What is financial capitalism?
Financial capitalism, also known as monopoly capitalism , is a phase of capitalism that began in the late 19th century.
Before, there were two phases that marked capitalism: mercantile capitalism and industrial capitalism. The first with the intensification of foreign trade and the second with the development of industries with the appearance of the steam engine.
After these periods, large companies emerged. These strengthened and faced less competition than most merchants, where they applied higher prices and made higher profits.
Adam Smith, in his book The Wealth of Nations , has already warned that large companies could achieve a level of growth that others could not. This is mainly the case with publicly traded companies that grow when they receive investments through stocks.
In summary, we can say that the phase of financial capitalism:
- It begins with the development of companies after Mercantile and Industrial Capitalism;
- Some companies grow exponentially and dominate the market they are in;
- With less competition, or even a monopoly, these companies charge much higher prices, making very high profits;
- The supply of financial products, such as stocks and bonds, is growing even more, which makes these companies grow even more.
Financial capitalism crisis
With financial capitalism, crises also came. The first of these occurred in 1929, with the collapse of the New York Stock Exchange, where several shares were devalued in half.
The same happened in 2008, with the emergence of the housing crisis in the United States, due to the excessive liberalization of credits for the purchase of homes.
With easier mortgage loans from banks or finance companies, many debtors were unable to pay their debts. This led the entire economy to a major general recession.