{"id":88820,"date":"2025-12-31T14:27:21","date_gmt":"2025-12-31T14:27:21","guid":{"rendered":"https:\/\/www.taxresearch.org.uk\/Blog\/?p=88820"},"modified":"2025-12-31T14:30:14","modified_gmt":"2025-12-31T14:30:14","slug":"glossary-entry-financial-capitalism","status":"publish","type":"post","link":"https:\/\/www.taxresearch.org.uk\/Blog\/2025\/12\/31\/glossary-entry-financial-capitalism\/","title":{"rendered":"Glossary entry: financial capitalism"},"content":{"rendered":"

When writing a post<\/a> on comment in the Guardian this afternoon, I realised that my glossary entry on financial capital was insufficient to encompass the madness of financial capitalism, financialisation and financial engineering.<\/em><\/p>\n

I have corrected this by writing glossary entries on each of the last three issues. This is the entry on financial capitalism:<\/em><\/p>\n

\n

Financial capitalism<\/a><\/span><\/p>\n

\u00a0describes a form of capitalism in which the ownership, control, and accumulation of financial assets dominate economic decision-making, social priorities, and political power.<\/hgroup>\n
\n

Under\u00a0financial capitalism<\/a>, the primary objective of economic activity is not the production of useful goods and services, but the extraction of financial returns through interest, dividends,\u00a0capital<\/a>\u00a0gains, fees, and speculative price movements. Wealth is increasingly accumulated by owning claims on income rather than by contributing to productive capacity or social value.<\/p>\n

Financial capitalism is characterised by several defining features:<\/p>\n

    \n
  1. \n

    Primacy of financial returns<\/b><\/b><\/p>\n

    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.<\/p>\n<\/li>\n

  2. \n

    Expansion of rent-seeking<\/b><\/b><\/p>\n

    Income increasingly takes the form of economic rents \u2014 unearned returns derived from ownership, monopoly power, intellectual property, land, or financial\u00a0leverage<\/a>\u00a0\u2014 rather than wages or profits linked to productive effort.<\/p>\n<\/li>\n

  3. \n

    Subordination of the real economy<\/b><\/b><\/p>\n

    Productive businesses, public services, households, and even governments are reorganised to serve financial markets. Cost-cutting,\u00a0asset<\/a>-stripping, outsourcing, and under-investment become common as financial metrics override operational resilience and social need.<\/p>\n<\/li>\n

  4. \n

    Growth of debt dependency<\/b><\/b><\/p>\n

    Households, firms, and states become increasingly reliant on borrowing to sustain consumption, investment, or public\u00a0provision<\/a>. This strengthens the power of financial institutions and exposes the economy to instability when confidence falters.<\/p>\n<\/li>\n

  5. \n

    Political capture by finance<\/b><\/b><\/p>\n

    Financial capitalism reshapes regulation, taxation, and macroeconomic policy to protect asset values and\u00a0creditor<\/a>\u00a0interests.\u00a0Central banks<\/a>,\u00a0fiscal rules<\/a>, and trade agreements are often designed to reassure markets rather than to meet social or ecological goals.<\/p>\n<\/li>\n<\/ol>\n

    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.<\/p>\n

    In consequence, financial capitalism tends to generate:<\/p>\n