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Profiting Without Producing: How Finance Exploits Us All
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.
416 pages, Paperback
First published November 1, 2013
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Displaying 1 - 13 of 13 reviews
March 7, 2016
An outstanding book. Lapavitsas has granted scholars a great favour here. He has done the heavy intellectual thinking about finance, finance capitalism and financialization. His research commences in the 1970s and explores the decline in regulation of the banking sector. The GFC was not simply caused by overconfident fools trading in derivatives. It was one end point (there have been many - and there will be many more) of a delusional period that binarized public accountability, transparency and regulation against dynamic, exciting, money money money let's make lots of money, markets.
The usefulness of this binary collapsed in 2007/8. But what makes this book important is that Lapavitsas does not end or dwell in the GFC itself. Instead, he has kept the clock moving and showed the impact on public finances (and therefore public 'goods' such as health, education and the wider functions of citizenship) because 'the state' bailed out ruthlessly greedy banks. While the banks have continued their practices and behaviours, 'the state' has been left to pay the bill. That bill has resulted in austerity politics, where the most vulnerable members of our culture - children, the elderly, men and women with impairments, the sick, the unemployed, the underemployed, the homeless - are living (and dying) in the half life of radioactive financialization.
This is a detailed book that picks the scab of the political economy. It reveals the maggots still living in finance capitalism. The disconnection between 'the banks' and 'citizenship' is clear. Tragically - and as this book clearly shows - the GFC may be over the banks. We will be paying for their risk and greed for decades.
The usefulness of this binary collapsed in 2007/8. But what makes this book important is that Lapavitsas does not end or dwell in the GFC itself. Instead, he has kept the clock moving and showed the impact on public finances (and therefore public 'goods' such as health, education and the wider functions of citizenship) because 'the state' bailed out ruthlessly greedy banks. While the banks have continued their practices and behaviours, 'the state' has been left to pay the bill. That bill has resulted in austerity politics, where the most vulnerable members of our culture - children, the elderly, men and women with impairments, the sick, the unemployed, the underemployed, the homeless - are living (and dying) in the half life of radioactive financialization.
This is a detailed book that picks the scab of the political economy. It reveals the maggots still living in finance capitalism. The disconnection between 'the banks' and 'citizenship' is clear. Tragically - and as this book clearly shows - the GFC may be over the banks. We will be paying for their risk and greed for decades.
November 13, 2015
Certainly some thorough research on 'financialization' - though I'm not sure if it was all required for his argument, which was that financial institutions have become (and are systemically inclined to become) parasitic in modern capitalism. The shift of losses from the bursting of the financial bubble to the public, and the consequential shifting of sovereign debt to workers are examples of this parasitism.
What was interesting in the book was the analysis of the evolution of commodity-money and credit-money over the past couple of hundred years - complicating our understanding of exactly what we are talking about when we talk about money. Also interesting was the discussion of the reversal of capital flows from developing to developed countries as the developing countries are forced to hoard US dollar reserves so as to be able to get credit on the world market: "The reversal of capital flows has entailed significant costs for developing countries, resembling the imposition of an informal tribute paid by developing to developed countries, above all, to the US" (p.246).
And the advice to re-introduce public banking was interesting - taking away the public guarantees that allow private financial institution to engage in 'regulator arbitrage' - that is, fraud. Public banking would better support the advancement of the public interest.
I was not sure at times that his solutions to the negative impacts of financial capitalism were first steps to socialism - it seems that he wants to stop this form of predatory capitalism without addressing the traditional form of predatory capitalism.
Nonetheless, an interesting book.
What was interesting in the book was the analysis of the evolution of commodity-money and credit-money over the past couple of hundred years - complicating our understanding of exactly what we are talking about when we talk about money. Also interesting was the discussion of the reversal of capital flows from developing to developed countries as the developing countries are forced to hoard US dollar reserves so as to be able to get credit on the world market: "The reversal of capital flows has entailed significant costs for developing countries, resembling the imposition of an informal tribute paid by developing to developed countries, above all, to the US" (p.246).
