This essay will seek to explore the key aspects of ‘financialisation’ encompassing a wide range of perspectives and arguments. It will seek to illustrate the ubiquitous nature of finance-led capitalism, focusing on how it has been culturally communicated and produced through particular assumptions and rationalities that exemplify economic frameworks such as neoliberalism. In order to understand ‘financialisation’ and all it entails, one must first see it not as something inevitable but as a motley array or a contingent coming together of practices, materials, people and knowledge’s. It will also focus on how these have ultimately shifted the dominance of the finance sector and are continuing to shape economic life. We must also understand the social and cultural practices of valuation and the power that economists and economic modelling has in governing our futures. Finally, as ‘financialisation’ can be seen as “wealth growing through investment overshadowing all other economic objectives and strategies” (Greenfield, wk 9), this raises significant concern about the state of the worlds’ economies. Saskia Sassen argues we must “begin to ‘definancialise’ the major economies to a significant degree, so that the world can begin to move towards the creation of a “real” economy that delivers security, stability, and sustainability” (Sassen 2009). As economies around the world are either in or heading for prolonged recession what might be the future for this growth regime we know as ‘Financialisation’?

It is important to know that ‘Financialisation’ is characterised by the accumulation of profits predominantly through financial channels, such as interest, derivatives, swaps, hedge funds and capital gains that ultimately reduce the production of goods/ services to an exchangeable financial instrument (Maudlin 2015). It is a process by which contingent practices and materials are put together to create wealth through intangible, future or present promises. Maudlin states, “Economic activity can be ‘creative’ or ‘distributive’” meaning that on one hand something can be produced/created and on the other is simply the process of “money changing hands” (Maudlin 2015). This distinction between ‘creative’ and ‘distributive’ explains why the financial sector went from being 10% of the corporate sector 40 years ago to now 40% and growing (Woolley, 2008). Practices and institutions of finance such as investment banks, stock markets, superannuation funds, insurance companies, credit rating agencies, accountancy firms are not simply adjuncts to other areas of economic activity but of central importance to this leading sector (Greenfield, wk 9). We can see that financialisation is a growth regime organised around equity and shareholder value. “Shareholder value sets a requirement in financial return which is reflected in rising equity price appreciation” (Aglietta 2000, pg. 155). In financialised economies this shareholder value doctrine differentiates growth from the previous model of productivity and real increases to fuel consumption and company growth, from owning and investing, which “stimulates consumption, not only out of disposable income but also out of capital gains,” (Aglietta 2000, pg. 155). Ultimately, it has been culturally communicated that growth is fuelled by the increase in wealth through capital markets or investment and presented as effortless wealth that we would be stupid not to be involved in.

This relates to what Mitchell says about economies and the market being “produced not by the natural workings of self-interest but by the complex organization of desire, agency, price, ownership, and dispossession” (Mitchell 2007, pg.95). He sees economies as socially constructed and politically arguable, contesting how the relations between aggregate numbers of ‘economic men’ bring new social realities and arrangements into being. Similarly, de Goede highlights the cultural aspects of economies particularly the social and cultural practices of valuation. She allows us to see value not as inherent by money forms but as something that is always socially attributed, “money, capital, and finance are not unmediated economic realities” (de Goede 2005, pg. xv). The maintenance of monetary authority is very carefully constructed, which is why the introduction of new forms of currency such as Bitcoin create such controversy. “Money practices, even modern deregulated financial practices, require in-depth social relationships, trust, interpretative communities, and authoritative underpinnings” (de Goede 2005, pg. xxiv). What we value and how we value changes depending on the cultural assumptions and communicative devices that perform and bring that value into begin. Economists and economic modelling also play a roll in the formative aspects of communication. Economists can be seen as wielding the knowledge and power to facilitate our actions in the present so as to achieve their calculated future. With the increasing financialisation of society, mathematical models that economists produce occasionally act as a substitute for genuine political debate. These models position economists as key authoritative and political actors, allowing them to govern and change the experience of the future with the economic charts and information they provide. This relates to what thrift says about the ‘new’ economy involving “strong non-inflationary growth arising out of the increasing influence of information and communications technology and the associated restructuring of economic activity” (Thrift 2001, pg. 414).

