Jack Welch, the former CEO of General Electric, embodied Milton Friedman’s doctrine of shareholder primacy, translating it into corporate practice. Yet, Welch was only one among many. The transformation from an industrial-based to a financialized U.S. economy was driven by a broader ensemble of influential actors across business, policymaking, and academia.
Intellectual / Ideological Architects
Milton Friedman emerged as the intellectual godfather of shareholder value maximization, providing the ideological foundation for what would later become a defining doctrine of corporate capitalism. In his influential 1970 essay for The New York Times, Friedman argued that the sole social responsibility of business is to increase its profits, contending that corporations owe no obligations beyond delivering returns to their shareholders. This argument offered powerful moral and theoretical justification for executives to prioritize short-term profitability over broader considerations such as worker welfare, community development, or long-term industrial investment. Over the following decades, Friedman’s philosophy became a guiding principle for a generation of business leaders and policymakers, legitimizing a worldview in which the corporation’s purpose was narrowly defined in financial rather than social or productive terms.
Building on this intellectual foundation, Michael Jensen of Harvard Business School played a decisive role in translating Friedman’s ideas into the institutional logic of modern corporate governance. In the 1980s, Jensen developed agency theory, which reframed the relationship between managers and shareholders as one of principal and agent—implying that managers must be “disciplined” by financial markets to ensure their actions align with shareholder interests. His advocacy for stock-based executive compensation further entrenched the belief that the value of a company could—and should—be measured primarily by its share price. Together, Friedman and Jensen transformed corporate purpose from a multidimensional enterprise serving various stakeholders into a financial instrument serving a single constituency. Their ideas laid the theoretical groundwork for the rise of financialized capitalism, in which managerial strategy, corporate behavior, and even national economic policy increasingly revolved around the imperatives of shareholder value.
Corporate “Welch-Style” Practitioners
The rise of “Welch-style” corporate practice in late twentieth-century America reshaped the ethos of managerial capitalism. Figures such as Carl Icahn, Eddie Lampert, and Jeff Immelt each embodied and extended the logic of financialization that Jack Welch had made central to corporate America. Carl Icahn, emerging as a dominant corporate raider in the 1980s, weaponized shareholder value as a disciplinary tool. His aggressive takeovers and demands for restructuring compelled executives to prioritize immediate returns to investors, often through downsizing, divestiture, or debt-financed share buybacks. The mere threat of an Icahn-style raid was enough to induce self-imposed austerity and short-termism across the corporate landscape, embedding the fear of market reprisal into managerial decision-making.
By the 2000s, this logic had evolved into what might be called “financial engineering as management.” Eddie Lampert, who took control of Sears, epitomized this transformation. Viewing the company as a portfolio of assets rather than a coherent retail enterprise, Lampert applied hedge fund tactics within the firm itself—splitting divisions into competing units, cutting investment in stores and operations, and emphasizing financial maneuvers over industrial renewal. The result was predictable: Sears, once a symbol of American consumer capitalism, collapsed under the weight of its own financial abstraction.
At General Electric, Jeff Immelt’s tenure from 2001 to 2017 demonstrated the inescapable inertia of financialization. Inheriting Welch’s sprawling conglomerate, Immelt sought to pivot GE back toward its industrial roots, yet remained tethered to GE Capital—the financial arm that had come to dominate the firm’s profits and risk profile. His difficulties in disentangling GE from its dependence on financial markets revealed how deeply the Welch-era model had reshaped the modern corporation. Together, these figures illustrate the enduring legacy of a system where managerial authority became subordinated to market discipline, and where the pursuit of shareholder value supplanted the older industrial ethos of productive growth and long-term stewardship.
Wall Street / Financial Deregulation Titans
Robert Rubin, a former Goldman Sachs executive who later served as U.S. Treasury Secretary under President Bill Clinton, was a central architect of the financial deregulation wave that reshaped Wall Street in the 1990s. He played a pivotal role in dismantling the New Deal–era safeguards that had constrained speculative finance for decades, most notably through the repeal of the Glass–Steagall Act and the loosening of controls on derivatives trading. Rubin’s conviction that Wall Street’s dynamism was vital to sustaining U.S. global dominance reflected a broader ideological shift: the belief that unfettered financial markets represented not a danger to stability but the highest expression of American economic leadership.
Working closely with Rubin, Larry Summers—his successor at the Treasury and a Harvard-trained economist—reinforced this new orthodoxy. Both men shared the view that financial innovation, rather than industrial investment, would secure America’s future competitiveness. Their policies institutionalized a deep alignment between government and finance, allowing the rise of complex instruments and speculative capital that would later underpin systemic fragility.
At the Federal Reserve, Alan Greenspan completed this triad of deregulation. As chairman from 1987 to 2006, he provided the intellectual and policy cover that enabled Wall Street’s ascent. His persistent faith in market self-correction justified a light-touch regulatory approach even as leverage, derivatives, and asset bubbles proliferated. By keeping interest rates low and regulatory oversight minimal, Greenspan helped sustain an era of easy credit and financial exuberance. Together, Rubin, Summers, and Greenspan embodied the convergence of economic ideology and policy power that transformed the American economy from an industrial powerhouse into a financialized one—an evolution whose consequences would become painfully clear in the crises that followed.
