The "shareholder value" version of the financialisation argument has often been taken for granted. But it contains big gaps. Dick Bryan and Michael Rafferty have pointed out that:
the stock market should not be so heavily emphasised. It is, after all, a relatively minor forum for raising funds. Even in the so-called market-based systems such as the US, UK and Australia, retained earnings, loans and bond issues have been far more important . . .
Furthermore, pension funds etc:
rarely if ever play an active role in the managerial decisions of firms. Institutional shareholder pressure on company boards . . . is the exception rather than the norm . . . 60
The fact that firms hand out a bigger portion of their profits as dividends need not in itself slow down the level of investment. The "rentier" shareholders can themselves lend a portion of their incomes back for further investment-and will do so if they think it is going to be profitable enough to do so. One proponent of the "shareholder value" interpretation, Stockhammer, admits that most economists hold that:
Financial investment is a transfer of assets, not a use of income. Buying stocks transfers liquidity from one economic agent to another, possibly from firms with bad investment opportunities to ones with good opportunities. Thus macroeconomically financial investment cannot substitute for physical investment.61
And Crotty suggests at one point that "financialisation", by increasing competition between firms, brings about more, "coerced", investment.62 Certainly, big financial institutions have nothing in principle against productive investment, even if finance did come to absorb a peak figure of 25 percent of total investment in the US in 1990 as against only 12 percent in the mid-1970s63 and rose to close to half in Britain in the same period.64 This was shown in the late 1990s when the dotcom/new technology boom saw industrial investment in the US financed by borrowing from the institutions as it soared ahead of savings.
Financialisation and the Bubbles That Burst
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