Re: [OPE-L] The Financialization of Capitalism

From: Paul Cockshott (wpc@DCS.GLA.AC.UK)
Date: Wed May 16 2007 - 19:00:20 EDT

>It has been argued [10][1,2,3,12,7,11] that the 
>real rate of return on capital tends to decline 
>over the course of capitalist development. If 
>the rate of interest does not fall at a 
>corresponding rate then the level of voluntary 
>fundraising by firms will decline, since a 
>diminishing portion of firms will be making 
>enough profits to cover the rate of interest. 
>However, the level of savings will not 
>necessarilly decline at a corresponding rate.

Paul, this does not seem to me to follow, for 
even if the rate of interest does fall at a 
corresponding rate, the real rate of return on 
capital still may have still declined to such a 
point that fresh borrowings are not made.

I am making a weaker point than you in my
quote above, but it does not contradict your quote.

>As the demand for funds within the industrial 
>and commercial sector dries up in the face of 
>high interest rates, lending comes to be 
>directed increasingly towards the funding of the 
>state debt and consumer credit.

Why would not states and consumers be limited as 
to their borrowings by high interest rates as 
well? What guarantee that they'll be able to 
absorb the surplus stock of liquid money capital? 
Which you seem to believe on theoretical grounds 
will rise in the course of accumulation, though 
(now in reply to Allin) it may now show up in the 
M2 numbers as you also seem to be suggesting


For the British financial statistics one sees
that the industrial and commercial companies run
a net financial surplus, they essentially lend
money to the state and to individuals through
the intermediary of the financial system.

If the industrial and commericial companies run
a surplus the other sectors have to run a deficit -
have to borrow. It is of course possible that 
consumer expenditure would fall, eliminating part
of the surplus of the industrial and commercial
firms and thus enabling the domestic sector
to borrow less.

What I am arguing though, is that the slack is
taken up in the unproductive incomes of the 
financial sector. It goes on bonuses, fees and the
construction of office blocks. Share prices rise
until commissions on their dealing absorbs the surplus saving
of the I&C companies. The financial sector rather than
channeling funds increasingly simply consumes them.

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