Financialisation and the periodisation of capitalism: appearances and processes

Abstract

This paper argues that the analysis of financial processes is essential for understanding changes in the financial system. Those processes give rise to appearances such as the statistical data that are the basis of most studies of financialisation. In their turn, this paper argues, financial processes are fundamentally determined by the structure of the financial system and, in particular, corporate finance which, through its effect on business investment, influences the dynamics of the capitalist system. That structure changes through particular phases of capitalist development. The author closest to this approach was Hyman P. Minsky. However, his approach was not especially systematic. The paper puts forward a more systematic periodization of capitalist through mercantile capitalism, classic, bank-based capitalism, finance capital, state finance capitalism, to pension fund capitalism and capital market inflation. The paper shows how each period ends with financing difficulties that are overcome with financial innovation leading to a new financial structure with corresponding changes in financial processes. The paper argues that the phase of capital market inflation, inaugurated by funded pension schemes in the last decades of the twentieth century, has come to an end in the illiquidity of capital markets that lies behind the 2008 financial crisis. The paper suggests that the measures of ‘unconventional monetary policy’ or ‘Quantitative Easing’ mark a new period of state finance capital with a return to the state support of a structurally illiquid capital market that prevailed in Europe and North America from the 1930s to the 1960s.