Financialising the State : Recent development in fiscal and monetary policy

Understanding the nature of state financialisation is crucial to ensure definancialisation efforts are successful. This paper provides a structured overview of the emerging literature on financialisation and the state. We define financialisation of the state broadly as the changed relationship between the state, understood as sovereign with duties and accountable towards its citizens, and financial markets and practices, in ways that can diminish those duties and reduce accountability. We then argue that there are four ways in which financialisation works in and through public institutions and policies: adoption of financial motives, advancing financial innovation, embracing financial accumulation strategies, and directly financialising the lives of citizens. Organising our review around the two main policy fields of fiscal and monetary policy, four definitions of financialisation in the context of public policy and institutions emerge. When dealing with public expenditure on social provisions financialisation most often refers to the transformation of public services into the basis for actively traded financial assets. In the context of public revenue, financialisation describes the process of creating and deepening secondary markets for public debt, with the state turning into a financial market player. Finally, in the realm of monetary policy financial deregulation is perceived to have paved the way for financialisation, while inflation targeting and the encouragement, or outright pursuit, of market-based short-term liquidity management among financial institutions constitute financialised policies

Financialisation and physical investment: a global race to the bottom in accumulation?

We estimate the effects of financialisation on physical investment in the developed and developing countries using panel data based on balance-sheets of publicly listed non-financial companies (NFCs) for the period 1995-2015. Among the developed economies, we focus on the cases of the USA, Japan, and a group of Western European countries. In the developing world, we present estimations based on the group of the NFCs in all developing countries as well as BRICS as a group- and country specific estimations for South Africa, South Korea, India, and China. We find robust evidence of an adverse effect of both financial payments (interests and dividends) and financial incomes on investment in fixed assets. The negative impacts of financial incomes are non-linear with respect to the companies’ size; financial income crowds out investment in large companies, and have a positive effect on the investment of only smaller, relatively more credit-constrained companies. Our findings support the ‘financialisation thesis’ that the increasing orientation of the non-financial sector towards financial activities is ultimately leading to lower physical investment, hence to stagnant or fragile growth, as well as long term concerns for productivity in both developed and developing countries

Financialisation and Capitalist Accumulation : Structural Accounts of the Crisis of 2007-9

The crisis of 2007-9 resulted from a financial bubble marked by weak production, expanding bank assets, and growing household indebtedness. For these reasons the crisis casts light on the financialisation of capitalist economies. The literature on financialisation generally links weak production with booming finance; according to some, causation runs from weak production to booming finance, while for others it runs in the opposite direction. This article argues that there is no direct causation between booming finance and weak production. Rather, financialisation represents systemic transformation of capitalist production and finance, which ultimately accounts for the crisis of 2007-9, and has three main features. First, less reliance of large corporations on banks; second, banks shifting their activities toward mediating in open markets and transacting with individuals; third, increasing implication of individuals in the operations of finance.

'The callous credit nexus':ideology and compulsion in the crisis of Neoliberalism

Many accounts of the rise and decline of neoliberalism forefront its ideological nature and capacity for hegemonic leadership. In contrast, I argue that outside of elite groups neoliberalism did not become hegemonic in Gramsci's sense of a 'national-popular' force. Neoliberalism is a convenient term to describe a two-stage process of 'purifying' the coercive nature of the capital relation through what Gramsci broadly called 'a war of movement' in the 1970s and 1980s and 'a war of position' in the 1990s and 2000s. This double-movement compelled credit-worthy individuals to routinely market, sell, purchase and perform for money-wages. New techniques of the self were perfected in the marketised war of position to service the credit-led financialisation of everyday life. Social positionings dependent on financialisation are now subject to a 'crisis of authority'

Financialisation, or the Search for Profits in the Sphere of Circulation

Financialisation of advanced capitalist economies during the last three decades represents expansion of the sphere of circulation, while the sphere of production has continued to face difficulties of profitability and productivity growth. In the course of financialisation, relations between industrial/commercial capital, banks and workers have been put on a different footing. The financial sector has become capable of extracting profit directly out of wages and salaries, a process called financial expropriation. Financial institutions have also become adept at profit-making through mediating transactions in open financial markets, that is, investment banking. The combination of financial expropriation and investment banking catalysed the crisis that began in 2007.

Financialisation embroils developing countries

Financialisation of developed countries includes increased lending to individuals as well as adoption of investment banking by commercial banks, thus contributing directly to the crisis of 2007-9. Financialisation has acquired an international aspect since the 1990s, primarily through liberalised capital flows. In the 2000s international financialisation has resulted in net capital flows from developing to developed countries, thus imposing substantial costs on the former, while subsidising the USA as leading issuer of quasiworld- money. International financialisation has also spurred domestic financialisation in developing countries through development of bond markets and foreign bank entry. Developing countries have been drawn into the crisis as current accounts declined and short-term capital flows were reversed.Financialisation of developed countries includes increased lending to individuals as well as adoption of investment banking by commercial banks, thus contributing directly to the crisis of 2007-9. Financialisation has acquired an international aspect since the 1990s, primarily through liberalised capital flows. In the 2000s international financialisation has resulted in net capital flows from developing to developed countries, thus imposing substantial costs on the former, while subsidising the USA as leading issuer of quasiworld- money. International financialisation has also spurred domestic financialisation in developing countries through development of bond markets and foreign bank entry. Developing countries have been drawn into the crisis as current accounts declined and short-term capital flows were reversed