I have a new article forthcoming in Development and Change, on the political economy of financialization, coauthored with Arjun Jayadev and Enno Schroeder. Abstract:
We discuss the political economy of financialization in three settings: The US, the euro area, and India. The quantitative growth and increased social prominence of financial institutions and markets, we suggest, can be usefully seen in terms of the constraints or “discipline” they impose on other private and public decision makers. The role of finance in allocating real resources may be less important than its role in supporting the claims and authority of wealth-owners vis-a-vis other social actors. In the US, this is most visible in the pressure nonfinancial corporations face to increase payouts to shareholders. In Europe, the financial constraints on national governments are more salient. Tightening these constraints is openly acknowledged as the major benefit of financial integration. On the other hand, the constraints financialization imposes on policy may also limit the extent to which finance can in fact be liberalized. This countervailing pressure is visible in the great expansion of central bank’s balance sheets and management of financial markets over the past decade. It is even more clearly visible in India, where the conflict between financialization and concrete policy goals has sharply limited the extent of liberalization, despite consistent rhetorical support.
Full article here.
In the article you seem to imply that the causation goes from the political to the economic, that is, a certain political view (neoliberalism) becomes dominant, and then politicians change the laws, which lead to financialisation and the dictatorship of the creditor.
However, I wonder how much the causation goes from the political to the economic, and how much from the economic to the political: financialisation means that the private market creates more asset appreciation and more bubbles, but maybe the economy in some sense “needs” the bubbles.
For example, could the export-fueled Chinese growth happen without growing financialisation in the west? Could the west keep unemployment seasonably low without growing debt levels?
For example, in Italy we are trying to lower the bublic debt since the 90s, and since the 90s Italy is in a sort of long slump.
On one hand, this long slump is one example of the market’s “discipline” (that is mostly preemptive discipline of the politicians), but on the other hand, this imply that italian economy only works well when A) debt levels are growing or B) there is a rich export market that pulls the economy (that means that the debt levels are growing somewhere else).
If some countries actually need the rising debt levels (and therefore financialisation of sorts), then it could be that the economic is driving the political.