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Why ‘financialisation’ hasn’t depressed US productive investment

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  • Andrew Kliman
  • Shannon D. Williams

Abstract

The rate of capital accumulation in the USA has fallen markedly in recent decades. Works in the financialisation literature have tried to explain this phenomenon by arguing that rising financial payments and purchases have come at the expense of productive investment. This article shows that such arguments are not supported by the data. It also explains theoretically why rising dividend payments and the growth of corporations’ portfolio investment are compatible with the fact that corporations’ productive investment did not decline during the first two decades of ‘neoliberalism’ in the USA. There would necessarily be a trade-off between these uses of funds if they were all funded out of current profits, but there is no necessary trade-off because borrowed funds are an additional source. Finally, the article shows that the fall in US corporations’ rate of profit (rate of return on investment in fixed assets) fully accounts for the fall in their rate of capital accumulation.

Suggested Citation

  • Andrew Kliman & Shannon D. Williams, 2015. "Why ‘financialisation’ hasn’t depressed US productive investment," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 39(1), pages 67-92.
    • Handle: RePEc:oup:cambje:v:39:y:2015:i:1:p:67-92.
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    File URL: http://hdl.handle.net/10.1093/cje/beu033
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    Cited by:

    1. Shimano, Norihito, 2017. "The effect of pro-shareholder income distribution on capital accumulation: evidence from Japanese non-financial firms," MPRA Paper 76830, University Library of Munich, Germany.
    2. Ivan Mendieta-Muñoz, 2017. "Explaining the Historic Rise in Financial Profits in the U.S. Economy JEL Classification: E11, E44, G20," Working Paper Series, Department of Economics, University of Utah 2017_06, University of Utah, Department of Economics.
    3. Ben Fine & Alfredo Saad-Filho & Kate Bayliss & Mary Robertson, 2016. "Thirteen Things You Need to Know about Neoliberalism," Working papers wpaper155, Financialisation, Economy, Society & Sustainable Development (FESSUD) Project.
    4. Jo, Tae-Hee, 2016. "A Heterodox Theory of the Business Enterprise," MPRA Paper 72426, University Library of Munich, Germany.
    5. Tae-Hee Jo, 2016. "What If There Are No Conventional Price Mechanisms?," Journal of Economic Issues, Taylor & Francis Journals, vol. 50(2), pages 327-344, April.
    6. Walter Paternesi Meloni & Antonella Stirati, 2023. "The decoupling between labour compensation and productivity in high‐income countries: Why is the nexus broken?," British Journal of Industrial Relations, London School of Economics, vol. 61(2), pages 425-463, June.
    7. Guanchun Liu & Chien-Chiang Lee, 2018. "Financialization And Stagnant Capital Accumulation In China," Bulletin of Monetary Economics and Banking, Bank Indonesia, vol. 21(1), pages 1-10, July.

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