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2013 | Buch

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Financialization

The Economics of Finance Capital Domination

verfasst von: Thomas I. Palley

Verlag: Palgrave Macmillan UK

Enthalten in: Springer Professional "Wirtschaft+Technik" , Springer Professional "Wirtschaft"

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Über dieses Buch

The term financialization is a term that has become popular to describe developments within the global economy, and particularly within developed industrialized economies, over the past thirty years. The book is divided into four sections, which together give a comprehensive treatment of the economics and political economy of financialization.

Inhaltsverzeichnis

Frontmatter

Overview: Financialization as Financial Neoliberalism

1. Overview: Financialization as Financial Neoliberalism

Abstract

This book is about financialization, a term that has become popular to describe developments over the past 30 years within the global economy, and particularly within developed industrialized economies. Seen in that light, financialization represents the most recent stage of capitalist economic development.

Thomas I. Palley

The Macroeconomics of Financialization

Frontmatter

2. Financialization: What It Is and Why It Matters

Abstract

This chapter explores the core construct of financialization. The chapter focuses on the US economy, which is where financialization seems to be most developed. However, judging by the increase in rentier income shares, financialization appearsto have infected all industrialized economies (Power et al., 2003; Jayadev and Epstein, 2007).

Thomas I. Palley

3. The Macroeconomics of Financialization: Stages of Development Approach

Abstract

Chapter 2 provided an empirical characterization of financialization. This chapter examines the macroeconomics of financialization using a stages of development approach that captures the evolving nature of financialization. This stages of development approach is suggested by Chick’s (1986) treatment of the evolution of banking systems.

Thomas I. Palley

4. The Simple Analytics of Debt-driven Business Cycles

Abstract

Chapter 3 presented a static stages of development model of financial-ization. A key feature was increasing debt and debt burdens in both the household and corporate sector. This chapter explores how debt can give rise to boom–bust business cycles.

Thomas I. Palley

5. Deflation and Inflation Dynamics with Debt

Abstract

A hallmark of financialization has been massive increase in inside debt (debt contracted between private sector borrowers and lenders).¹ Increased debt has played a critical role within the corporate sector, financing leveraged buyouts and transforming corporate cash flows into interest payments that squeeze workers by limiting financial resources available for wage payments.

Thomas I. Palley

Financialization and Instability

Frontmatter

6. Herd Behavior: Safety in Numbers

Abstract

The financial crisis of 2008 revealed the fragility of financial systems. One cause of that fragility may have been herd behavior on the part of financial market participants that had all adopted common behaviors and investment strategies. Evidence for such behavior is provided by former Citigroup CEO Chuck Prince’s comments about investing in mortgage-backed securities, including sub-prime loans:

When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you’ve got to get up and dance. We’re still dancing. (Financial Times, July 9, 2007)

Thomas I. Palley

7. Short-termism: The Problem of Managerial Turnover

Abstract

In his now famous testimony before the House Committee on Oversight and Government Reform on October 23, 2008, former Federal Reserve Chairman Alan Greenspan stunned observers by declaring:

As I wrote last March, those of us who have looked to the self-interest of lending institutions to protect shareholders equity, myself especially, are in a state of shocked disbelief (p.11)

Thomas I. Palley

8. A Theory of Minsky Super-cycles and Financial Crises

Abstract

Chapter 4 emphasized the relevance of the ideas of Hyman Minsky for understanding business cycles. However, Minsky’s ideas, as developed in his financial instability hypothesis, extend beyond standard cycle analysis and provide an encompassing frame for understanding financialization, albeit one that emphasizes instability. Chapters 2 and 3 focused on the income redistribution aspects of financialization and the role of financial markets, especially credit, in filling resulting demand shortages. Minsky’s theory adds a rich evolutionary dynamic that explains why financialization has a tendency to instability. That tendency is supported by the microeconomics of managerial herd behavior and short-termism, which were examined in Chapters 6 and 7.

Thomas I. Palley

Financialization and Growth

Frontmatter

9. Inside Debt and Economic Growth

Abstract

Chapter 4 explored the role of debt and financial market exuberance in the business cycle. Chapter 8 extended the analysis of cycles to incorporate the idea of a financial super-cycle that operates over several business cycles. This chapter further extends the time period of analysis to the long-run growth effects of financialization, particularly increased inside (that is, private sector) debt.¹

Thomas I. Palley

Financialization and Policy

Frontmatter

10. A Monetary Policy Framework for Asset Price Bubbles

Abstract

Previous chapters have provided an empirical and theoretical analysis of financialization’s economic impact; the final three chapters of the book turn to issues of economic policy. In this regard, there are two sets of policy issues. The first is how to stabilize and improve the performance of financial markets. The second is how to reverse financial neoliberalism and replace it with a structural Keynesian regime.

Thomas I. Palley

11. Monetary Policy and Central Banking after the Crisis: The Implications of Rethinking Macroeconomic Theory

Abstract

The financial crisis of 2008 and the Great Recession have prompted a retrospective on the conduct of monetary policy and central banking (Bernanke, 2010). Before the crisis, economists and central bankers were in a celebratory mode, with talk about the “Great Moderation” and praise for advances in monetary economics that had helped stabilize the economy (Bernanke, 2004; Goodfriend, 2007; Blanchard, 2008): now, however, there is talk among policy insiders of need to rethink monetary policy.

Thomas I. Palley

12. The Political Economy of Financialization

Abstract

Financialization constitutes a particular ordering of economic arrangements. That statement challenges the way economists usually talk about the economy, because it challenges the view that the economy is a natural order.

Thomas I. Palley

Backmatter

Titel: Financialization
verfasst von: Thomas I. Palley
Verlag: Palgrave Macmillan UK
Electronic ISBN: 978-1-137-26582-1
Print ISBN: 978-1-137-46829-1
DOI: https://doi.org/10.1057/9781137265821