and other players catch up.

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