The Financialization Project
The financialization of the economy is a series of changes that have occurred in our savings, power, wealth and society over the past 35 years. This project aims to create a standard definition of these changes with the goals of better understanding their impact on rising US inequality and developing an effective policy response. While here, you can learn more about the definition, check out our latest research, and read about our team members. We’ll have much more to come in the future, so please continue to check us out.
ANNOUNCING DISGORGE THE CASH BY JW MASON
In this white paper, Roosevelt Institute Fellow J.W. Mason provides evidence that the relationship between corporate cash flow and borrowing to productive corporate investment has disappeared in the last 30 years and has been replaced with corporate funds and shareholder payouts. Whereas firms once borrowed to invest and improve their long-term performance, they now borrow to enrich their investors in the short-run. This is the result of legal, managerial, and structural changes that resulted from the shareholder revolution of the 1980s. Under the older, managerial, model, more money coming into a firm – from sales or from borrowing – typically meant more money spent on fixed investment. In the new rentier-dominated model, more money coming in means more money flowing out to shareholders in the form of dividends and stock buybacks.
These results have important implications for macroeconomic policy. The shareholder revolution – and its implications for corporate financing decisions – may help explain why higher corporate profits in recent business cycles have generally failed to lead to high levels of investment. And under this new system, cheaper money from lower interest rates will fail to stimulate investment, growth, and wages because, as we show here, additional funds are funneled to shareholders through buybacks and dividends.
Announcing Frenzied Financialization
In the Washington Monthly, Mike Konczal explores the savings and power aspects of financialization, explaining how the growth of the financial sector has left us all poorer.