In the immediate wake of the collapse of the U.S. financial sector in 2008, a number of commentators pointed to the non-financial sector as a potential source of demand growth and innovation that could lead a recovery and long-term economic expansion (see, for example, Mandel 2008). This view was justified by the fact that non-financial corporate profits for years provided savings and liquidity for the rest of the economy. These profits offset the low levels of personal saving and the large deficits on the government and foreign accounts, and also created the possibility that these firms could finance investment out of internal funds, that is without seeking access to frozen credit markets (see Figure 6.1 for U.S. net savings and current account balance as a percentage of gross domestic product (GDP)). Despite U.S. monetary policy in its most expansionary mode in recent history, nonetheless the private investment growth since 2009 has been inadequate to create a typical recovery in employment.

This prospect should be viewed in some historical perspective. Beginning in the 1980s and gaining strength in the 1990s, American corporate strategy began to shift, focusing more on the maximization of shareholder value and less on long-term growth. The transformation involved less investment out of retained earnings and, instead, a financialization of the non-financial corporate sector, driven by an increased offering of financial services, an increase in the purchase of financial assets, and, more recently, the massive purchase of their own shares aimed at raising stock prices.