Instructions: This question asks you to explain the process of “Financialisation” and its connection to the development of monopoly capital
Financialization refers to the development and the increasing role of financial institutions, financial markets, actors, and motives in the operation of local and international economies. The influence of the development improves the importance of the financial sector and the overall economy. However, Yagoubi (2013) argues that the financialization of capitalism causes a significant shift from production and its influence on economic activity to finance, causing the development of monopoly capitalism. Its ability to change how financial markets operate influences macro and micro-economies significantly. This impact influences the economic policies and set tendencies in the corporate environment. Therefore, financialization is perceived as a dominant force in the finance industry, which facilitates the growing percentage of surplus products in the capitalist economy (Haiven, 2014). This essay outlines the process and influence of financialization in the development of monopoly capital.
As a dominant aspect in the financial industry, financialization aims at elevating the importance of the financial sector over other sectors that contribute to the economy. It focuses on transferring income from the real sector to the financial sector thus increasing income inequality and contributing to wage stagnation. The process begins with capital accumulation by financial industries. These institutions try to gain financial advantage by acquiring more capital from other sectors into the financial sector. According to Haiven (2014), this stage mainly occurs during a period of recession which is usually characterized by negative economic growth. The process then moves on to a stage that marks the major impact of financialization. This stage captures the impact of financial markets, financial actors and financial institutions on the economy (Haiven, 2014). In the long run, the process of financialization accounts for growth of a country’s financial patterns from instability to stability. Its significant impact on the financial patterns increases the importance of financial markets, actors and institutions. This boosts economic activities nationally and internationally. This process clearly points out the incredible power of the financial sector over economic and political fields and portrays how financialization depends on the dimensions of speculative capital (Yagoubi, 2013).
Monopoly capital is a capitalist system developed by trade monopolies in the hands of a few people. This definition links the development of monopoly capital to the aspects of financialization. The connection between these two aspects is marked by the increasing role of the finance industry in the operations of capitalism (Foster, 2014). This is clearly depicted by the fact that financialization transfers its concept of stagnation to monopoly capital. On the other hand, just like financialization gives advantage to finance, monopoly capital gives advantage to capital over other fields. Finally, financialization has highly contributed to the rise of a new hybrid phase of monopoly known as ‘monopoly-finance capital.’ This new face of monopoly traps capital into an endless cycle of stagnation and financial explosion thus hinders it from advancing (Foster, 2014). These facts clearly outline the role financialization plays in the development of monopoly capital.
In conclusion, the financialization process involves the
increasing role and influence of financial institutions, markets, actors, and
financial motives in the functioning of domestic/international economies. The process
causes a significant impact on other sectors such as production and
manufacturing and impacts the service industry among other implications. Most
importantly, it influences the development of monopoly capital and triggers the
development of the finance sector and inter-related industries. The analysis of
the stages of financialization and its impact on the development of monopoly
capital enhances understanding on the topic.
Foster, J. B., 2014. An Elaboration of Marxian Political Economy. The Theory of Monopoly Capitalism, pp. 320-324.
Haiven, M., 2014. Cultures of Financialization. Fictitious Capital in Popular Culture and Everyday Life, pp. 5-13.
Yagoubi, S., 2013. Accounting theories, Financialization process and Neoliberalism. Journal of Global Economics, pp. 23-34.