Describe the concept of financialization and outline its four key dimensions. What has the effect of financialization been on labor?

Question

What will be an ideal response?

Answer 1

Financialization is a process by which financial markets, motives, results, and institution become more important than the production and delivery of goods and services. Under financialization, financial motives and institutions become active players that strongly influence corporate decision-making and challenge governmental sovereignty. In this way, financialization affects both consumers and workers (as well as their unions and government officials). Financialization has four key dimensions. Share price maximization refers to the proliferation of the shareholder value model and the drive to increase short-term share prices, often by repurchasing stock at the expense of reinvesting in labor, technology, or facilities. Generating profits through financial transactions relies on increasing importance of the financial sector in determining societal outcomes and increasing financial services provided by nonfinancial businesses (e.g., offering credit or loans directly to consumers). The most visible and aggressive dimension of financialization is the use of private equity to strip off assets of a company and sell them at a profit at the expense of long-term investment in the company's core business. Finally, the last dimension involves the drive for public sector budget austerity where fiscal concerns are prioritized over the delivery of public sector services. The effect of financialization on labor has been to create job loss, decrease bargaining power, increase labor insecurity, put downward pressure on wages and benefits, and decrease worker voice.