Shifting sources and uses of profits: sustaining US financialization with global value chains

Abstract

This paper links the financialization of non-financial corporations to the extensive development of global value chains by these corporations. The main focus is the US and its offshoring in China. Financialization has encouraged a restructuring of production, with firms narrowing their scope to core competence. And the rising ability of firms to disintegrate production vertically and internationally has allowed them to maintain cost mark-ups – and thus profits and shareholder value – even in a context of slower economic growth. The resulting rise in the profit share has not supported dynamic gains from offshoring as often predicted, since financialization pressures have reduced fixed investment to allow for higher dividend payments, share buybacks, M&A activity and other financial asset purchases. The paper explores the sustainability of the global value chain–financialization link and its operation in other industrialized countries. The conclusion briefly considers the role of the non-financial corporate sector in the face of the current financial sector decline.