The Financialization of the World

This article contains excerpts from the introduction and prologue of my book titled The Financialized World (Nikkei Business Publications of Nikkei Inc., scheduled for publication in December 2025). If you find the content interesting, I would greatly appreciate it if you considered purchasing a copy from your local bookstore or another retailer.

There lie the logic and mechanisms of financialization in matching apps, which are a human version of M&A (hypothesis)!^[1]

Some readers may find this statement rather abrupt. Matching apps have recently become firmly established as tools for meeting people or finding marriage partners. Some of my readers may even have used matching apps themselves.

Matching apps are a highly convenient means of finding one's ideal partner. From a broader perspective, the act of matching takes place routinely across all areas of the economy and society. One of the central missions of economics is the efficient allocation of scarce resources. As such, economics has long focused on effectively using resources by analyzing how best to match the parties who possess scarce resources (natural resources, capital, labor, etc.) with the parties who need those resources. As my readers are well aware, one conclusion that economics has reached is that the optimal way to achieve efficient use of resources is through the market mechanism (an automatic adjustment of supply and demand via prices). However, the market mechanism does not always function smoothly in every case. For it to operate perfectly, the strict conditions of a perfectly competitive market must be satisfied. In reality, such conditions are rarely met, yet the financial market is generally regarded as one that comes closest to realizing them.

The financial market is a place where those who have money but no immediate plans to use it are matched with those who currently need funds (strictly speaking, the financial market is not limited to this function). A wide range of transactions take place within the financial market in the broad sense. Most people typically imagine securities trading, such as stocks and bonds. However, there are also large-scale transactions involving different currencies (foreign exchange), investment funds such as mutual funds, and derivatives trading. Among transactions in the financial market, one area that has recently drawn particular attention and seen rapid expansion in scale is corporate M&A (mergers and acquisitions). In M&A transactions, buyers and sellers engage in deals involving companies themselves, along with the various tangible and intangible assets they hold. Today, companies are viewed as a bundle of assets and are actively traded, much like financial products. This type of matching takes place on a daily basis. Upon closer examination, the process of M&A, which matches one company with another, closely resembles the process of matching individuals through matching apps.

Recently, finance has expanded in a broad sense, including the rise in M&A activity. Some researchers have examined and analyzed this expansion within the framework of financialization. But what exactly is financialization?

Financialization is a long-term structural process of gradual quantitative and qualitative change, in which the direct and indirect roles and influence of finance, understood in a broad sense, steadily increase within a capitalist economy and society. Financialization is recognized as taking various forms. According to the researchers, corporations, households, and governments, which are the three principal economic actors, are each becoming financialized in different ways. At the same time, finance itself, which exerts influence over these economic actors, is continually changing and evolving.

As one example, consider the financialization of corporations. Typically, a company (a non-financial private enterprise), as generally envisioned, acquires and utilizes resources to produce tangible goods and intangible services, sells them to a variety of parties to earn profits, distributes part of those profits to workers and other stakeholders, and reinvests the remainder into further business activities aimed at growth. However, under financialization, companies increasingly reduce the proportion of funds allocated to such real cyclical activities. In that case, where are these funds being directed instead? The answer is toward financial activities. Companies are recognized as increasingly allocating substantial resources to financial operations, including direct and indirect financial investments and financial activities such as M&A.

As another example, let us consider the financialization of households. In this example, households are understood as individuals in their role as economic actors. Similar to corporations, households are gradually expanding the scale of their financial activities, both directly and indirectly. Even so, there is a significant difference between corporations and households.
Specifically, while corporations focus almost exclusively on economic activities, households spend the majority of their time in non-economic and social activities. Nevertheless, the influence of finance has been qualitatively increasing even in these non-economic aspects of household life. Notably, financial considerations now broadly shape individuals' judgments, values, perceptions, and ways of thinking when they make various choices. This financial mindset is a key concept for understanding financialization. Stated succinctly, a financial mindset means evaluating things in numerical terms.

Financialization is advancing and manifesting in these diverse forms. What does that mean for our economy and society? Researchers studying financialization have broadly analyzed individual phenomena as well as the various effects of financialization itself, and have identified numerous implications. Many of these findings are negative, with a prominent observation being that financialization amplifies economic inequality. Economic inequality expands widely through both the concentration of wealth (assets and income) in the hands of a small number of wealthy individuals and the growth of poverty. It is argued that financialization plays a significant role in influencing both of these aspects. Capital in the Twenty-First Century, a controversial book written by Thomas Piketty, made a profound impact by presenting global inequality expansion based on extensive data. Although the book does not explicitly place financialization at the forefront of its narrative, its content overlaps substantially with the discussion of financialization.

Among the various effects of financialization, I consider the increasing influence of finance on perception and thought to be particularly significant. As people have more opportunities to engage with finance through media, education, and other channels, they have become more receptive to financial ways of thinking in varying degrees. Today, in a variety of contexts, many individuals naturally consider questions such as, "What are the risks and returns if I choose this action and what level of performance can be expected?" Even in everyday conversation, specialized terminology that originally applied only within the financial world is now commonly used. There are likely various kinds of debate on how society will be affected by such a situation, which resembles what political philosopher Michael Sandel once called the marketization of society. In any case, the key point I wish to convey in concluding this article is that financialization is not other people's business; rather, it has likely been quietly permeating our everyday lives, often without realizing it.

In light of the foregoing, I hope readers can begin to grasp, at least intuitively, that the initial hypothesis that "matching apps are...financialization" may carry significance far beyond a mere similarity of processes.

[1] This is an homage to the opening line of Kajii Motojiro's poem titled Under the cherry trees: "There lie cadavers buried under the cherry trees!"