Financialization's conservation and transformation: from Mark I to Mark II

This paper argues that, as far as the investment behavior of non-financial corporations is concerned, the apparent continuity over the last four decades suggested by the financialization label is misleading. Indeed, while the disconnection between profitability and investment is a robust stylized fact for most of the period, with cumulative detrimental consequences for labor, we contend that the underlying mechanisms changed meaningfully at the turn of the millennium. This contribution proposes to establish-empirically and theoretically-two distinctive successive financialization regimes (Mark I and Mark II) and to explain their evolutionary articulation. Financialization Mark I is characterized by the empowerment of financial actors: in a context of high-interest rates and full-blown liberalization, diminishing retained earnings by non-financial corporations resulted in a dramatic slowdown of investment with cascading negative effects for labor. Contrastingly, Financialization Mark II is characterized by a strongly established financial hegemony with new forms of intellectual and financial monopoly. In this configuration, interest rates are low and global value chains are deeply seated. This fuels rampant deflationary pressure, which changes the overall dynamic of the profit-investment nexus. Then, in Financialization Mark II, contrary to what occurred during Financialization Mark I, distributed profits are the consequence of slow investment.