Financialization Revisited: A Mesoeconomic Approach

Abstract

The different manifestations of the financialization trend show how contemporary capitalism has become dominated by financial institutions, markets, and motives. That dominance changes how our economic system operates. With large institutional investors exercising often impatient control as majority shareholders, corporate managers are increasingly concerned with quarterly earnings and share buybacks at the expense of longer-term commitments to skill formation, product development, or new production technologies. Their short-term bias gets reinforced when chief executives running these corporations get most of their remuneration in the form of stock options. Financialization has also transformed our system on the macroeconomic level. When capital moves with lightning speed across borders at an unimaginably large scale, then national economies become intertwined in entirely new ways.