"...a crisis of financialisation. ...during the last three to four decades there has been asymmetric growth of circulation relative to production, which is characteristic of financialisation." This is the second of six parts of an essay on the relation between Capital and the State in the epoch of Financialisation. _____
Financialisation and State Capture (Originally called "What can we say about the crisis of 2007/2009?") "Financialisation is an epochal transformation of capitalism" Part II, State Intervention Costas Lapavitsas, Theory and Struggle, Marx Memorial Library, 2014 Part II State intervention summed up If we sum up the aims of public policy in dealing with the crisis what we have are the following priorities: first, rescue the banks and restore financial profitability; second, pass the costs onto working people through austerity and wage restraint; and third - just as important, although it wasn't immediately obvious in 2008/2009 and only became clear in 2010/2011 - avoid any major institutional change in finance. Once profitability had been restored and the costs passed onto working people, it became clear that the underlying concern of the state was to avoid serious institutional transformation of finance. financial_profit_figure1.jpg Figure 1 shows financial profit in the United States, the country for which we have the best data - unfortunately this calculation is impossible to make with similar accuracy for any other mature capitalist country. It shows financial profit, by which is meant the profit of financial institutions and is actually a very narrow part of financial profit, because there is also financial profit that is not financial institution profit, not bank profit. What is shown in Fig. 1 is essentially the profit of banks from 1945 to 2011, and shows financial profit as a proportion of total profit. That is, the curve shows the proportion of the total profit of the US capitalist class that is actually attached to finance, and particularly to the financial institutions, mainly the banks. There are basically three periods in this. The first runs from 1945 to about 1970 when the proportion rises steadily. The second is when the proportion goes flat, from about 1970 to about 1990. And then third is after 1990 when it shoots right up. For a roughly decade and a half financial profit as a proportion of total profit increased very fast. When you look at 2003 it is clear the financial profit as a proportion of total profit is phenomenal: roughly 40 per cent. The figure depends on how you calculate it and what I am showing you is quite a conservative calculation, but it still is very high: 40 per cent of total profit came out of banks. This proportion began to decline in 2003 and for about four, five or six years. These were the years of the bubble. As profit began to decline, the banks went mad. They tried to make returns out of paper dealing and mortgage lending to the poorest sections of the US working class. Then the crisis came and financial profit collapsed. At which point the intervention by the state took place. And what did the intervention by the state do? It made financial profit bounce right back. This was the objective of state intervention. Financial profit has not reached the level of 2003, but it is quite healthy even as we speak. The state in the United States and elsewhere saw to it that financial profit recovered quickly. That was a key focus of public intervention in dealing with the crisis. Is this a crisis of over-accumulation? In a general sense it is. In the sense that profitability and production and accumulation have not recovered the vigour that they had in the 1960s and the first part of the 1970s, there is no question at all about it. However, bearing in mind what I have presented to you, I think we need to be more precise and factor in all the changes that I've outlined. Crisis of financialisation To me the crisis that broke out in 2007 is a crisis of financialisation. It should be seen as a crisis of financialisation, of the structural, historic transformation that has taken place in mature capitalism during the last three to four decades. Financialisation is best understood as an epochal transformation of capitalism and I'll now discuss how it has worked. First, financialisation is an epochal, historic transformation in the simple sense that during the last three to four decades the sphere of circulation, including finance, has grown enormously and much faster than the sphere of production. There has been asymmetric growth of circulation relative to production, which is characteristic of financialisation. Second, financialisation is an epochal, historical transformation in that it represents the second bout of the rise of finance in advanced industrial capitalism. The first bout was the period of imperialism that Hilferding, Lenin and others wrote about at the end of the 19th century and beginning of the 20th century. Financialisation represents the second bout of the rise of finance; it is similar, but also different to the first bout. As a concept, financialisation originates in Marxist political economy. The first reference to it that I can find is associated with Monthly Review and with Paul Sweezy. For Sweezy, modern capitalism is characterised by the ceaseless growth of 'surplus' which cannot be easily absorbed productively and tends to be used unproductively. A crisis emerges when the 'surplus' is so great that the economy becomes inundated with it and tries to find other ways of dealing with its excess. Sweezy thought that finance could be one of these ways in which the surplus could find some kind of profitable use. When the crisis of 1973-74 broke out and the long post-war boom finished, Sweezy was the first to argue that from now on we are likely to see a period of steady growth of finance because that is where the surplus will end up. So the Monthly Review tradition is where the first intimations and first analysis of financialisation can be found, and it continues to produce valuable work on this issue. ~ * ~ From: http://www.marxlibrary.org.uk/theory-struggle/item/175-what-can-we-say-about -the-crisis-of-2007-2009 To read a facsimile of the original, on line, complete with all the graphs, go to: https://issuu.com/marxmemoriallibrary/docs/14junefinal_1_/2?e=16494710/14316 995 -- -- You are subscribed. This footer can help you. Please POST your comments to [email protected] or reply to this message. 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