Political Champions
Ronald Reagan’s presidency in the 1980s laid the political and ideological foundations for America’s financialized turn. His administration championed deregulation, deep tax cuts, and the weakening of organized labor, fundamentally reshaping the relationship between government and markets. These policies dismantled many of the New Deal–era safeguards that had constrained corporate and financial power, unleashing a wave of speculative energy on Wall Street. Reagan’s economic philosophy — rooted in the belief that unfettered markets drive innovation and prosperity — created the permissive environment in which figures like Jack Welch at General Electric and a new class of financial engineers could thrive. Corporate restructuring, leveraged finance, and the rise of shareholder-value capitalism were all midwifed by the deregulatory momentum of the Reagan years.
A decade later, Bill Clinton’s presidency consolidated and globalized this new economic order. Often described as a “Wall Street Democrat,” Clinton embraced market liberalization not as a Republican import but as the natural evolution of American competitiveness in a global age. His administration advanced the North American Free Trade Agreement (NAFTA), ushered China into the World Trade Organization, and presided over the repeal of the Glass-Steagall Act — the Depression-era barrier between commercial and investment banking. Clinton’s economic team — Robert Rubin, Lawrence Summers, and Alan Greenspan, dubbed by Time magazine as “The Committee to Save the World” — epitomized the fusion of finance and state power. Under their stewardship, financial globalization became both the symbol and substance of American economic leadership, intertwining Wall Street’s ascendancy with the nation’s political and strategic ambitions.
Together, Reagan and Clinton bridged ideological divides to produce a bipartisan consensus around deregulation, market primacy, and global finance. Reagan supplied the ideological revolution; Clinton institutionalized it. By the dawn of the 21st century, their combined legacies had entrenched a political economy in which the fortunes of the American state and its financial sector were deeply — and perhaps irreversibly — intertwined.
Symbolic Figures in Financial Engineering
The rise of financial engineering in late twentieth-century America produced a generation of figures whose innovations and influence reshaped corporate capitalism. Among them, Michael Milken stands out as the pioneer of the junk bond revolution of the 1980s. By legitimizing high-yield debt as a tool to finance leveraged buyouts and hostile takeovers, Milken helped unleash a wave of corporate restructurings that mirrored Jack Welch’s drive for efficiency and shareholder returns. His methods provided the financial infrastructure for a new era of corporate raiders and private equity firms, turning debt into a weapon for disciplining management and breaking up conglomerates. Though his eventual conviction for securities violations tarnished his reputation, the tools he popularized—junk bonds, leverage, and aggressive deal financing—became embedded in the DNA of modern finance.
Sandy Weill carried this transformation into the institutional realm. As the architect of Citigroup’s “financial supermarket” model, Weill realized a vision in which commercial banking, investment banking, and insurance coexisted under one roof—a structure made possible only by the repeal of the Glass-Steagall Act in 1999. His empire epitomized the fusion of finance and conglomeration on a global scale, blurring traditional boundaries and setting the stage for systemic risk that would later define the financial crisis.
Henry Paulson, who rose from CEO of Goldman Sachs to U.S. Treasury Secretary, embodied the revolving door between Wall Street and Washington. His tenure during the 2008 financial meltdown symbolized the culmination of the financialized system that Milken and Weill had helped build. The government’s interventions under Paulson’s watch—massive bailouts and liquidity injections—revealed the extent to which private financial innovation had become inseparable from public policy. Together, these figures exemplify how financial engineering evolved from a speculative niche into a governing logic of the American economy, intertwining markets, corporations, and the state in a self-reinforcing circuit of power and risk.
Conclusion
Milton Friedman provided the intellectual foundation for a new economic order, arguing that the sole responsibility of business was to maximize shareholder value. Michael Jensen translated this idea into corporate governance doctrine, embedding it in business schools and boardrooms through agency theory and performance-based incentives. Jack Welch then transformed that doctrine into practice, institutionalizing shareholder primacy inside General Electric—the most powerful industrial corporation of its time. His aggressive restructuring, cost-cutting, and financial engineering became the operational template for corporate America. Figures like Carl Icahn and Michael Milken weaponized the same logic through corporate raiding and junk-bond financing, using markets as tools of coercion to force firms into short-term value maximization.
The transformation did not remain confined to the corporate sphere. Policymakers such as Robert Rubin, Larry Summers, and Alan Greenspan codified this financial ethos into national policy, dismantling regulatory guardrails and celebrating market self-correction as a governing principle. Politically, Ronald Reagan and Bill Clinton provided the ideological and legislative cover—through deregulation, tax reform, and globalization—to align state power with financial interests. Together, these actors presided over the shift from an industrial capitalism rooted in production and employment to a financial capitalism driven by speculation, leverage, and asset appreciation.
The outcome was a hollowing out of America’s industrial base. The efficiency of markets, once heralded as a universal good, eroded the foundations of productive capacity and national resilience. Overreliance on global supply chains for critical technologies exposed structural vulnerabilities that no invisible hand could repair. The financial innovations that once symbolized American dynamism ultimately amplified fragility, culminating in the 2008 crisis. The U.S. experience stands as a cautionary tale: market efficiency alone cannot secure strategic economic strength, nor can financial capitalism substitute for the industrial and technological depth that sustains a nation’s long-term power.