Profiting Without Producing: How Finance Exploits Us All
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Financialization is one of the most innovative concepts to emerge in the field of political economy during the last three decades, although there is no agreement on what exactly it is. Profiting Without Producing puts forth a distinctive view defining financialization in terms of the fundamental conduct of non-financial enterprises, banks and households. Its most prominent feature is the rise of financial profit, in part extracted from households through financial expropriation. Financialized capitalism is also prone to crises, none greater than the gigantic turmoil that began in 2007. Using abundant empirical data, the book establishes the causes of the crisis and discusses the options broadly available for controlling finance.
the early 1980s. Third, from the early 1980s to the present, the trend has become notably steeper, financial profits reaching the extraordinary proportion of 45 percent of total profits in the early 2000s. Fourth, the behaviour of financial profits has been cyclical throughout the post-war period, but the cycles have become more pronounced since the early 1980s. By far the most violent fluctuation has occurred in the course of the crisis of the 2000s for reasons discussed in Chapter 9. FIG. 7
Runs, and Deposit Insurance’, Journal of Banking and Finance 4, 1980, pp. 335–44. Brynjolfsson, Erik, and Lorin Hitt, ‘Beyond Computation: Information Technology, Organizational Transformation and Business Performance’, Journal of Economic Perspectives 14:4, 2000, pp. 23–48. Brynjolfsson, Erik, and Lorin Hitt, ‘Computing Productivity: Firm-Level Evidence’, MIT-Sloan Working Paper 4210–01, 2003. Brynjolfsson, Erik, Lorin Hitt, and Shinkyu Yang, ‘Intangible Assets: Computers and Organizational
order, first, to minimize the chances of the borrower undertaking fraudulent or careless action (moral hazard) and, second, to avoid attracting disproportionate numbers of poor quality borrowers (adverse selection). The outcome of moral hazard and adverse selection could be the rationing of credit actually provided by lenders, and hence the failure of credit markets to clear.9 In this light, banks and other financial institutions are providers of services that presumably improve the efficiency
simply a part of the surplus value that is subsequently generated – because of ownership rights over of the capital lent. In effect, the monied capitalist is a rentier, though this word appears very rarely in Marx’s writings. To be more specific, for Marx, the act of lending implies the splitting of surplus value into interest and ‘profit of enterprise’.17 This quantitative division of surplus value corresponds to the qualitative distinction between, respectively, ‘monied’ capitalist and
develop and form the financial system. Trade credit typically emerges within particular sectors of production in which enterprises are already related to each other through pre-existing practices of buying and selling, thus already possessing a basis for trust necessary for the advance of credit.36 Trade credit improves the profitability of ‘active’ capitalists because it, first, accelerates the turnover of capital and, second, reduces reserves of money and inventories of finished output held by