Financial Tail Wags Economic Dog: Asia Sentinel

The ability to pay for goods and services now dominates economies and the processes of financing have become a larger goal than actual production. “Financialization involves the growth and transformation of finance such that with its hugely expanded size, scope and concentration, finance now overshadows, dominates and destabilizes the productive economy,” explain Jomo Kwame Sundaram, Michael Lim Mah Hui, adding that “financialization as a process… turns every product into a commodity to be traded.” They point out the financial sector has grown rapidly, in the United States now representing more than 20 percent of GDP is almost twice as large as both trade and manufacturing sectors. Shadow banking and non-traditional finance firms, like hedge funds, are subjected to fewer regulations. The essay concludes with an ominous warning that societies are embracing systems with cotss and risks that they do not really understand. The 2008 global financial crisis offers a reminder that problems for these dominant industries can mean trouble for the global economy. – YaleGlobal