Re: [OPE-L] The Financialization of Capitalism

From: Rakesh Bhandari (bhandari@BERKELEY.EDU)
Date: Wed May 16 2007 - 11:42:11 EDT

>On Tue, 15 May 2007, Rakesh Bhandari quoted:
>>  From John Bellamy Foster...
>>  For the owners of capital the dilemma is what to do with the immense
>>  surpluses at their disposal in the face of a dearth of investment
>>  opportunities. Their main solution from the 1970s on was to expand
>>  their demand for financial products as a means of maintaining and
>>  expanding their money capital. On the supply side of this process,
>>  financial institutions stepped forward with a vast array of new
>>  financial instruments: futures, options, derivatives, hedge funds,
>>  etc. The result was skyrocketing financial speculation that has
>>  persisted now for decades.
>Where did the people who write this sort of thing learn their
>macroeconomics?  It's the ABC of Keynesian/Kaleckian theory that
>financial investment is not a sink for income, in the sense of an
>alternative to consumption or the purchase of capital goods.  For
>every financial asset purchased, a financial asset is sold by
>somebody; so it does not in the least solve the "problem" of
>disposing of an excessive surplus.

Good point.

>It is possible for the capitalist class of a particular nation to
>"solve" this sort of "problem" by net acquisition of financial
>claims against the capitalists of another nation (which means
>running a trade surplus).  But that is far from the case in the
>USA, which has been running an increasing trade deficit.  Both
>private consumption and private investment have been increasing as
>shares of US GNP of late, matched by a decline in government
>expenditure and a rising trade deficit.

The main claim here is that finance capital has been able on the
basis of its enlarged resources to discipline governments with the
threat of flight and corporations with the threat of hostile take
overs. Hence neo liberal, anti social democratic governance on one
the one side and more ruthless corporations on the other hand.


>Yes, we've seen an increased "layering" of financial transactions,
>but these are not in any real sense an alternative to good old
>fashioned consumption and investment; they are a complement, with
>certain (malign) redistributive effects.
>Allin Cottrell

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