All I can find is older Marxist theory or current books written from a lib side of things. I’d love a book that covers the current state of financialization from a Marxist point of view.
Ahh right I saw Patnaik's name come up a while ago and meant to follow up there. Thank you!
I know this is rather long but I realy hope you read this because you specificaly mention financialisation and this is a somewhat contested term or theory. Unless you mean in a more literal sense "the current financial markets" in which case this may not apply entirely, though you did ask for a Marxist perspective,
I confess I am very much in debt of Michael Roberts writings here and his refutation, I think he is very much closer to the truth here. I recommend his critiques, the most recent is here. I quote the recent post below and also here is his older critique which I recommend reading in full.
the relevant part of his post
I have written extensively on the financialization thesis. But the most devastating refutation of the financialization hypothesis (FH), both theoretically and empirically comes from a new paper not presented at IIPPE, by Stavros Mavroudeas and Turan Subasat.
On the theory, the authors say: “The Marxisant versions of the FH ultimately concur with the mainstreamers and the post-Keynesians that the unproductive-capital dominates productive-capital, and that the former acquires autonomous (from surplus-value) sources of profit. Consequently, they converge to a great extent with the Keynesian theory of classes and consider industrialists and financiers as separate classes. For Keynesian analysis, this is not a problem as it posits that different factors affect savings and investment. However, Marxism conceives interest is part of surplus-value and financial profits depend upon the general rate of profit, Marxism does not elevate the distinctiveness of money-capital and productive-capital to the point of being separate classes. Finally, the Marxisant FH currents have a problematic crisis theory. Instead of a general theory of capitalist crisis, they opt for a conjunctural one… the FH eventually ascribes to a Keynesian possibility theory of the crisis which has well-known shortcomings. In conclusion, the FH variants fail to offer a realistic account of the rise of fictitious-capital activities during the recent period of weak profitability and increased over-accumulation of capital. Marxist theory “does so by realistically keeping the primacy of the production sphere over circulation and also the notion that interest is part of surplus-value extraction.”
And empirically: First, the claim that most of the largest multinational companies are financial is not true. Over the last 30 years the financial sector share in GDP has declined by 51.2% and the financial sector share in services declined by 65.9% of the countries in our study. “Although the rapid expansion in the financial sector observed in some countries before the 2008 crisis suggests that the financial sector may have played an important role in deindustrialization, this situation seems to be cyclical when it comes to a wider time frame.”
I quote the other MR post below which explains the contested theoretical part here
In a chapter of our new book, World in Crisis, G Carchedi provides compelling empirical support for Marx’s law of profitability showing the link between the financial and productive sectors in capitalist crises. From the early 1980s, the strategists of capital tried to reverse the low profitability reached then. Profitability rose partly through a series of major slumps (1980, 1982, 1991, 2001 etc). But it also recovered (somewhat) through so-called neoliberal measures like privatisations, ending trade union rights, reductions in government and pensions etc.
But there was also another countertendency: the switch of capital into unproductive financial sectors. “Faced with falling profitability in the productive sphere, capital shifts from low profitability in the productive sectors to high profitability in the financial (i.e., unproductive) sectors. But profits in these sectors are fictitious; they exist only on the accounting books. They become real profits only when cashed in. When this happens, the profits available to the productive sectors shrink. The more capitals try to realize higher profit rates by moving to the unproductive sectors, the greater become the difficulties in the productive sectors. This countertendency—capital movement to the financial and speculative sectors and thus higher rates of profit in those sectors—cannot hold back the tendency, that is, the fall in the rate of profit in the productive sectors.”
Financial profits have claimed an increasing share of real profits throughout the whole post–World War II phase. “The growth of fictitious profits causes an explosive growth of global debt through the issuance of debt instruments (e.g., bonds) and of more debt instruments on the previous ones. The outcome is a mountain of interconnected debts. ….But debt implies repayment. When this cannot happen, financial crises ensue. This huge growth of debt in its different forms is the substratum of the speculative bubble and financial crises, including the next one. So this countertendency, too, can overcome the tendency only temporarily. The growth in the rate of profit due to fictitious profits meets its own limit: recurring financial crises, and the crises they catalyze in the productive sectors.”
What Carchedi finds is that “Financial crises are due to the impossibility to repay debts, and they emerge when the percentage growth is falling both for financial and for real profits.“ Indeed, in 2000 and 2008, financial profits fall more than real profits for the first time.
So first of all I'll give my basic understanding of it.
Financialisation is used by some to describe the neoliberal period starting from the late 80's. It comes after the golden age of capitalism, the post WW2 era that benefited the US heavily as the winner and against European economy mostly destroyed, and also spreading imperialism thanks to cheap oil, access to new markets etc. It was an era of the a genuine improvement in the material conditions of the working class and large economic growth.
Financialization is contested because it assumes that what disturbed the previous golden era was this rise in power by financial capitalist institutions that came into conflict with and later subdue the original industrial capitalist sector.