And the advice to re-introduce public banking was interesting - taking away the public guarantees that allow private financial institution to engage in 'regulator arbitrage' - that is, fraud. Public banking would better support the advancement of the public interest.
I was not sure at times that his solutions to the negative impacts of financial capitalism were first steps to socialism - it seems that he wants to stop this form of predatory capitalism without addressing the traditional form of predatory capitalism.
Nonetheless, an interesting book.
Shelved as 'did-not-finish'
January 4, 2016Are Marxist economists always required to discuss Marx, or are they allowed to develop an interest in reality 'qua' reality (and not 'qua' evidence that Marx's theories are still sound)? Embarassing.
January 2, 2016
The economic crisis of 2007 to 2009 was a global phenomenon brought about by problems with the economic system itself, argues Costas Lapavitsas, an economist and member of the Greek Parliament. In his book Profiting Without Producing, he explains how since the 1970s, there has been increasing reliance upon the financial (i.e., the banking) sector to create profits, and thus it is no surprise that the most recent crises are financial crises, crises out of the banking system and not out of the productive sector of the economy. The financial sector has grown because of a problem in the productive sector. (Explanations vary as to what is wrong with the productive sector, but economist Robert Brenner in his book
The Economics of Global Turbulence
has argued that the real problem there is that businesses have been investing and producing redundant technologies and goods and services to help create artificial booms but cannot sustain the investment because the goods, services, and technologies they produce are already at overcapacity.) Whatever the problem with the productive sector may be, Lapavitsas writes that the new collusion between governments and banks represents an epochal transformation that has not been seen since the end of the 19th or early 20th century, but which is considerably more advanced. This new epoch of financialization or finance capitalism has arisen because the circulation of money has grown faster than production and has allowed for new sources of profit. It is a key feature of developed countries and there are efforts to integrate developing countries into these global financial flows.
This new epoch of finance capitalism backed by governments involves a relationship with the banks, households, and non-banking enterprises. Banks have begun to reduce the amount of lending they do to non-banking enterprises like big businesses and increase the amount of lending they do to other banks and to households, especially with the latter in the form of mortgages for homes. The profits are extracted from the income flow to other banks and to households and banking enterprises' own investments and involvement in money stocks.
As banks make money more readily available to households, the amount of borrowing households do increases, particularly in terms of mortgages, but also in terms of school loans and money set aside for pensions (for health insurance and retirement, for example). Households become increasingly reliant on borrowing for their livelihood because the goods and services they traditionally obtained through public provision just are not available. Developed countries differ in terms of the amount of public provision they provide, and you can find that the amount of borrowing households do from banks is correlated with the degree to which public provision like housing, education, and health are provided by governments. More public provision is provided in Germany, for example, than the United States so there is less borrowing from banks in Germany. The more households borrow, the more their sources of income become fields of profit-making for banks, in effect allowing banks to expropriate money from ordinary people instead of through traditional productive capacities, through lending to businesses, say.
Governments are able to impose some controls over this flow of money through the creation of money themselves. When it was discovered during the last couple of financial crises, 2001 to 2003 and 2007 to 2009, that the banks had been giving out loans to some of the poorest workers in the United States and repackaging these loans to sell to other banks and creditors, the government response was not to regulate this activity but to save the large lending banks (like Fannie Mae and Freddie Mac) by lowering interest rates at which these reckless banks could borrow money to nearly 0 per cent and giving public funds (your tax dollars) to these private banks to help them recover. The basic idea around this public policy is that governments need to restore financial profitability by making the public subsidize the loss. Any other costs are to be made up for by businesses, who in order to continue to thrive then cut labor costs and wages.
The final move on behalf of financialization, led particularly by the United States government, is to encourage developed and developing countries to further tie their currency to the dollar (effectively the world currency) and integrate as many other countries into the financial system. What this does for countries like Turkey, Brazil, Mexico and Korea is that as foreign banks enter these countries and these countries buy up more U.S. dollars, the flow of money does not in terms of net value help these countries but flow back into the economy of the U.S. In the end, developing and developed countries do not really benefit in terms of better livelihood for their people from these deals because these mechanisms create new economic dependence on the U.S. dollar and the U.S. economy.
