PROFITING WITHOUT PRODUCING:CONFRONTING FINANCIALISATION

COSTAS LAPAVITSAS

SOAS AND RMFJuly 2014

What is financialisation?

An epochal transformation

Asymmetric growth of circulation and new sources of profit

The second bout of the rise of finance in advanced industrial capitalism

The concept of financialisation has Marxist origins

Sweezy and the investible surplus.

Arrighi and the ‘autumn’ of hegemony.

Aglietta, Boyer and the regime of accumulation.

Post-Keynesianism and the return of the rentier.

Sociology/economic geography of finance.

An approach based on classical Marxism – Hilferding/Lenin

Transformation of relations among enterprises, banks, and workers.

No rentier class in a traditional sense.

Integration of developing countries through global financial flows

Financial profit, USA

0

5

10

15

20

25

30

35

40

45

Pre-tax financial sector profit as a share of total pre-tax domestic profit (US, 1945-2011)

Source: calculations by author, NIPA, Table 6.16. Domestic profit is with IVA and CCAdj

pe

rce

nt

Productive/commercial capital

Growing detachment of corporations from banks but with significant variations

Increasing involvement of corporations with the financial system

USA

19

46

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

UK

1965

1967

1969

1971

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

-100

-50

0

50

100

150

200

Net sources of finance as percentage of gross capital formation of the UK private nonfinancial corporations

internal funds

bank credit

market funding

Source: calculations by author, ONS, Financial Statistics, Tables 11.1D and 14.3C

perc

ent

Banks

Banks have reduced lending to corporates – with variations

Banks have increased lending to other banks.

Banks have increased lending to households.

USA

Composition 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

UK

Composition of MFI loans as a share of MFI assets: UK, June 1990 - March 2010

0

5

10

15

20

25

30

Jun-9

0De

c-90

Jun-9

1De

c-91

Jun-9

2De

c-92

Jun-9

3De

c-93

Jun-9

4De

c-94

Jun-9

5De

c-95

Jun-9

6De

c-96

Jun-9

7De

c-97

Jun-9

8De

c-98

Jun-9

9De

c-99

Jun-0

0De

c-00

Jun-0

1De

c-01

Jun-0

2De

c-02

Jun-0

3De

c-03

Jun-0

4De

c-04

Jun-0

5De

c-05

Jun-0

6De

c-06

Jun-0

7De

c-07

Jun-0

8De

c-08

Jun-0

9De

c-09

Source: calculations by author, Bank of England, Monetary and Financial Statistics, B2.1 and B2.1.1

%

to private non-financialcorporations

to households and non-profit institutions servinghouseholds

to other financialcorporations

Households

Household borrowing has increased – with substantial variations – for mortages

Household assets have increased

Retreat of public provision is key

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

UK

Composition of household liabilities, as a share of GDP (UK, 1987-2009)

0

20

40

60

80

100

120

1987 1988 1989 1990 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 ONS, Financial Statistics Consistent, Table 12.1N, UK Output, Income and Expenditure, Table C.1. Loans include loans issued by both UK and rest of the

world MFIs. "Other liabilities" are calculated as a residual.

%

Other liabilities

Short-term(unsecured)loans

Loans securedon dwellings

Thus, financialisation in mature capitalist countries:

A structural transformation at the molecular level of accumulation.

Finance has found new fields of profit – households and financial transactions.

In developing countries, meanwhile

Subordinate financialisation

Based on the role of the dollar as world money

Reverse capital flows and foreign bank entry have catalysed financialisation in middle income countries

Confronting financialisation

Changing financialisation is not simply a matter of regulation of finance.

Public policy toward investment and financial activities of enterprises

Public ownership and control over banks

Public provision of housing, health, education.