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Financialisation as a Form of the Dutch Disease

Financialisation is a term that describes the dominance of the financial sector over the real sector (or sectors) of the economy, including manufacturing industry and agriculture.

It refers to the increasing importance of financial markets, financial motives, financial institutions, and financial elites in the operation of the economy and its governing institutions, both at the national and international levels. In a financialised economy, profit making occurs increasingly through financial channels rather than through trade and production. The Dutch disease is defined as the apparent relationship between the increase in the economic development of natural resources and a decline in manufacturing industry and agriculture—it is typically associated with developing countries. However, the demise of manufacturing industry in both the U.S. and U.K. is attributed to excessive financialisation and the philosophy of “who needs manufacturing industry when we have the City” (or Wall Street for that matter). The objective of this project, led by Imad Moosa, is to demonstrate that the Dutch disease does not only arise out of excessive dependence on natural resources but also on excessive dependence on the financial sector.