Before addressing the topic of definancialisation, it might be a good idea to say something about its necessary precursor, i.e. financialisation.

A compelling case study is GE – or General Electric – which, on some measures, is the ninth largest company in the world. In his column for the New Yorker, James Surowiecki explains how this industrial giant financialised itself:

“In the public imagination, G.E. never stopped being an industrial company, but for the past three decades it’s also been, essentially, a huge bank. Its finance division got started during the Great Depression, as a way of helping consumers pay for washing machines and refrigerators. But Jack Welch, who took over in 1981, was obsessed with ‘growing fast in a slow-growth economy.’ G.E.’s traditional businesses, like appliances and lighting, were no longer growing quickly, so Welch needed a new profit engine. Enter G.E. Capital.”

In time, this means to an end became an end in itself:

“It became a key source of profits, growing almost twice as fast as the company as a whole and expanding into every conceivable market: consumer lending, credit cards, equipment leasing, commercial real estate, auto loans, leveraged buyouts, even subprime mortgages.”

GE was by not the only company to follow this path. Indeed, over the same period entire economies financialised themselves – with finance moving from a supporting to a starring role. Vast fortunes were made, and with tax revenues rolling into national treasuries, governments weren’t inclined to ask too many searching questions about the possible drawbacks.

And yet, as GE was to discover, there were drawbacks aplenty:

“G.E.’s in-house R. & D. spending fell as a percentage of sales by nearly half. Vijay Govindarajan, a management professor at Dartmouth… told me that ‘financial engineering became the big thing, and industrial engineering became secondary.’ This was symptomatic of what was happening across corporate America: as Mark Muro, a fellow at the Brookings Institution, put it to me, ‘The distended shape of G.E. really reflected twenty-five years of financialization and a corporate model that hobbled companies’ ability to make investments in capital equipment and R. & D.’”

It was symptomatic of what happened to corporate Britain too – a loss of focus on investment in productive economic activity and a chasing after profits from what were essentially asset bubbles. I don’t think it’s any coincidence that as one of the most heavily financialised and indebted of the major economies we also have a particular problem with low productivity and investment in innovation. Certainly, these factors left us badly exposed to the financial crisis and its aftermath.

With the worst of the storm now behind us, individual businesses and entire economies must decide whether to remount the financial roller-coaster or whether to get back to basics. GE for one has made its choice:

“Jeff Immelt, G.E.’s C.E.O., announced that the company was going to sell off most of G.E. Capital, its financial-services arm, and concentrate on the company’s industrial businesses… this is a genuinely momentous move. Not only is G.E. reinventing itself; the move from financial services back to industry could herald the close of an entire chapter of American capitalism.”

Finance, of course, will remain a hugely important industry and an essential tool for other industries. However, even in Britain, home to the world’s most sophisticated financial sector, we need to understand the limits.

Financialisation has always been something that has fed upon itself. But with companies like GE leading a trend away from the debt-driven growth strategies of previous decades, we may find the momentum is now with definancialisation.