Re: [OPE-L] The Financialization of Capitalism

[Paul Cockshott <wpc@xxxxxxxxxxxxx>]

Here is my take on it, written for an encyclopedia

Paul Cockshott

www.dcs.gla.ac.uk/~wpc



-----Original Message-----
From: OPE-L on behalf of Rakesh Bhandari
Sent: Tue 5/15/2007 6:43 PM
To: OPE-L@xxxxxxxxxxxxxxxx
Subject: [OPE-L] The Financialization of Capitalism
 
 From John Bellamy Foster.

  I am wondering whether there is an alternative explanation for the
mounting stock of surplus in the form of liquid money capital...

http://www.monthlyreview.org/0407jbf.htm

The monopoly capitalist economy, Baran and Sweezy suggested, is a
vastly productive system that generates huge surpluses for the tiny
minority of monopolists/oligopolists who are the primary owners and
chief beneficiaries of the system. As capitalists they naturally seek
to invest this surplus in a drive to ever greater accumulation. But
the same conditions that give rise to these surpluses also introduce
barriers that limit their profitable investment. Corporations can
just barely sell the current level of goods to consumers at prices
calibrated to yield the going rate of oligopolistic profit. The
weakness in the growth of consumption results in cutbacks in the
utilization of productive capacity as corporations attempt to avoid
overproduction and price reductions that threaten their profit
margins. The consequent build-up of excess productive capacity is a
warning sign for business, indicating that there is little room for
investment in new capacity.
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.