“Financial” vs. “Real”: An Overview of the Contradictory Role of Finance

Ozgur Orhangazi

Working Papers from Political Economy Research Institute, University of Massachusetts at Amherst

Abstract: This paper discusses the contradictory role and place of finance within the post-1980 U.S. economy. A central argument advanced is that the relationship between the real and financial sides of the economy has become increasingly more complicated and contradictory. Therefore, the distinction made between “real” and “financial” problems of the economy needs to be better qualified by taking into account the dynamics between the two. The contradictory relationship is analyzed through a discussion of finance in relation to labor and households, nonfinancial corporations, speculative asset bubbles, and global imbalances. This analysis shows that finance has been in a contradictory unity with the rest of the economy. It has contributed to some of the problems in the economy, while providing solutions to them at other instances, and in the process it shaped and in turn was shaped by the rest of the economy.

Date: 2011
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