Governments cover a significant area of contemporary economic activity particularly after having adopted an economic framework that reduces its roll to enabling ‘free markets’ to grow and function. Since the 1970s we have seen the development of a neo-liberal approach to governing. Policies of privatisation and deregulation, marketization and corporatisation have become more and more frequent. It is common to interpret this shift as evolutionary with the naturalist metaphors used by particular actors to persuade audiences. However, in reality it has been a result of the political assembling of a finance-led capitalism. Financial capitalism is a species of market-orientated capitalism whereby market logic is the organising principle for almost all of the institutional forms. There is seen to be “significant decentralisation of wage bargaining, individualisation of pay and segmentation of [the] labour market” (Boyer 2005, pg. 22). It is important to understand that neoliberal economics was a development of neoclassical economics that began in the 1870s. Neo-classical economics is a departure from the Classical Marxist Political economy that was popular in the late 19th century. Marx was very approving of capitalism however he identified the capitalists trap which, according to Karl Marx, if the rate of exploitation was high and increasing, that was going to be a threat to the capitalist system (Greenfield wk. 7). He advocated for a particular social class where by the workers are the most vital component to the economy. The ratio of net profits to wages in an economy equals the rate of exploitation that then balances the relations between capitalists and workers. Neo-classical economics moves away from social class to the individual level where “individual choices operating through market mechanisms allocate resources most efficiently” (Stretton 2000, pg. 221). Neoliberalism is also a rejection of Keynesian demand-management techniques that “challenge the notion that free market economies can function without a minder” in which case is the roll of active government intervention (Krugman 2009). In working out the productive contributions of each factor of production (labour, capital, land) the Neo-Classical economic model claims that supply and demand determines the price of exchanges, for instance, “the supply and demand for land, interacting with the supply and demand for its products, determine the quantity and price of the land the farmer uses. The farmer gets the best return for his capital and enterprise. The land finds its most productive use. And the landlord gets what the land itself actually contributes to the value of the crop” (Stretton 2000 pg. 219).

The idea of the ‘rational economic man’ is often used as a rhetorical device compelling us to believe we are isolated individuals preventing us from seeing that we are all affected by one another. Someone’s flat screen TV and sports car could potentially be new computers in public schools. However, users of this model defend it arguing, “their economic science is value-free [and] claim that the model merely explains how the economy works in an objective factual way” (Stretton 2000 pg. 221). In Malcolm Turnbull’s recent praise of the Trans-pacific Partnership deal on 3AW he uses the language of the free market putting into ‘play’ particular economic assumptions that the market is an efficient mechanism for the allocation of scarce resources. Turnbull welcomed the 12-country trade deal sealed on Tuesday as “a gigantic foundation stone” for the economy that will deliver jobs and growth. He claims, “in and age of a rapidly globalising economy where services are more important than ever, where access to markets are more important than ever” the deal will be of ‘enormous benefit’ to Australians (Sydney Morning Herald). This coincides with neo-liberalism and a neo-classical economic framework where by the governing concept is that growth is good. As Hay states, “Neoliberal reform is a condition of sustained economic growth and competitiveness in an economically interdependent world in which market participants can be assumed to form their expectations in a rational manner” (Hay 2004, pg. 504). Free trade in goods and services, free circulation of capital and freedom of investment are three fundamental points neoliberals such as Malcolm Turnbull strive for. By using the rhetoric of competition claiming that it will bring about “more innovation and hence services will become better”, Turnbull allows us to see how governing works through communicative devices that formatively persuade populations to conduct themselves accordingly. This also shows us how the financialised economy is formed. Through particular actors such as Malcom Turnbull exemplifying economic frameworks that which produce what we then can recognize and call ‘finance-led capitalism’.

