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Financialization as an Obstacle to Industrialization

In: The Industrial Policy Revolution II

Author

Listed:
  • C. P. Chandrasekhar

    (Jawaharlal Nehru University)

Abstract

No one can deny that finance has a role to play in industrialization. On the other hand, any process, however short term, in which the financial sector feeds on itself to generate extremely high profits, must be inimical to industrialization. Under the latter, the flow of finance into speculation would, however temporarily, raise returns on financial investments well above returns on investment in real assets and dampen the incentive to undertake real investment. Further, in such a regime, credit to purchase financial assets would fetch higher interest and be privileged over credit for real capital formation.

Suggested Citation

  • C. P. Chandrasekhar, 2013. "Financialization as an Obstacle to Industrialization," International Economic Association Series, in: Joseph E. Stiglitz & Justin Lin Yifu & Ebrahim Patel (ed.), The Industrial Policy Revolution II, chapter 5, pages 350-363, Palgrave Macmillan.
    • Handle: RePEc:pal:intecp:978-1-137-33523-4_14
    DOI: 10.1057/9781137335234_14
    as

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