Politics in Practice

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Marx, the Financialisation Theorist

Gustavo Moura de Cavalcanti Mello is a Professor in the Department of Economics and the Post-Graduate Programme in Social Policy at the Federal University of Espírito Santo, Brazil. He is the co-editor of Financial Speculation and Fictitious Profits: A Marxist Analysis (2019) in the Marx, Engels, and Marxisms book series. Read chapter 7, “Profit, Interest, Rent, and Fictitious Profit,” for free until February 10. 

A characteristic of modernity is a kind of compulsion for the new and the predominance of an evolutionary concept of history. The ideology of progress leads us to form a hierarchy of past epochs and to make the present "absolute", a present that is commonly held as being the high point, the summit, and sometimes even the end point. We tend to cast an eye of arrogant superiority over history, an eye which only focuses on the cataloging of identities and differences. The result is a misunderstanding of the procedural character of history and the construction of an idealistic view of our own time. To grasp what makes the present unique, however, it is necessary to understand the process by which it emerged and to take seriously its fleeting character of mediation between the past and the future. This mediation arises from the link between the contingent and the determinations and constitutive tendencies of our time.

A key feature of contemporary capitalism is the exponential growth of a plethora of financial securities, and the central role of movements of financial markets with respect to international capital flows, corporate investment decisions, developments in state policies, and so on. In the last decades, the boom of the derivative markets and the boom of economic crises, with their drastic social consequences, have led many researchers, from the most varied theoretical orientations, to study this phenomenon. Even in this unorthodox, unapologetic field, little attention has been paid to the conditions of its emergence, and financialisation has been treated as a kind of detour, an aberration, or as a force to be tamed or countered.

This understanding is not only insufficient, but fundamentally mistaken, from the perspective of the criticism of political economy. Marx rigorously demonstrated that the production of abstract wealth, the accumulation of capital, is the foundation, the engine, and the purpose of modern economic dynamics, and that capital is a contradictory social form that constitutes itself as an insatiable, expansionist and totalitarian "automatic subject," intolerant of other forms of social reproduction and which tends to subordinate and reduce the different spheres of life to their image and likeness. Amid this fetishistic process of the subjectivation of capital, which seeks to fully dominate its conditions of valorisation, capital tends to become autonomous from its own substance (abstract work). One of the consequences of this dynamic is the emergence of interest-bearing capital, the result of the downgrading of capital to its commodity form, which is temporarily disposed of in the form of loans, but which must return to its owner plus interest, regardless of how it will be effectively employed. Even more fetishistic is fictitious capital, a title deed generated from the capitalisation process, based on the expectation of future appropriation of income streams. It is a form devoid of any value, which has a movement in the financial markets that is independent of, but not indifferent to, the actual processes of extracting surplus value.

What distinguishes the current phase of capital's development, and a product of its core tendencies, is its mastery of the financial dimension of accumulation and the fictitious forms of capital, which casts its shadow over the expanded reproduction dynamics of capital. It exacerbates capitalist exploitation and dispossession, social inequality, the predation of labour power and of the natural environment, the production of relative overpopulation, unreasonable competition, and so on. As discussed in my research, from the standpoint of individual capital, the determinant is not exactly the production of value but the appropriation of the largest possible amount of surplus value in any of its transfigured forms (profit, interest, dividends, income) and even in the form of fictitious profits, which emerges from the creation of fictitious capital, rather than from an effective appreciation of value (arising from the employment of productive labour). From a general systemic perspective—of total social capital—this indifference takes its toll, and the emphasis on non-productive forms of investment undermine the substance of social wealth and produce powerful crises.

Such crises once produced vast capital devaluations, triggered various mechanisms to counteract falls in the rate of profit and temporarily resolved capital over-accumulation, but in recent decades this dynamic has changed. This is due to increases in automation, which, from the perspective of value appreciation, tends to reduce variable capital in relation to constant capital and makes ever larger portions of the population redundant and because of the roles assumed by Nation States that have, since the crisis of stagflation in the first half of the 1970’s, implemented policies of wage repression and the remoulding of the industrial reserve army, tax relief for big capital and regressive taxation regimes; policies of bailing out and injecting (fictitious) cash into large economic conglomerates by lowering interest rates and buying poor bonds, along with other policies that impel fictitious capital production and capital centralisation at the cost of rampant state debt. It is a contradictory and explosive dynamic that is approaching its absolute limits. Its violent and destructive character of capital accumulation is sharpened, endorsing the Marxian understanding that expanded reproduction of capital is expanded reproduction of barbarism.

The perspective held here calls for and feeds a battle on two fronts: the critique of the reformism and fascism which we are currently seeing. A “classic” and contemporary fascism that uses scapegoats to mobilise mass uprising from the vicissitudes of capitalism and which has always found a target in the “financial upstarts,” allegedly personified by the Jews. Capital, as Marx wrote, is dead labour, kept alive by sucking living labour, and has at its core the contradiction between capital and labour, on a local, regional, national and world scale. 

In this respect, reformism, like fascism in its various manifestations, tends to cloud the role of the state by introducing a dualistic and moralistic viewpoint that fails to reach the heart of the problem, where a properly dialectical approach is required. Currently, capital makes up a social, fragmented and contradictory totality, which has interest-bearing capital and fictitious capital as its elementary and dominant moments. These magnify its relevance in the wake of the crisis of over-accumulation that erupted in the early 1970’s and have been repeating ever since. The distinction between a “good”, “democratic” capitalism that meets “social needs”—“industrial capitalism” or anything that has value—and that “bad,” “misanthropic” and “authoritarian” is nothing but a form of mystification, and the rentier's old “euthanasia” which, as well as being a daydream, is a diversion that hinders the formulation of true answers to contemporary dilemmas.

Far removed from the totalitarian and genocidal bluster of the fascists, or the well-intentioned illusions of the reformists, such responses necessarily involve the construction of non-fetishist social relations, relationships not mediated by “things,” intended to produce abstract, non-hierarchical and heteronomous wealth. To put it positively, by the construction of a society of freely socialised individuals, who consciously and in a planned way determine the form of the material and spiritual reproduction of their lives. So, both for the understanding of financialisation, and for the construction of alternatives to capitalist barbarism, we can see the importance of the careful resumption of Marx's analyses and propositions.

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