Lapavitsas does think there is a longterm way out of this epoch of finance capitalism. It involves a three-point program. He encourages citizens in their respective countries to first fight for public policy to invest in their national companies, in order to increase the amount of productivity in these companies through public subsidy. Since tax dollars are already subsidizing the broken banking system anyway, he also encourages countries to push legislation to gain public ownership and control over banks. That way, ordinary citizens can impose regulations over the directions in which banks spend and profit through the stock market. And the final proposal is a push for more legislation that provides public provision for housing, health, and education in order to decrease the reliance on private financial institutions. He doesn't really think this reversal will happen any time soon, if at all, but nonetheless believes that any move in this direction would be the right move.
Lapavitsas' book is not fun to read by any means. It is too heavy on theory in order to make what should be a basic point, namely that central banks and other smaller banks, in collusion with governments, are essentially predatory on ordinary people's household funds. He invokes Karl Marx as well as a host of other obscure economists and economic theories in order to make the point, which is unnecessary. Ordinary people get the point.
This new epoch of finance capitalism backed by governments involves a relationship with the banks, households, and non-banking enterprises. Banks have begun to reduce the amount of lending they do to non-banking enterprises like big businesses and increase the amount of lending they do to other banks and to households, especially with the latter in the form of mortgages for homes. The profits are extracted from the income flow to other banks and to households and banking enterprises' own investments and involvement in money stocks.
As banks make money more readily available to households, the amount of borrowing households do increases, particularly in terms of mortgages, but also in terms of school loans and money set aside for pensions (for health insurance and retirement, for example). Households become increasingly reliant on borrowing for their livelihood because the goods and services they traditionally obtained through public provision just are not available. Developed countries differ in terms of the amount of public provision they provide, and you can find that the amount of borrowing households do from banks is correlated with the degree to which public provision like housing, education, and health are provided by governments. More public provision is provided in Germany, for example, than the United States so there is less borrowing from banks in Germany. The more households borrow, the more their sources of income become fields of profit-making for banks, in effect allowing banks to expropriate money from ordinary people instead of through traditional productive capacities, through lending to businesses, say.
Governments are able to impose some controls over this flow of money through the creation of money themselves. When it was discovered during the last couple of financial crises, 2001 to 2003 and 2007 to 2009, that the banks had been giving out loans to some of the poorest workers in the United States and repackaging these loans to sell to other banks and creditors, the government response was not to regulate this activity but to save the large lending banks (like Fannie Mae and Freddie Mac) by lowering interest rates at which these reckless banks could borrow money to nearly 0 per cent and giving public funds (your tax dollars) to these private banks to help them recover. The basic idea around this public policy is that governments need to restore financial profitability by making the public subsidize the loss. Any other costs are to be made up for by businesses, who in order to continue to thrive then cut labor costs and wages.
The final move on behalf of financialization, led particularly by the United States government, is to encourage developed and developing countries to further tie their currency to the dollar (effectively the world currency) and integrate as many other countries into the financial system. What this does for countries like Turkey, Brazil, Mexico and Korea is that as foreign banks enter these countries and these countries buy up more U.S. dollars, the flow of money does not in terms of net value help these countries but flow back into the economy of the U.S. In the end, developing and developed countries do not really benefit in terms of better livelihood for their people from these deals because these mechanisms create new economic dependence on the U.S. dollar and the U.S. economy.
Lapavitsas does think there is a longterm way out of this epoch of finance capitalism. It involves a three-point program. He encourages citizens in their respective countries to first fight for public policy to invest in their national companies, in order to increase the amount of productivity in these companies through public subsidy. Since tax dollars are already subsidizing the broken banking system anyway, he also encourages countries to push legislation to gain public ownership and control over banks. That way, ordinary citizens can impose regulations over the directions in which banks spend and profit through the stock market. And the final proposal is a push for more legislation that provides public provision for housing, health, and education in order to decrease the reliance on private financial institutions. He doesn't really think this reversal will happen any time soon, if at all, but nonetheless believes that any move in this direction would be the right move.
