Finance capitalismWikipedia open wikipedia design.
|Part of a series on|
Financial capitalism is thus a form of capitalism where the intermediation of saving to investment becomes a dominant function in the economy, with wider implications for the political process and social evolution. Since the late 20th century, in a process sometimes called financialization, it has become the predominant force in the global economy, whether in neoliberal or other form.
Finance capitalism is characterized by a predominance of the pursuit of profit from the purchase and sale of, or investment in, currencies and financial products such as bonds, stocks, futures and other derivatives. It also includes the lending of money at interest; and is seen by Marxist analysts (from whom the term finance capitalism originally derived) as being exploitative by supplying income to non-laborers. Academic defenders of the economic concept of capitalism, such as Eugen von Böhm-Bawerk, see such profits as part of the roundabout process by which it grows and hedges against inevitable risks.
In financial capitalism, financial intermediaries become large concerns, ranging from banks to investment firms. Where deposit banks attract savings and lend out money, while investment banks obtain funds on the interbank market to re-lend for investment purposes, investment firms, by comparison, act on behalf of other concerns, by selling their equities or securities to investors, for investment purposes.
The meaning of the term financial capitalism goes beyond the importance of financial intermediation in the modern capitalist economy. It also encompasses the significant influence of the wealth holders on the political process and the aims of economic policy.
Thomas Palley has argued that the 21st century predominance of finance capital has led to a preference for speculation—Casino Capitalism—over investment for entrepreneurial growth in the global economy.
Rudolf Hilferding is credited with first bringing the term finance capitalism into prominence, with his (1910) study of the links between German trusts, banks, and monopolies before World War I—a study subsumed by Lenin into his wartime analysis of the imperialist relations of the great world powers. Lenin concluded of the banks at that time that they were “the chief nerve centres of the whole capitalist system of national economy”: for the Comintern, the phrase "dictatorship of finance capitalism" became a regular one.
In such a traditional Marxist perspective, finance capitalism is seen as a dialectical outgrowth of industrial capitalism, and part of the process by which the whole capitalist phase of history comes to an end. In a fashion similar to the views of Thorstein Veblen, finance capitalism is contrasted with industrial capitalism, where profit is made from the manufacture of goods.
Fernand Braudel would later point to two earlier periods when finance capitalism had emerged in human history—with the Genoese in the 16th century and the Dutch in the 17th and 18th centuries—although at those points it was from commercial capitalism that it developed. Giovanni Arrighi extended Braudel's analysis to suggest that a predominance of finance capitalism is a recurring, long-term phenomenon, whenever a previous phase of commercial/industrial capitalist expansion reaches a plateau.
Whereas by mid-century the industrial corporation had displaced the banking system as the prime economic symbol of success, the late twentieth-century growth of derivatives and of a novel banking model ushered in a new (and historically fourth) period of finance capitalism.
- Neal, Larry: The Rise of Financial Capitalism: International Capital Markets in the Age of Reason (Studies in Monetary and Financial History). (Cambridge University Press, 1993, ISBN 9780521457385)
- Goetzmann, William N.; Rouwenhorst, K. Geert: The Origins of Value: The Financial Innovations that Created Modern Capital Markets. (Oxford University Press, 2005, ISBN 978-0195175714))
- Rothbard, Murray: Making Economic Sense, 2nd edition. (Ludwig von Mises Institute, 2006, ISBN 9781610165907), p. 426. In own words of the Austrian School economist Ludwig von Mises, "A stock market is crucial to the existence of capitalism and private property. For it means that there is a functioning market in the exchange of private titles to the means of production. There can be no genuine private ownership of capital without a stock market: there can be no true socialism if such a market is allowed to exist."
- Dore, Ronald: Stock Market Capitalism, Welfare Capitalism: Japan and Germany versus the Anglo-Saxons. (Oxford University Press, 2000, pp. 280, ISBN 978-0199240616)
- Preda, Alex: Framing Finance: The Boundaries of Markets and Modern Capitalism. (University of Chicago Press, 2009, pp. 328, ISBN 978-0-226-67932-7)
- "Capitalism" by John Scott and Gordon Marshall in A Dictionary of Sociology Oxford University Press 2005. Oxford Reference Online. Oxford University Press
- Simon Johnson, "The Quiet Coup", May 2009, The Atlantic.
- R. Munck, Globalization and Labour (2011) p. 77–8
- Charles R. Morris, The Trillion Dollar Meltdown (2008) p. 156
- "The Contradiction of Capitalism in the Search for Democracy", Latin American Perspectives, Vol. 24, No. 3, Ecuador, Part 1: Politics and Rural Issues (May, 1997), pp. 116–122
- F. Boldizzoni, Means and Ends: The Idea of Capital in the West 1500–1970, Palgrave Macmillan 2008, pp. 128–32
- J. Bradford De Long & Carlos D. Ramirez, "Understanding America’s Hesitant Steps Toward Financial Capitalism", 1996, UC Berkeley Archived 2012-03-13 at the Wayback Machine
- Dimitri B. Papadimitriou & L. Randall Wray, "Minsky's Analysis of Financial Capitalism, 1999
- Thomas Palley, From Financial Crisis to Stagnation (2012) p. 218
- Frederic Jameson, 'Culture and Finance Capital', in The Jameson Reader (2005) p. 257
- Quoted in E. H. Carr, The Bolshevik Revolution 2 (1971) p. 137
- Quoted in F. A Voight, Unto Caesar (1938) p. 22
- C. J. Calhoun/G. Derluguian, Business as Usual (2011) p. 57
- Jameson, p. 259-60
- A. Sampson, Anatomy of Britain Today (1969) p. 475
- P.Auger, Chasing Alpha (2009) p. 122 and p. 108
- Jameson, p. 256-7
- Jameson, p. 268-273
- Rudolf Hilferding, Finance Capital (1981)
- Giovanni Arrighi, The Long Twentieth Century: Money, Power, and the Origins of our Times (1994)
- John Kenneth Galbraith, The New Industrial State (1974)