Fictions of financialization
Or, I'm writing a book about finance capital
Some news: I’ve signed a contract with Pluto Press for a new book, tentatively titled Fictions of Financialization: What we’re getting wrong about speculation, exploitation, and twenty-first century capitalism. It should be out some time in 2024. I’m going to use this blog to work out some bits and pieces of the argument. So, a short post on what the book is going to be about…
Finance is everywhere in contemporary capitalism. The share of the financial sector in the North American and European core economies of the capitalist world system has grown drastically in recent decades. Global financial flows exercise tightening discipline over peripheral states, exemplified by a renewed round of third world debt crises in the aftermath of the pandemic. People and households globally are faced with deepening levels of indebtedness. Meanwhile the balance sheets of the largest asset managers -- companies like Blackrock and Vanguard -- have ballooned to tens of trillions of dollars. These find themselves in control of a range of assets running from conventional stocks and bonds right through to low-income rental housing. The rise of finance has been accompanied by increasingly precarious livelihoods, a widening gap between poles of fabulous wealth and grinding deprivation, and accelerating climate breakdown.
Yet, financial tools are also increasingly posed as solutions to the crises and contradictions of neoliberal capitalism. Leading states and international organizations propound financial responses to problems ranging from the climate crisis to wildlife conservation to crumbling infrastructure. Proposals have circulated in recent years for solving the world’s problems by converting everything from education, forests, roads, and shifting weather patterns into financial assets.
The task of understanding the place and power of finance in twenty-first century capitalism is urgent. The power of finance is an important obstacle to building just, ecologically viable economies and societies. We need the tools to critique financial solutions, to grasp the contradictions of financial accumulation, and to situate finance capital in relation to the ongoing restructuring of the ‘real’ economies of production and reproduction. We badly need to understand the sources, and the limits, of that power.
This book contributes towards this task in two ways. First, it develops a critique of the concept of ‘financialization’, which has become the dominant way of framing and interpreting the dispersed developments traced above. Initially popularized by Giovanni Arrighi’s world-historical discussion of the ‘long twentieth century’, and diffused through debates among Sociologists and heterodox Economists in the 2000s, the concept has become increasingly widespread in media and activist debates in recent years. ‘Financialization’ is now invoked in media venues ranging from The Atlantic to leftist outlets like Jacobin or Tribune. It is invoked by Marxist and other radical writers, as well as by figures in establishment Economics like Dani Rodrick or John Kay. In short, ideas about the financialization of the economy and of daily life are part of the common-sense about the failures of present-day capitalism across a wide swathe of progressive and radical thought.
Amidst all this stretching and twisting, and despite the obvious political differences between Marxists and mainstream economists, invocations of ‘financialization’ mostly retain a core story. It runs something like the following: After the collapse of Keynesian economic models in the 1970s, contemporary capitalism has been restructured into a form uniquely dominated by finance. Capitalist profits in this context are increasingly generated through financial channels, coming at the expense of jobs and production in the ‘real’ economy. This has kicked off a search for speculative profits which has led to the subjection of ever-wider areas of social life, and increasingly nature, to the domination of finance. Profit-making in this context is increasingly derived from speculative forms of activity divorced from the needs of production, and from social and ecological reproduction.
My book aims to make the case against the growing dominance of this ‘financialization’ story in our understandings of the crises of contemporary capitalism. Parts of the financialization narrative no doubt ring true -- since the 1970s, a growing share of capitalist profits have indeed been recorded in the financial sector, the scope of speculative trading has boomed in that time, and people are deeper in debt in many places. The financialization story offers an intuitively appealing diagnosis tying together many of the phenomena mentioned in the first paragraphs above. But invoking ‘financialization’ ultimately obscures more than it reveals about how these developments are tied together, and how the social power of finance in particular and capital in general operates. ‘Financialization’ too often serves as a shortcut, a way of attributing disparate social phenomena to the growing power of finance capital. It offers up a ready-made way of critiquing myriad changes in the way that finance capital and the wider economy operate, allowing authors to more or less uncritically assimilate them as instances of a wider process. More importantly, these analyses, implicitly or explicitly, often draw a moralistic distinction between ‘financial’ and ‘real’ economies. In so doing, invocations of ‘financialization’ can lead to truncated and politically-limited critiques of contemporary capitalism.
Simply put, far too often talking in terms of financialization implies that the solutions lie in ‘less finance’. Financialization stories invite the fantasy that the route to just and sustainable economies and societies runs through ‘confronting finance’ or through struggles over the scope and form of financial activity. This risks glossing over the exploitative and unsustainable nature of capitalism, full stop. Stories about financialization in this way can inadvertently make it harder for us to connect up the transformation of finance over recent decades with the shifting terrain of capitalist and imperialist exploitation and commodification. While we can credit the financialization debate with often raising a vital set of questions about the contemporary transformations of capitalism and the place of finance in it, the concept of ‘financialization’ itself closes down the range of meaningful answers to these questions. Talking in terms of financialization is a dead-end if we want to understand the nature of contemporary capitalism.
If the book’s first contribution is to develop an extended critique of ‘financialization’, its second is to lay the groundwork for an alternative way of approaching the power of finance without losing sight of the wider contradictions of capitalist accumulation.
It does this by engaging with a range of Marxist thought on money, finance, and forms of exploitation. We need to get away from twin, equally unhelpful poles that have tended to dominate these debates: On one hand, in some quarters we find a dogmatic assertion that value can only be created by labour, and finance as an extension must be a set of ‘fictitious’, ‘parasitic’, or ‘speculative’ somehow detatched from the ‘real’ economy. On the other, a good number of recent considerations have suggested that the rise of finance means that we must rethink ‘value’ such that it is no longer necessarily dependent on production and labour.
I try to get away from this impasse by starting from the premise that risk and speculation are core to the operation of capital, full stop. Capital, understood in Marx’s terms as ‘value in process’, is a bet that abstract values can be realized through the exploitation of concrete labour and nature in a specific place and time -- a point stressed by a good deal of ‘value-form’ Marxist scholarship. Financial practices are, in the first instance, means by which capital and labour seek to manage or displace the tensions between the impersonal compulsions generated by capitalist social relations and the uneven geographies of actually-existing exploitation. Financial relations are in this sense an extension of the basic logics of capitalism, not deviations from them. All capital is fundamentally speculative. Finance capital depends on and emerges from dispersed and uneven processes of exploitation, and is integral to the whole circuit of capital.
Critiques of contemporary capitalism, then, must keep in view the whole circuit of social relations through which value is unevenly realized. The shifting balance of capitalist profits between ‘financial’ and ‘productive’ capitals, which even Marxist variants of the financialization narrative ultimately stress, is much less important than understanding the concrete ways that financial accumulation is entangled with and depends on the concrete exploitation of labour and nature. In order to do so, the book draws on and elaborates on David Harvey’s useful but underdeveloped suggestion (from Limits to Capital) that finance capital must be understood as a contradictory process rather than a unitary ‘power bloc’ within capital. Financial profits are in need of continual realization through the concrete exploitation of labour and nature, which is uncertain at all points. These processes generate contradictions which must be continually navigated and governed.
The plan is that the book will give a genealogy and critique of financialization debates, then flesh out the ‘process’ view above in relation to recent debates about finance and value, before digging into debates about finance and production, finance and nature, and finance and the state from this angle. Now I just have to write it…
Anyways, over the next year or so I’ll be trying to hammer all of this into a book-like shape. Expect this blog to feature a lot of the rabbit holes this is inevitably going to take me down in the meantime.