The Political Economy of Financialization and Its Consequences

Abstract

The current economic situation in the United States and the even worse disaster in Southern Europe is a result of the exhaustion or lack of efficacy of the historical sources for the accumulation of capital combined with the political power of plutocracy that cannot, or will not, do anything but exacerbate crisis and stagnation. Accumulation is the dynamic of capitalism, the wherewithal to invest and make more profits in new avenues of business development—when accumulation reaches limits, crises come about. Crisis can take different expressions—drastic falls in asset values, sharp decline in economic activity, steep rise in unemployment…as in the Great Depression of the 1930s and, again, in 2008–2009. More common is recession of several years’ duration, as in periods in the 1980s, the 1990s, and the first years of the 2000s. Notably, these recessions have increased in frequency, length, and depth since the 1970s, reflecting a deepening stagnation of the economy. Rates of economic growth have steadily declined in the last decades, with GDP growth of over 4% in the 1950s and 1960s, to an average of 3% in the following three decades, falling to 2% from 2000 to the crisis of 2008. The mode of economic recovery in America and Europe since the latest crash has nothing to do with the opening of new avenues of economic development and everything to do with resurgence of speculative activity (financed at near zero interest by the Federal Reserve) that was the immediate root of the 2007–2009 debacle, but with the backdrop of vast expenditures for war abroad, and “security” and repression at home, and, most of all, with the heightened exploitation of labor resulting in declining income and short-falls in effective demand.