Under financial capitalism, the primary objective of economic activity is not the production of useful goods and services, but the extraction of financial returns through interest, dividends, capital gains, fees, and speculative price movements. Wealth is increasingly accumulated by owning claims on income rather than by contributing to productive capacity or social value.

Financial capitalism is characterised by several defining features:

1. Primacy of financial returns

   Investment decisions are judged mainly by short-term financial yield rather than long-term productive, social, or environmental outcomes. Activities that generate steady but modest real returns are displaced by those promising rapid financial gains.

2. Expansion of rent-seeking

   Income increasingly takes the form of economic rents — unearned returns derived from ownership, monopoly power, intellectual property, land, or financial leverage — rather than wages or profits linked to productive effort.

3. Subordination of the real economy

   Productive businesses, public services, households, and even governments are reorganised to serve financial markets. Cost-cutting, asset-stripping, outsourcing, and under-investment become common as financial metrics override operational resilience and social need.

4. Growth of debt dependency

   Households, firms, and states become increasingly reliant on borrowing to sustain consumption, investment, or public provision. This strengthens the power of financial institutions and exposes the economy to instability when confidence falters.

5. Political capture by finance

   Financial capitalism reshapes regulation, taxation, and macroeconomic policy to protect asset values and creditor interests. Central banks, fiscal rules, and trade agreements are often designed to reassure markets rather than to meet social or ecological goals.

Financial capitalism should be distinguished from market economies in general. Markets can exist without financial dominance. What defines financial capitalism is that finance ceases to be a supporting system for economic activity and instead becomes the organising logic of the economy itself.

In consequence, financial capitalism tends to generate:

• Rising inequality of income and wealth

• Chronic under-investment in public goods and maintenance

• Asset price inflation disconnected from real economic capacity

• Economic fragility and recurrent financial crises

• A weakening of democratic accountability

Within the Funding the Future framework, financial capitalism is understood as a historically specific and unstable phase of capitalism, closely linked to financialisation and financial engineering, and incompatible with an economy organised around care, sustainability, and long-term capital maintenance.

Reforming or moving beyond financial capitalism, therefore, requires not simply better regulation of finance, but a reassertion of social purpose over financial return — redefining what the economy is for, and whom it is meant to serve.

Related entries:

• Capital
• Capital maintenance concepts
• Financial capitalism
• Financialisation
• Financial engineering
• Physical  capital
• Human capital
• Social capital
• Environmental capital
• Sustainable cost accounting
• Income

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