Lapavitsas' book is not fun to read by any means. It is too heavy on theory in order to make what should be a basic point, namely that central banks and other smaller banks, in collusion with governments, are essentially predatory on ordinary people's household funds. He invokes Karl Marx as well as a host of other obscure economists and economic theories in order to make the point, which is unnecessary. Ordinary people get the point.
August 28, 2016
Lapavitsas challenges some of the preconceptions about financialization and provides a very carefully researched examination of the true nature of financialization in the major industrialized countries, and what it has meant for the subordinate classes under this financialized neoliberalism.
January 13, 2017
Πολύ καλό βιβλίο! Με ενθουσίασε και με έβαλε σε πολλούς προβληματισμούς! σίγουρα μετά απο αυτό θα εμβαθύνω περισσοτέρο στα πολιτικά κατασκευάσματα!
June 6, 2021
"Confronting financialization includes reasserting the importance of public housing, health, education, pensions, and consumption more generally. It entails the re-imposition of a public spirit across these fields and the ascendancy of the notion of a public right to access basic goods and services...[it] cannot be confronted without re-establishing the ideological primacy of the collective over the individual, and of the public over the private."
Lapavitsas details the pernicious mechanisms by which the financial industry exploits all parties ripe for extraction. He situates his Marxist analysis within a historical overview of the rise of financialization, with special attention paid to the late 2000s crises in the U.S. and Europe. The classic neoliberal-era cocktail of deregulation, liberalization and privitazation has set the stage for rising inequality, devastatingly high personal debt burdens, and broad instability.
"The rise of finance and the penetration of economic life by financial practices have exacerbated the inherent propensity of capitalist accumulation toward instability and crisis."
Here, the author explains how crises are part and parcel of financialized capitalism, which affects micro personal incomes up through macro international capital flows. This framework is rationalized under free market ideology and buttressed by a sharp reduction in the provision of basic social services. We are left with a web of deeply embedded problems which the public ownership model proposed in the final pages seeks to correct.
Admittedly, this took me a while to get through after first getting stuck in the vocab-rich background chapters. With only a handful of economics classes under my belt and none in finance, much of the details went over my head. The content of this book is not widely accessible. That said, the author cannot be faulted for my lack of subject knowledge, and those with experience in related fields would be able to grasp the entirety of his arguments. But if you're like me, feel free to just focus on part three.
Lapavitsas details the pernicious mechanisms by which the financial industry exploits all parties ripe for extraction. He situates his Marxist analysis within a historical overview of the rise of financialization, with special attention paid to the late 2000s crises in the U.S. and Europe. The classic neoliberal-era cocktail of deregulation, liberalization and privitazation has set the stage for rising inequality, devastatingly high personal debt burdens, and broad instability.
"The rise of finance and the penetration of economic life by financial practices have exacerbated the inherent propensity of capitalist accumulation toward instability and crisis."
Here, the author explains how crises are part and parcel of financialized capitalism, which affects micro personal incomes up through macro international capital flows. This framework is rationalized under free market ideology and buttressed by a sharp reduction in the provision of basic social services. We are left with a web of deeply embedded problems which the public ownership model proposed in the final pages seeks to correct.
Admittedly, this took me a while to get through after first getting stuck in the vocab-rich background chapters. With only a handful of economics classes under my belt and none in finance, much of the details went over my head. The content of this book is not widely accessible. That said, the author cannot be faulted for my lack of subject knowledge, and those with experience in related fields would be able to grasp the entirety of his arguments. But if you're like me, feel free to just focus on part three.
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February 28, 2025Very quick thoughts:
this book serves as the summation of Lapavitsas' previous output, though at times resembling more of a bricolage than a synthesis. For me, the 2003 'Social Foundations...' is superior in laying out the theoretical framework taken up here, though without any development of a financialisation thesis. The most commendable part of this framework is its strict insistence on the relation between real accumulation and finance.
