Financialization has become a hybrid concept somewhat uneasily weaving together questions about the emergence and growth of (speculative) financial markets with observations of the transformations occurring in the wider economic system (and society) in response to this growing “ecological dominance” (Jessop) of finance.
Despite a growing recognition that both aspects are linked in many ways, there is still a tendency to treat them as discrete, if interacting, phenomena. I suggest, instead, that such a conceptualization of their relationship as “accidentally (causally or externally), not systemically (internally) related” (Streeck) prevents us from coherently theorizing the financialization of contemporary capitalism and the ways in which the transformation of finance, and of the “real” economy, are constitutively linked.
The exponential growth and increasingly speculative character of financial activity is typically depicted as the result of its “dis-embedding”, permitting a self-reinforcing cycle of increasing self-referentiality and autonomization of financial processes,
Financialization of the wider economic system, in contrast, is seen to result from the growing power of finance to impose its interests on the “real” sector of the economy; the “finance-led accumulation regime” (Boyer) is thus the consequence of this imposition of financial imperatives on the wider economic system.
Drawing on heterodox economic conceptions of modern capitalism as a system of mutually constitutive monetary flows and assets, I argue instead that we must understand transformations in the structure of finance and corporate practice as co-constitutive: the dis-embedding and growing self-referentiality of speculative finance would not have been possible without corresponding transformations in the monetary forms that corporate activity takes. Rather than understanding the “financialization” of the wider economy as the causal result of the dominance of speculative finance, we need to dissect the systematic relation of the co-evolution of those institutional forms in order to understand the role of finance in contemporary capitalism.
