Palladino on corporate financialization

At the Roosevelt Institute: Corporate Financialization Hurts Jobs and Wages by Lenore Palladino. In the first paragraph Palladino sets the context of the argument. In the second, she defines corporate financialization: "the shift within public companies from making money off of selling goods and services to making a higher proportion of their profits off of financial activity..."

Exactly. Back in the 1990s, I remember being surprised to read that

Since 1990, Ford has made more money from financial services, principally automobile loans to consumers and dealers, than from car- and truck-making operations.

- NY Times, 10 Feb 1994

And less surprised, but still shocked to read that

Ford Motor Company has earned more as a banker than as a car builder in five of the last six years.

- NY Times, 15 Dec 1996

"[T]he ratio of financial profits out of overall corporate profits has increased dramatically in the last few decades," Palladino says, "and corporations have spent trillions purchasing back their own stock simply to increase their share price since such maneuvers became legal in 1982."


Palladino:

Though the literature is still nascent, several scholars have examined the direct negative impact of corporate financialization on income inequality. One study found that financialization, net of other factors, could account for more than half of the decline in labor’s share of income in the non-financial sector of the economy

Income is generated more within the financial sector these days, and less within the non-financial sector. And, Palladino says, this "financialization of America’s public corporations has contributed just as much to economic inequality as more commonly-cited factors."

As Adam Smith said: The cost of finance, if not paid out of profit, must come out of wages.