Capitalism is first and foremost a historical social system.

Financialization and Social Justice

Dr. Conor McCabeUCD School of Social Justice26 April 2014

DREAM…

INNOVATION

[Lehman collapse, 15 September 2008 - headlines 16 Sep 2008]

The purpose of capitalism is self-expansion – capital begets capital – and it does so by monetizing social value and human labour.

This is a circuit of transformation.

The purpose of capitalism is self-expansion – capital begets capital – and it does so by monetizing social value and human labour.

This is a circuit of transformation.

Historical capitalism involved therefore the widespread commodification of processes – not merely exchange processes, but production processes, distribution processes, and investment processes – that had previously been conducted other than via a ‘market’.

The purpose of capitalism is self-expansion – capital begets capital – and it does so by monetizing social value and human labour.

This is a circuit of transformation.

Historical capitalism involved therefore the widespread commodification of processes – not merely exchange processes, but production processes, distribution processes, and investment processes – that had previously been conducted other than via a ‘market’.

And, in the course of seeking to accumulate more and more capital, capitalists have sought to commodify more and more of these social processes in all spheres of economic life.

Immanuel Wallerstein, Historical Capitalism (London: Verso, 2011), 15.

Capitalism is first and foremost a historical social system.

What distinguishes the historical social system we are calling historical capitalism is that in this historical system capital came to be used (invested) in a very special way. It came to be used with the primary objective or intent of self-expansion.

Capitalism is first and foremost a historical social system.

What distinguishes the historical social system we are calling historical capitalism is that in this historical system capital came to be used (invested) in a very special way. It came to be used with the primary objective or intent of self-expansion.

It was this relentless and curiously self-regarding goal of the holder of capital, the accumulation of still more capital, and the relations this holder of capital had therefore to establish with other persons in order to achieve this goal, which we denominate as capitalism.

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“Marx, for example, emphasizes that all of these forms of capital – merchants’ capital, money capital and rent on land – had an historical existence which stretches back well before the advent of industrial capital in the modern sense.

“Marx, for example, emphasizes that all of these forms of capital – merchants’ capital, money capital and rent on land – had an historical existence which stretches back well before the advent of industrial capital in the modern sense.

We therefore have to consider an historical process of transformation in which these separate and independently powerful forms of capital became integrated into a purely capitalist mode of production.

“Marx, for example, emphasizes that all of these forms of capital – merchants’ capital, money capital and rent on land – had an historical existence which stretches back well before the advent of industrial capital in the modern sense.

We therefore have to consider an historical process of transformation in which these separate and independently powerful forms of capital became integrated into a purely capitalist mode of production.

The form and manner of this historical process must therefore be a focus of attention.”

David Harvey, Limits to Capital (London: Verso, 2006), 73.

“Capitalism only triumphs when it becomes identified with the state, when it is the state.

In its first great phase, that of the Italian city-states of Venice, Genoa and Florence, power lay in the hands of the moneyed elite. In seventeenth-century Holland the aristocracy of the Regents governed for the benefit and even according to the directives of the businessmen, merchants, and money-lenders.

Likewise, in England the Glorious Revolution of 1688 marked the accession of business similar to that in Holland.” (Braudel 1977)

The fusion of state and capital was the vital ingredient in the emergence of a distinctly capitalist layer on top of, and in antithesis to, the layer of market economy.

Over the last quarter of a century something fundamental seems to have changed in the way in which capitalism works.

The tendency since 1970 has been towards greater geographical mobility of capital.

Rather than being a modest helper to the capital accumulation process, [finance] gradually turned into a driving force. Speculative finance became a kind of secondary engine for growth given the weakness in the primary engine, productive investment.

Rather than being a modest helper to the capital accumulation process, [finance] gradually turned into a driving force. Speculative finance became a kind of secondary engine for growth given the weakness in the primary engine, productive investment.

The result was an acceleration of the process of debt build-up – going beyond mere speculative orgies that historically came at the peak of business cycles, becoming instead a permanent, institutionalized feature of the economy.

Rather than being a modest helper to the capital accumulation process, [finance] gradually turned into a driving force. Speculative finance became a kind of secondary engine for growth given the weakness in the primary engine, productive investment.

The result was an acceleration of the process of debt build-up – going beyond mere speculative orgies that historically came at the peak of business cycles, becoming instead a permanent, institutionalized feature of the economy.

The search by capital for profitable outlets for its surplus despite the stagnation of investment opportunities within production, coupled with the belief that asset prices as a whole went only one way – up – generated a secular financial explosion. (p.18)

Financialization refers to the increasing importance of financial markets, financial motives, financial institutions and financial elites in the operation of the economy and its governing institutions, both at the national and international levels.

Gerald Epstein (2002) Financialization, Rentier Interests, and Central Bank Policy’

“In the case of the United States, financialization during the 1990s led to a closer alignment of large industrial and financial firms in the U.S., leading to a greater emphasis by Alan Greenspan and the U.S. Federal Reserve in financial asset appreciation as a goal of monetary policy.”

Gerald Epstein (2002) ‘Financialization, Rentier Interests, and Central Bank Policy ‘

“Part of the reason people get less giddy about the Dow than they did five years ago is that they have learnt a bit about inequality.

what looks like a recovery, a rally or an increase in consumer confidence may just be the effect of elites passing money among themselves.“

Christopher Caldwell, FT 9 March 2013