Farrar, Straus and Giroux

‘Financialization’ is a long word; if I could use one with fewer syllables I would, because it is at the heart of the neoliberal project and it needs to be better understood. Economists use the term to describe four specific changes that began in the 1980s:
Companies turned away from banks and went to the open financial markets to fund expansion.
Banks turned to consumers as a new source of profit, and to a set of high-risk, complex activities that we call investment banking.
Consumers became direct participants in the financial markets: credit cards, overdrafts, mortgages, student loans and motor car loans became part of everyday life. A growing proportion of profit in the economy is now being made not by employing workers, or providing goods and services that they buy with their wages, but by lending to them.
All simple forms of finance now generate a market in complex finance higher up the chain: every house buyer or car driver is generating a knowable financial return somewhere in the system. Your mobile phone contract, gym membership, household energy – all your regular payments – are packaged into financial instruments, generating steady interest for an investor, long before you decide to buy them. And then somebody you have never met places a bet on whether you will make the payments.

Proponents of the ‘financial autumn’ theory point to the same pattern in the Genoese Republic – the main financial centre of the late Middle Ages – then the Netherlands, and then London towards the end of the British Empire. But in each of these examples, the pattern was for the dominant power to become lender to the world. Under neoliberalism, this has been reversed. The USA – and the West in general – have become the borrowers, not the lenders. This is a break in the long-term pattern.

The gurus of neoliberalism urged everybody to follow the Anglo-Saxon model, but in reality the system relied on some key countries choosing not to.