It can be seen that the institutionalisation of this governing neoliberal economic paradigm has perhaps contributed to the dismantling of our democracy and the increase of wealth inequality. Competing projects about how to govern economic activity have raised questions as to the need to definancialise the major economies. Yanis Varoufakis delivered a TED Global talk in Geneva on ‘the future of democracy and capitalism’ describing “a world that is simultaneously libertarian (focusing on empowered individuals), Marxist (having confined the wage-profit distinction to the dustbin of history) and Keynesian, globally Keynesian.” He seeks to remove what he calls the ‘twin peaks paradox’ that is threatening our global economies. One peak is the mountain of debt that ‘casts its long shadow’ around the world, the other a mountain of idle cash belonging to corporations and rich savers that are too terrified to invest their savings in productive activities that can generate the incomes necessary to extinguish the mountain of debt and also produce things humanity needs desperately, such as green energy. As these twin peaks refuse to cancel each other out through the normal operations of the markets, Yanis highlights that if we do not address this “our economic future will be bleak, our societies nasty, and our technological innovations wasted” (Varoufakis 2016). Paul Woolley similarly addresses what he calls “capital market dysfunction”. Supposedly, the finance sector’s role is as an intermediary to efficiently allocate resources (capital) in the economy, but in reality, Woolly argues that it commands a disproportionately high share of capital, brains and profits (Woolly 2008). Sassen also believes that financialisation has gone too far, “financialised capitalism has reach the limits of its own logic” (Sassen 2009). She stresses that if we do not begin to definancialise our economies, the complex instruments of “primitive accumulation” will extract value from all economic sectors, “with taxpayers money as the last frontier” (Sassen 2009). So perhaps with the prolonged economic recessions we are seeing and the ‘dysfuntionality’ of the finance sector, it is time to bring finance to ‘the people’. We are in need of an enormous transformation with deregulated capital failing to sustain the planet. Hind proposes a solution, “employee ownership and control, with oversight of management being seen as normal part of working life, will make a reformed global financial system more durable, by giving knowledge and economic power
to those with an interest in defending it” (Hind 2009). Through the many aspects of financialisation discussed, we can see it as a project that has been actively pursued and as a result, significantly shapes economic and social life.

Colin Hay (2004), ‘The Normalizing Role of Rationalist Assumptions in the Institutional Embedding of Neo-liberalism’, Economy & Society, 33(4), pp. 501-527, excerpts.

Dan Hind (2009), ‘Jump! You Fuckers!’, available online,

Dr Paul Woolley (2008), ‘Global finance: big, bloated and dangerous?’ Big Ideas, ABC Radio National. Transcript of, 3 February 2008. Available online,

Hugh Stretton (2000), ‘A Neo-Classical Model’ in Stretton, Economics: A New Introduction, Sydney, UNSW Press, pp. 217-222.

John Mauldin (2015) ‘The Financialization of the Economy’, Financial Sense, 29 October.

Marieke de Goede (2005), ‘Introduction: Money and Representation’ in Virtue, Fortune, and Faith: A Genealogy of Finance, Minneapolis, University of Minnesota Press, pp. xiii—xxvii (excerpt).

Mark Kenny (2015), ‘Malcolm Turnbull welcomes TPP as ‘gigantic foundation stone’ for economy’, Sydney Morning Herald, 7 October

Michel Aglietta (2000), Shareholder value and corporate governance: Some tricky questions. Economy and Society, 29(1), 146-159.

Nigel Thrift (2001), ‘”It’s the Romance, Not the Finance, that makes the Business Worth Pursuing”: Disclosing a New Market Culture’, Economy & Society 30 (4), pp. 412-432 excerpts.

Paul Krugman (2009), ‘Rethinking Economics’, Australian Financial Review, 11 September, pp. 2, 10—11.

Robert Boyer (2005), How and Why Capitalisms Differ, MPIfG Discussion Paper, No. 05/4. Economy & Society, 34.4), p.535

Saskia Sassen (2009), ‘Too Big to Save: the End of Financial Capitalism’, Open Democracy , April 1, available online, URL:http://www.opendemocracy.net/article/too-big-to-save-the-end-of-financial-capitalism-0 ,

Timothy Mitchell (2007), ‘Economy’ in B. Burgett & G. Hendler eds, Keywords for American Cultural Studies, NY, New York University Press, pp.92-95.

Yanis Varoufakis (2016) ‘Capitalism will eat democracy — unless we speak up’ TEDTalks Geneva, Video, Available online,