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Theorizing the process of financialization through the paradox of profit : the credit-debt reproduction mechanism
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Javidanrad, Farzad, Ackrill, Robert, Bakas, Dimitrios and Garratt, Dean (2024) Theorizing the process of financialization through the paradox of profit : the credit-debt reproduction mechanism. Journal of Post Keynesian Economics . pp. 1-23. doi:10.1080/01603477.2024.2327998 ISSN 0160-3477. (In Press)
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Official URL: http://doi.org/10.1080/01603477.2024.2327998
Abstract
Financialization occurs where, over time, capitalist economies undergo a transformation, with profit-making via investment in production declining, to be replaced by profit-making via investment in financial markets. In the present research, we offer a novel theoretical explanation for this process, that we call the credit-debt reproduction mechanism. We derive this inductively, starting with Marx’s analysis of the paradox of monetary profit and its practical manifestation in the capitalist economy, the shortage of money in circulation. This shortage results in capital becoming increasingly expensive, making long-term investment decisions less certain, less profitable and less justifiable. Investment in financial markets grows, but this leads to an ever-expanding cycle of credit and debt, which puts capitalist economies on a one-way road from productive investments to predominantly unproductive investments. We include in this analysis important reflections on the distinction between “financialization” and “financial development.” We also revive and revisit the notion of the shortage of money as a key driver in this process. Another contribution made in this research is to draw a distinction between practical and theoretical solutions to the paradox of monetary profit. Crucially, our research confirms the absence of a theoretical solution to the paradox, there existing only practical solutions.
Item Type: | Journal Article | ||||||||
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Subjects: | H Social Sciences > HB Economic Theory H Social Sciences > HG Finance |
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Divisions: | Faculty of Social Sciences > Economics | ||||||||
Library of Congress Subject Headings (LCSH): | Financialization, Money supply, Profit, Marx, Karl, 1818-1883. Kapital, Marxian economics, Capitalism | ||||||||
Journal or Publication Title: | Journal of Post Keynesian Economics | ||||||||
Publisher: | Routledge | ||||||||
ISSN: | 0160-3477 | ||||||||
Official Date: | 2024 | ||||||||
Dates: |
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Page Range: | pp. 1-23 | ||||||||
DOI: | 10.1080/01603477.2024.2327998 | ||||||||
Status: | Peer Reviewed | ||||||||
Publication Status: | In Press | ||||||||
Access rights to Published version: | Open Access (Creative Commons) | ||||||||
Date of first compliant deposit: | 2 May 2024 | ||||||||
Date of first compliant Open Access: | 2 May 2024 |
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