I find Lapavitsas' thought immensely helpful and am broadly in agreement with it. The political conclusions towards the end of this book are disappointingly brief and perhaps reveal the difficulties that a politics borne out of opposition to contemporary finance face. Though I would not level this accusation towards Lapavitsas per se, I think it applies well to fellow travellers of the financialisation thesis, particularly in post-keynesian anti-rentierism (which Lapavitsas rightly opposes). This is all the more disappointing considering Lapavitsas� insistence on returning to real accumulation to find the source of finance. Struggles in accumulation seem to be forgotten by the end of the book.
More attention is paid here to the problems of data and methodology than in Lapavitsas' journal output around the same time. This is a theme productively developed with Soydan in a recent working paper, which pertains to specific problems for developing countries. The same paper makes a useful strict distinction between financial deepening, liberalisation and financialisation.
this book serves as the summation of Lapavitsas' previous output, though at times resembling more of a bricolage than a synthesis. For me, the 2003 'Social Foundations...' is superior in laying out the theoretical framework taken up here, though without any development of a financialisation thesis. The most commendable part of this framework is its strict insistence on the relation between real accumulation and finance.
I find Lapavitsas' thought immensely helpful and am broadly in agreement with it. The political conclusions towards the end of this book are disappointingly brief and perhaps reveal the difficulties that a politics borne out of opposition to contemporary finance face. Though I would not level this accusation towards Lapavitsas per se, I think it applies well to fellow travellers of the financialisation thesis, particularly in post-keynesian anti-rentierism (which Lapavitsas rightly opposes). This is all the more disappointing considering Lapavitsas� insistence on returning to real accumulation to find the source of finance. Struggles in accumulation seem to be forgotten by the end of the book.
More attention is paid here to the problems of data and methodology than in Lapavitsas' journal output around the same time. This is a theme productively developed with Soydan in a recent working paper, which pertains to specific problems for developing countries. The same paper makes a useful strict distinction between financial deepening, liberalisation and financialisation.
December 19, 2016
Lapavitsas situates financialisation as a transformation of capitalism on a par with the emergence of monopolistic joint stock enterprise at the end of the 19th century. This had produced a long boom that lasted until the 1970s.
After the 1970s there were ‘profound changes in production methods deriving from information and telecommunications technologies.� TNCs became dominant over production and trade. Global productive capacity shifted from the west to the east.
“Meanwhile the institutional framework of capitalist activity has been altered as deregulation has prevailed in important markets, above all for labour and finance.� For all this accumulation has lack dynamism, inequality increased, and crises have been sharper and more frequent.
The sluggishness in the basic driver of growth meant that an ‘asymmetry� emerged between the spheres of production and the ballooning sphere of circulation. This has happened because of the changing behaviour of non-financial enterprises � banks and households. � This had led to the rise of profits accruing from financialisation � including a possible new form of profit not related to surplus value.
Lapavitsas points to the apparent paradox of making the role of banks decisive in accounting for financialisation. The more obvious cause seems to be the expanding and changing role of financial markets. But much of this emanates from innovations by banks. The most fundamental is the growth of derivative markets in recent years. He explains that they lie at the heart of the derivatives markets which have been such a prominent feature of financialisation. They play the role of price-making skills and contribute their general organisational capabilities of banks. The dark side to all this is that their domination of derivatives markets means that they are even capable of manipulating the key market rate on the basis of which derivative prices are formed. To summarise his position, “The vast growth of derivative markets reflects in part the turn of banks towards trading in open financial markets which is one of the fundamental tendencies of financialisation. In sum, at the root of financialisation lie the vast banks of mature and other mature economies.�
Even deeper roots for these developments are to be found in the changes that money has gone through since the 1970s, with the severance of the link with gold when the Bretton Woods agreement was terminated, the rise of fiat money, and the emergence of the US dollar as de factor world money. Money in these latter forms are seen as having made its mark on the social outlook of financialised capitalism. “Communal and associative bonds have shrunk; public provision has generally retreated and money has been re-strengthened as the pivot of a broad range of social interactions.�
But despite this financial capitalism is inherently chaotic:
“The term ‘global financial system� is in practice a misnomer: global finance amounts to a jumble of financial flows, often undertaken by institutions that have global reach. There is ultimately no sense of ordered and regular interaction among the many global agents.�
For Lapavitis the components of finance do not in themselves produce monetary value but merely intervene in its advance and payment. For finance to emerge as a system the prerequisite is that social relations exist in such ways that “the deployment, expansion and accrual of monetary value across the economy could be taken for granted by participants in financial transactions.�
The retreat of labour, evidenced by the growth of unemployment and the decline of the share of GDP being distributed in wages, deregulation and the growth of inequality were part and parcel of the neoliberal ideology that permitted the turn towards financialisation. Despite the claims made for an economic miracle, productivity remained flat across the period since the 1970s and growth was typically weak. As Lapavitis argues:
“The flows of loanable capital and the financial revenue relative to GDP point to a cumulatively greater weight of finance in the economy. Above all, financial profits have become a larger part of total profits, even though employment in the financial sector has been relatively stagnant. Given that finance is an intermediary activity that does not generate value and surplus value, the source of financial profit lies in profits and incomes created in other parts of the economy.�
The chronology for the rise of financialisation therefore follows this timeline:
1970s � End of the value of money being linked to gold.
