Financialisation

Financialisation refers to the increasing importance of financial markets, financial motives, financial actors, and financial institutions in the operation of domestic and international economies. It signifies a shift where financial activities, rather than the production of goods and services, become a primary driver of economic growth and decision-making. This process can manifest in various ways, including the growth of the financial sector relative to the real economy, the increasing share of profits derived from financial activities, and the penetration of financial logic into non-financial areas of life.

Key characteristics of financialisation often include a rise in debt levels, both corporate and household, and a greater reliance on financial instruments like derivatives and securitization. It can also involve a focus on shareholder value maximization as the primary corporate goal, potentially influencing investment decisions and labor practices. The concept is often debated, with proponents arguing it can lead to more efficient capital allocation and innovation, while critics express concerns about increased financial instability, income inequality, and a potential disconnect from productive economic activity. Understanding financialisation is crucial for analyzing contemporary economic trends and policy challenges.