The term “financialization” has come into usage relatively recently, although many of the processes of financialization itself are long-standing phenomena of capitalism that were recognized and discussed well before the term itself was coined. Other terms such as “finance-led capitalism” and “finance capitalism” express similar ideas to financialization as a “regime of accumulation” (see below). The term “financialization” has been used in many ways that appear mutually inconsistent (Vercelli 2013: 20). This chapter explores the meanings attached to the term and indicates how financialization is approached in this book. It sets out the key elements that have been associated with financialization, particularly since 1980. These elements are not always mutually consistent, nor do they apply in all experiences of financialization.

Financialization involves large and increasing scales of financial institutions and financial markets, the greater roles of financial motives in the operations of domestic and international economies and their impacts on polities, social life and the environment (following Epstein 2005: 3 as quoted previously). Financialization is not just a matter of there being a large financial sector (however that is judged), but one of a financial sector whose scale and impacts on the economy, society and public life are increasing. When the size of the financial sector is measured (as will be done in Chapter 4), it is seen to be generally increasing relative to the size of the economy (as measured, for example, by gross domestic product [GDP]).

One dimension of financialization involves the growth in the scale of operations of banks and other financial institutions, including but not limited to the volumes of deposits taken and of loans provided. Financial markets include stock and equity markets, foreign exchange markets, securities markets and so on, and their growth can be viewed in terms of the capitalization of the financial assets, which are traded in the relevant markets, and in terms of turnover of the assets. The role of these financial markets could also be judged by the extent to which funds are raised through the new issue of equity shares (less the retirement of assets), although in recent times in many countries stock markets have notbeen the net source of funds to corporations as the issue of new shares has been more than offset by buy-backs of shares and purchase of shares of one company by another in the process of acquisition.