1970s-80s � Surplus dollars accumulate across the world as it becomes the world medium of exchange.
1980s � Banks take on role as mediating the value of money and develop new functions managing the value of assets and derivatives. Growth of credit. Simultaneously the power of the working class to wrestle its share of value from the system is severely reduced. Social needs increasingly mediated by markets � housing especially.
1990s � “Subordinate financialisation� extends to developing countries who are forced to maintain dollar reserves as insurance against balance of payment crisis.
2000s � The system tailspins into crisis as the weakness of regulation brings higher levels of risk into the circuits of financial flows, with the subprime mortgage crisis triggering the near collapse of world banking.
The book concludes with a discussion about the possibilities for re-regulating financial capitalism and comes to some pessimistic conclusions. Both the ‘market-negating� approaches that had sought to limit the expansion of finance in the 1930s and the ‘market conforming� approaches of the 1990s and 00s are in adequate to the task. The book concludes with a call for a direct confrontation with the fundamental logic of financialisation which would involve, amongst other things, ending the dominant position of the market in areas like housing, healthcare and public education.
After the 1970s there were ‘profound changes in production methods deriving from information and telecommunications technologies.� TNCs became dominant over production and trade. Global productive capacity shifted from the west to the east.
“Meanwhile the institutional framework of capitalist activity has been altered as deregulation has prevailed in important markets, above all for labour and finance.� For all this accumulation has lack dynamism, inequality increased, and crises have been sharper and more frequent.
The sluggishness in the basic driver of growth meant that an ‘asymmetry� emerged between the spheres of production and the ballooning sphere of circulation. This has happened because of the changing behaviour of non-financial enterprises � banks and households. � This had led to the rise of profits accruing from financialisation � including a possible new form of profit not related to surplus value.
