The economic crisis erupted in 2007-2008, commonly known around the world as the Global Financial Crisis and in the US as the Great Recession, highlighted – for those who deliberately or unintentionally have in recent years overlooked it – the ascendancy of finance, a process and phenomenon that are often described as financialization. In my view, Financialization refers to the capturing impact of financial markets, institutions, actors, instruments and logics on the real economy, labor, households and daily life. Essentially it has significant implications for the broader patterns and functioning of a (inter)national economy, transforming its fabrics and modificating the mutual embeddedness of state-economy-society. Financialization is also a key feature of Neoliberalism and, as the latter, it is a state project.
In the enlightening article “Theorizing financialization” (open access), Costas Lapavitsas (University of London; Syriza’s adviser and parliament member) thoroughly reviews economic and sociological literature on this concept, and argues that the relationship between finance and production is more complex than is often assumed. According to Lapavitsas, there are mediating processes between the two that have to be analysed in their own right, if the concept of financialization is to have explanatory power. Financialization, furthermore, has implications for employment, work and the conditions of life of workers.
In an accessible manner, Lapavitsas discusses several approaches to financialization and the crisis, paying particular attention to Marxist, post-Keynesian and other heterodox treatments, which have significant overlaps with economic sociology (see Greta Krippner’s path-breaking work “The financialization of the American economy“). On this basis, he develops a theoretical view of financialization as systemic transformation of capitalism with three interrelated features, by drawing on the methodological approach of classical Marxism, especially that of Hilferding, while remaining mindful of the recent crisis. First, large corporations rely less on banks and have acquired financial capacities; second, banks have shifted their activities toward mediating in open financial markets and transacting with households; third, households have become increasingly involved in the operations of finance. The sources of capitalist profit have also changed accordingly.