What is finance?

Fin means end, such as in final, finish. Finance originally means ending, settlement, or payment. Later in 1500s, it means ransom and taxation. Only in eighteenth century the word finance acquired the modern meaning of money management.

Finance is supposed to be a finishing touch of an investment, a fine tuning tool for economic activities. But overtime, finance becomes the defining feature of a modern society. This is much like definition. We have to understand a concept to define a concept. When we finally understand an idea, we can define it clearly. But once we are able to define a concept, we put definitions at the beginning of a writing, not at the finish.

Many governments don’t have economics department. They have finance department. Finance minister is in charge of economic activities. Financial institutions are supposed to serve the needs of real economic activities. But over time, financial institutions often dominate industrial companies. In Canada, from time to time, technology companies or resource companies may come to the top. But most of the time, top three companies are financial institutions.

Finance is supposed to refine our life. But finance comes to define our life. With high tax rate and high pension deduction, real economic activities are subdued and financial activities flourish. Incomes of the working people have been stagnant for several decades. The values of financial assets, on the other hand, are skyrocketing.  A highly financialized society is a fine and the final stage of the society.