Lapavitsas points to the apparent paradox of making the role of banks decisive in accounting for financialisation. The more obvious cause seems to be the expanding and changing role of financial markets. But much of this emanates from innovations by banks. The most fundamental is the growth of derivative markets in recent years. He explains that they lie at the heart of the derivatives markets which have been such a prominent feature of financialisation. They play the role of price-making skills and contribute their general organisational capabilities of banks. The dark side to all this is that their domination of derivatives markets means that they are even capable of manipulating the key market rate on the basis of which derivative prices are formed. To summarise his position, “The vast growth of derivative markets reflects in part the turn of banks towards trading in open financial markets which is one of the fundamental tendencies of financialisation. In sum, at the root of financialisation lie the vast banks of mature and other mature economies.�
Even deeper roots for these developments are to be found in the changes that money has gone through since the 1970s, with the severance of the link with gold when the Bretton Woods agreement was terminated, the rise of fiat money, and the emergence of the US dollar as de factor world money. Money in these latter forms are seen as having made its mark on the social outlook of financialised capitalism. “Communal and associative bonds have shrunk; public provision has generally retreated and money has been re-strengthened as the pivot of a broad range of social interactions.�
But despite this financial capitalism is inherently chaotic:
“The term ‘global financial system� is in practice a misnomer: global finance amounts to a jumble of financial flows, often undertaken by institutions that have global reach. There is ultimately no sense of ordered and regular interaction among the many global agents.�
For Lapavitis the components of finance do not in themselves produce monetary value but merely intervene in its advance and payment. For finance to emerge as a system the prerequisite is that social relations exist in such ways that “the deployment, expansion and accrual of monetary value across the economy could be taken for granted by participants in financial transactions.�
The retreat of labour, evidenced by the growth of unemployment and the decline of the share of GDP being distributed in wages, deregulation and the growth of inequality were part and parcel of the neoliberal ideology that permitted the turn towards financialisation. Despite the claims made for an economic miracle, productivity remained flat across the period since the 1970s and growth was typically weak. As Lapavitis argues:
“The flows of loanable capital and the financial revenue relative to GDP point to a cumulatively greater weight of finance in the economy. Above all, financial profits have become a larger part of total profits, even though employment in the financial sector has been relatively stagnant. Given that finance is an intermediary activity that does not generate value and surplus value, the source of financial profit lies in profits and incomes created in other parts of the economy.�
The chronology for the rise of financialisation therefore follows this timeline:
1970s � End of the value of money being linked to gold.
1970s-80s � Surplus dollars accumulate across the world as it becomes the world medium of exchange.
1980s � Banks take on role as mediating the value of money and develop new functions managing the value of assets and derivatives. Growth of credit. Simultaneously the power of the working class to wrestle its share of value from the system is severely reduced. Social needs increasingly mediated by markets � housing especially.
1990s � “Subordinate financialisation� extends to developing countries who are forced to maintain dollar reserves as insurance against balance of payment crisis.
2000s � The system tailspins into crisis as the weakness of regulation brings higher levels of risk into the circuits of financial flows, with the subprime mortgage crisis triggering the near collapse of world banking.
The book concludes with a discussion about the possibilities for re-regulating financial capitalism and comes to some pessimistic conclusions. Both the ‘market-negating� approaches that had sought to limit the expansion of finance in the 1930s and the ‘market conforming� approaches of the 1990s and 00s are in adequate to the task. The book concludes with a call for a direct confrontation with the fundamental logic of financialisation which would involve, amongst other things, ending the dominant position of the market in areas like housing, healthcare and public education.
January 11, 2022
A very difficult book to read for one not versed in economics and finance but an useful book nonetheless.
April 4, 2022
good introduction to the problem of financialization in modern capitalism
April 14, 2025
Finans ve politikayı bağlamasını son 2 sayfada anlıyorsunuz . Çok doğru bir yaklaşım anlatımına bayıldım. Kesin tavsiye . Uluslararası finansa geniş açı ile bakmış .
This entire review has been hidden because of spoilers.
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July 30, 2015Review Aaron Leonard
Economics professor Costas Lapavitsas' new book Profiting Without Producing: How Finance Exploits Us All, delving into the elusive world of finance, that place where fortunes are made seemingly out of nothing, but with such dramatic impact on the world economy. Lapavitsas tackles one of the most innovative and perhaps most controversial concepts in political economy: financialization. Aaron Leonard recently corresponded with professor Lapavitsas via email to ask him about his new book and its wider implications.
You write, "Considerable care is required not to lapse into treating finance as a parasitical or speculative set of activities, thus assigning to financialization a purely pathological character that would be misleading." What exactly is financialization and what is the danger of simplistically dismissing it?
There is no generally agreed meaning to financialization. I understand it as a historic transformation of the capitalist economy -- an epochal change that has taken place during the last four decades.
It would be a mistake to think of financialization as simply the incredible rise of finance, or the growth of speculative profits. Financialization is fundamentally about the transformation of industrial and commercial enterprises, seeking profit in financial activities; the transformation of banks, seeking profits in financial transactions and in dealing with households; the transformation, finally, of households, being sucked into the operations of finance to borrow but also to manage pensions and insurance. It represents a deep change of economic but also social life, affecting even ethics and morality.
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