lapavitsas profiting without producing - barcelona 2014
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A CRISIS OF FINANCIALISATION IN EUROPE
COSTAS LAPAVITSAS
SOAS AND RMFJanuary 2014
Financialisation
An epochal transformation. The second bout of the rise of finance
Asymmetric growth of circulation and new sources of profit
Specifically:
Altered conduct of non-financial enterprises, banks, and households
Profits extracted from income flows and money stocks. Financial expropriation
Subordinate financialisation in developing countries
Non-financial enterprises
i.Growing detachment from banks
ii.Increasing involvement in the financial system
Financing of Investment - USA1
94
6
19
48
19
50
19
52
19
54
19
56
19
58
19
60
19
62
19
64
19
66
19
68
19
70
19
72
19
74
19
76
19
78
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
20
08
20
10
-150
-100
-50
0
50
100
150
200
Net sources of finance as percentage of capital expenditures of the US nonfinancial corporate business
internal funds
bank credit
market funding
Source: calculations by author, Flow of Funds, Table F.102
perc
ent
Financing of Investment - Germany
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
-60
-40
-20
0
20
40
60
80
100
120
140
Net sources of finance as percentage of gross capital formation of the German nonfinancial corporations
internal fundsbank creditmarket funding
Source: calculations by author, Eurostat, Annual Sector Accounts
perc
ent
Banks
i.Reduced lending to non-financial enterprises
ii.Increased lending to other banks
iii. Increased lending to households for mortgages
Bank lending - USAComposition of commercial bank assets: US, 1950-2009
0
5
10
15
20
25
2009
2007
2005
2003
2001
1999
1997
1995
1993
1991
1989
1987
1985
1983
1981
1979
1977
1975
1973
1971
1969
1967
1965
1963
1961
1959
1957
1955
1953
1951
Source: calculations by author based on data from FDIC Historical Statistics on Banking, Tables CB09, CB11, CB12
% o
f tot
al as
sets
Loans toindividuals
Householdmortgages
C&I
NFCmortgages
Bank lending - Germany
Structure of domestic bank lending, as a share of total bank assets: Germany, 1981-2010
0
5
10
15
20
25
30
35
40
Source: calculations by author based on data from Deutsche Bundesbank
% o
f tot
al a
sset
s
Lending to banks (MFIs) in theeuro area
Lending to domesticenterprises and self-employedpersons
Housing loans to domesticemployees and otherindividuals
Other loans to domesticemployees and otherindividuals
Households
i.Borrowing has increased – mortgages
ii.Assets have also increased - pensions
Household borrowing - USA
Composition of household liabilities, as a share of GDP (USA, 1945-2009)
0
20
40
60
80
100
120
1945
1947
1949
1951
1953
1955
1957
1959
1961
1963
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
Source: calculations by author based on Flow of Funds, Table L.100; NIPA, Table 1.1.5. "Other liabilities" are calculated as a residual - a difference between total household liabilities and mortgages
and consumer debt.
%
Otherliabilities
Consumercredit
Homemortgages
Household borrowing - GermanyComposition of household liabilities, as a share of GDP (Germany, 1991-2009)
0
10
20
30
40
50
60
70
80
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Source: calculations by author based on Deutsche Bundesbank, Financial accounts, and Statistisches Bundesamt Deutschlands. "Other liabilities" are calculated as a residual.
%
Otherliabilities
Consumerloans
Mortgageloans
In sum
A structural transformation at the molecular level of accumulation
Finance has found new fields of profit – households and financial transactions
A changing social structure
In Europe
Financialisation operating through the common currency
Split between core and periphery -subordinate financialisation in the periphery
EMU
A formal alliance to create an international reserve currency
A formal alliance to create a domestic monetary standard
But:
International and domestic roles clash
The clash is reflected in subordinate financialisation in the periphery.
Root cause: Capital-Labour relations
Germany, France, Southern Europe
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
90
95
100
105
110
115
120
125
130
135
ULC Germany ULC France ULC Southern Europe Inflation target of 1.9%
Result one: Imbalances among EMU states
Germany, France, Southern Europe
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
Germany France
Southern Europe (Greece, Portugal, Spain and Italy)
Introduction of the Euro
Result two: Large and changeable private capital flows.
Subordinate peripheral financialisation in the EMU
Peripheral euro-denominated debt for ‘international’ and ‘domestic’ reasons
The debt is held publicly and privately; mostly by households and banks
The debt appears as ‘domestic’, but much of it is in reality ‘international’
EU policy
‘Fix’ the crisis through austerity, privatisation, liberalisation and, above all, crushing wages
Replace private capital flows from abroad with official lending
Result: Stability through destruction
Deep recession, huge unemployment, debt has worsened
Shortage of domestic private credit
Lack of growth prospects and rising social tensions
The problem moves to the core: France and Italy
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
90
95
100
105
110
115
120
125
130
135
140
Germany Greece Spain France Italy Inflation target of 1.9%
Is there an alternative?
Marshall plan for the periphery to raise productivity
Rebalancing the German economy
Debt forgivenessRestructuring financeIncome and wealth redistribution
Little chance of this happening, hence a break-up is likely
A better, but unlikely, alternative
Exit option for individual countries, on a cooperative basis
Abandonment of the euro, management of exchange rates.
A radical alternative
Unilateral exit
Capital controls, bank nationalisation
Income and wealth redistribution
Restructuring to reverse financialisation
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