Krippner (2005) defines financialization as “a pattern of accumulation in which profits come primarily through financial channels rather than through trade and commodity production.” Financilazation gives power to control other country.

In late 1970s financialization begun in US with deregulated financial sector and liberalization. Financialization leads to shift in direct ownership of enterprise to financial securities. It is one of the best ways for capitalist to escape from the problem of introduction of new technologies, new product and other inheriting problem of market. At that time in USA cost of production was increasing, rise in price was not possible because market was oligopoly, due to competition from European and Japanese firm US was losing its own domestic market in addition to foreign market. Due to stagnation in real wage growth in US market and it was no more profitable for firms so investment in real sector so they started to invest in financial sector to offset low profit from real sector these all factor initiated financialzation rapidly. Process of financialzation in US can be through following points.

1. Shareholders value revolution: Shareholders started demanding more return from their investment there was shift of notion of retain and reinvest to maximize shareholders value through dividend payments, share buy-backs and merger and acquisition.
2. Change in the gap between the rate of return on manufacturing investment and rate of return on investment in financial assets. Returns from finance sector boomed after deregulation of financial markets and on the manufacturing side emergence of Japan and Europe and later East Asian countries as competitors affected profit directly, especially in automobiles and electronics.

There were two more dimensions for transformation from finance capital to financialization. Rise in the net worth of financial sector steadily relative to non financial sector Traditional non financial firm became more like financial holding companies, with a spectrum of financial services and financial investments swamping production in terms of their contribution to company revenue (Milberg 2008)’.

Above mentioned factors lead to vertical disintegration, offshoring, outsourcing and globalization of production to take benefit of cheap inputs, labour resource that helped them to increase profit share. It addition to reduction in direct cost it helped in lower wage demand in US itself. Oligopsony power in global value chain lead US firms to have greater control over input prices and greater flexibility due to the presence of multiple, competing suppliers which helped them to rise mark-up over cost, “capital inflows from trade surplus countries spurred in part by high returns on equity resulting from financialization” (Milberg 2008, 430) In 1990s managing global supply chain itself became an important strategy for US to compete with its low cost and flexible competitors.

Shift in the notion from retain and reinvest to downsize and distribute had made corporate managers to allocate resource efficiently and get returns to maintain the value of shareholders. In the name of ‘creating shareholder value’ past two decade have witnessed a marked shift in the strategic orientation of top corporate managers in the allocation of corporate resources away from retain and reinvest towards downsize and distribute. Under the new regime top mangers downsize the corporations they control, with a particular emphasis on cutting the size of the labour force they employ in an attempt to increase the return on equity. And with mangers productivity being judged by the profit they make their position has become more volatile.