Financialization and the Crisis of Democracy
The financialization of the world economy poses a major challenge for democratic legitimacy. This chapter examines the hypothesis that financialization has led to a decrease of both input and output legitimacy in Western democracies. It aims to identify a number of causal channels on how financialization negatively affects democracy. The literature on financialization has demonstrated the influence of the financial sector on very different spheres of society, economy and ecology. The financial sector can rely on comprehensive societal support, given that the process of financialization has increasingly made inroads into many sectors of society. The chapter demonstrates that financialization of capitalism over the last three decades poses a massive challenge for legitimate democratic rule. The increasingly networked character of financial markets under conditions of financialization poses a major problem for its democratic re-regulation. Large companies from the production sector also are highly unlikely to form a counter-movement to financialization.