"...those who think that by changing government, introducing a raft of laws and bringing in a new institutional framework of finance they would be able to deal with financialised capitalism are simply over-optimistic."
The next part is the last part. _____ Financialisation and State Capture (Originally called "What can we say about the crisis of 2007/2009?") "Financialisation is an epochal transformation of capitalism" Part V Financialisation of the Household Costas Lapavitsas, Theory and Struggle, Marx Memorial Library, 2014 Part V Financialisation of the household Let me come now to 'households'. I would have liked to speak about 'workers', of course, but Flow of Funds data doesn't give 'workers' as a category, so I cannot do that. I can only use 'households', which is the category that the data gives me, which isn't the same as 'workers', but it is a reasonable proxy for 'waged people'. Though, I must stress that even that, once you begin to look close to the figures, includes various people who work for investment banks who get remunerated in the form of wages but what they receive is not wages - it is profits accruing as salaries. In any case, let's use households in the way in which the data gives it to us and see what can be said about financialisation. What do we see? A couple of key things, actually. First, we see that household borrowing has increased tremendously and that is the most staggering feature about financialisation. This rising indebtedness, I have to stress, because people on the left often get this wrong, is not unsecured borrowing. It's not mostly borrowing to live, or to consume. Often people on the left make an easy connection: 'wages are not high enough, therefore people borrow to make up the shortfall, therefore, they end up more indebted.' This also happens but it's a small part of aggregate household indebtedness. Households borrow mostly for mortgages, not to consume on a daily basis. Before I examine this fact more closely, though, I wish to stress another point about household financialisation. It is not just indebtedness that has increased for households, but also the holdings of financial assets. These are very important because they are basically pensions, insurance and all the various other things that working people need today to survive. They are the counterpart to debt. Financialisation also applies to assets not just for debt. It's very important to remember this. Banks can make a profit out of lending money to you but also out of handling your pension funds. Financialisation works on both sides for the household. Why, then, has the financialisation of the household increased? It is not simply because wages are not rising. Wages have not risen, to be sure, and in the USA real wages have been flat for decades. That's important, but that's not the only reason of financialisation, or not even the main reason. Indeed, the main reason why financialisation of the household has become so prominent in the last three to four decades is more complex and has to do with public provision. What we observe in the last three to four decades is the retreat of public provision: in housing, in education, in health, in a whole range of areas that are fundamental to working life. As public provision has retreated, private provision has taken its place. And who mediates private provision? Private finance. The private financial system has emerged as the mediator of private provision. Banks have emerged as key agents in solving the housing problem, the health problem, the education problem, whatever other problem households might have. Without any notable skills in confronting this task, or any reason to believe that banks know how to deal with it. But that's how things have unfolded. Financialisation of the household is actually a complex result of these processes. Banks make profits out of lending to households but also out of handling household assets too. Let me show you a little bit of evidence again. This is the United States, Figure 6 [not shown here*] and it shows household debts as a proportion of GDP from 1945 to 2009. It's the household debt mountain basically. Household debt as a proportion of GDP in the United States just went through the roof, particularly from about 1980 onwards - the period of financialisation. What's the biggest part of that debt? It's the blue line, that is, mortgages. Other debt also increases, including consumer credit, but it is not at all the dominant part. I know that a certain part of mortgages is consumer credit masquerading as mortgage debt, and it is impossible to tell what proportion that is, but, nonetheless, the biggest part of US household debt is mortgage debt. If you look at Britain it's not that different. Figure 7 [not shown here*] shows British households from 1987 to 2009. The British people became more indebted as a proportion of GDP, and certainly from the middle of the 1990s the ratio went right up. The bulk of the debt is of course mortgage debt. Unsecured consumer borrowing is also there but it isn't the biggest part. British households have thus become financialised in this way, and for the reasons that I have explained to you. Let me now bring these analytical strands together and state that financialisation of mature capitalist countries is an epochal change in which finance has penetrated the most fundamental areas of capitalist accumulation. Finance has found new fields of profit in household income and in transactions in open financial markets. In this way finance has become an incredible source of profit for the capitalist class as a whole. These transformations have contributed to the gigantic crisis that we have been going through. They have led to the crisis in a structural way, not because policy making has been captured by the financial interest and is shaped by it, although the latter cannot be denied. I want to finish by saying a few words on what to do about financialisation. The first thing to stress is that if it is a historical transformation, which I think it is, if it is a historical period of capitalism, then it has deep roots and foundations, which I have discussed. It follows that confronting it, changing it, cannot be simply a matter of government policy. Policy is certainly necessary, but those who think that by changing government, introducing a raft of laws and bringing in a new institutional framework of finance they would be able to deal with financialised capitalism are simply over-optimistic. Such an approach does not quite appreciate the depth of financialisation and its structural aspects. This is not so much an issue in the UK, but in the United States where there are many people who think that if they introduce regulation and change government policy, they would deal with financialisation. But I doubt it. ~ * ~ 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. You can visit the group WEB SITE at http://groups.google.com/group/yclsa-eom-forum for different delivery options, pages, files and membership. To UNSUBSCRIBE, please email [email protected] . You don't have to put anything in the "Subject:" field. You don't have to put anything in the message part. 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