Marx, the Falling Rate of Profit, Financialization, and the Current Crisis

Abstract

Marx claims that the moralistic search for the guilty parties of a crisis (the "speculators") is the other side of the coin of the naïve belief that crises are avoidable. According to this ideological illusion, a crisis always comes from outside; it is a pathology alien to the system. For Marx, on the contrary, crises result from the overproduction of capital and commodities, and overproduction stems from the contradiction between the development of social productive powers and the capitalist relationships of production. A crisis is, therefore, the moment when capitalism's contradictions and the limits to the development of capital (that are inherent in capital itself) emerge. In particular, according to Marx, capitalist society is characterized by a long-term tendency for the rate of profit to fall. This paper argues that this tendency, as well as the countervailing factors that Marx discusses, are very useful for understanding the current crisis, which is the outcome of more than thirty years of feeble growth and of difficult captial valorization, and the massive recourse to interest-bearing capital, that is, to financialization, to remedy the situation. A crisis of overproduction preceded the bursting of the credit bubble but was hidden by the bubble, such that when the bubble burst, it appeared to have created the crisis. The crisis that began in 2007 thus became a genuine, generalized crisis that destroyed capital on a global scale, which for Marx is necessary, along with the destruction of the means of production, to restore profits and restart accumulation. While it is unclear whether the current crisis has destroyed enough capital to improve the profitability of invested capital and thus launch renewed accumulation, one thing is certain: we are in a depressive scenario much worse than the recessions of the last few decades. This situation calls into question the rationality and social sustainability of the current mode of production and puts the issue of the possibility, indeed the necessity, of a "superior level of social production" back on the agenda.