Financialization is rather a mere consequence of the falling rate of profit and the rising material conditions of the working class becoming unsustainable i.e wages too high. You see charts where real wages decouple from productivity gains starting from the 1970s and in turn the working class is given access to cheap credit in order to maintain the rise in consumption spending.
So the neoliberal era was the beginning of a countertendencecy(profitability is restored in the short term without disturbing the long term tendency) to the falling rate of profit, a period where the capitalist class realized they needed to take serious steps to restore profitability. This materialized as the infamous neoliberal government policies i.e austerity and the move to seek "fictional" profits from the financial markets.
Given that historical context, nowadays the situation is extremely dire, profitability is in the dumpster for the vast majority of corporations. What carries the US economy right now are the Megacorps and their profits. With the US government buying iPads and the general identity of Apple = American but also it is built on the back of the American industrial capacity moving to China. The vastly higher profitability in the Chinese industry is what allows in turn Apple's profit margins i.e imperialism was a fundamental part of the solution for now.
The main sticking point here is the financialisation theory undermines fundamental Marxist theory of the falling rate of profit. It begs the question what would happen if there was some magical stronger way to impose regulations in markets. The answer is this is nonsense, the US capitalist class must find a way to boost profitability or else their economic hegemony would be unsustainable. If somehow you put a Chinese-like government controls on US financial markets it would lead to a collapse.
Some people instead think that if you could treat the neoliberal/financial market disease you can fix the US economy and to some extent you can fix capitalism. It is obvious here why you see financialisation being discussed even in the mainstream, if you can pretend there is an evil actor behind the system, then the problem is not the system but the evil actors.
Financialization is part of this whole myth that if the US somehow gets their manufacturing back, and somehow put strong regulations/taxes(
) on the capitalist/billionaire/financial class that this will help the US revert to the golden era.It wont, it can't. This is quite against traditional Marxist theory, as long as the US remains a capitalist country this will remain true. Of course you could assume a US that is capable of doing that would no longer be capitalist, at that point then maybe we can consider different outcomes, not before.
While American capitalists made a mistake in moving their industrial capacity to China, this was a theoretical mistake, i.e there was no other alternative given the extremely low/falling industrial profit margins at the time.
This is why ultimately moving factories back to the US will not solve anything unless you also make American workers earn the same poverty wages as Chinese factory workers i.e current US foreign policy, decoupling talks are all grifter BS nonsense that wont help anything, disregarding the obvious technical and material difficulties(impossibility even?).
Thanks for the long write up! I'll admit I'm coming to the topic with a fairly limited understanding of this stuff, but I'm starting to fill in the gaps. Appreciate the effort here.
I checked out Michael Robert's blog a few months ago and found most of his posts had some expectation that you understand something fundamental about economics (modern or otherwise) that made it hard to penetrate.
Yes I agree, for example his research is mostly about trying to find more evidence in favor of the falling rate of profit as the underlying reason for the cyclical economic crisis in capitalism it is assumed the reader knows at least the fundamental of Marx labor theory of value.
Michael Hudson is much more approachable, you can find him a lot more publicaly on YT and he talks a lot more casualy about this stuff. You can get a different perspective from him. For example this is one of him on YT Michael Hudson on Financial Capitalism and Modern Monetary Theory
It is a good video but when he begins to describe the history of industrial capitalism(@12:30) it becomes completely ahistorical. Yes material conditions improved but those weren't in the self interest of capitalists but concessions in light of the socialist movements and the USSR.
Then it gets worse because exactly when these concessions, regardless of the underlying motivations if you want to concede this point, these concessions became unsustainable, it eroded profit margins therefore neoliberalism is the ultimate act in the self interest of industrial capitalists. You'd think de-funding health, education and infrastructure would be against industrialization? On the contrary if that was the case no industry would have moved to the global south in search of lower wages and higher exploitation rates. You don't need particularly highly educated or healthy workers to work on factories at all!
Perhaps he thinks self-interest implies rational but it doesn't. In the long run it may well be that the more self-interested you become the worse your decisions become and in turn it goes down in a cyclical spiral of self-destructive selfish behavior.
As for his other points like profits are all ficticious because they're all sent to some fiscal paradise etc this is correct, but not entirely. What the falling rate of profit is about is investment versus profit, while you can fake profits you can't fake investments in real production methods. It doesn't matter how much you fake Apple's bottom line, if tomorrow there was a new factory producing TSMC's chips in fucking Manhattan everyone would know, it would be measurable. Maybe not perfectly measurable but enough to support the theory.
The reason why I mentioned first of all financialisation is contested because I'd have no problem recommending MH's content, but as you can see even in a good video I'd recommend to everyone, if you are truly seeking a deeper understanding you have to be more critical of the narrative.
He is very good at explaining the more day to day events and news, he is much more willing to put things bluntly which can be appreciated and overall I still recommend and have a high regard for Michael Hudson's content.
His descriptions of all the current issues with finance capitalism, the burden and the further effects of exploitation are all correct.
Fucked.
Sorry, hopefully better educated comrades will reply. That's all I got.
