Financialization and the crises of capitalism

Financialization and the crises of capitalism
Petra Dühnhaupt
Institute for International Political Economy Berlin, 2016
Level: advanced
Perspectives: Marxian Political Economy, Institutionalist Economics, Post-Keynesian Economics, Other
Topic: Capitalism, Crisis, financialization
Format: Working paper/Journal article
Link: http://hdl.handle.net/10419/140624

Photo by Chris Li on Unsplash

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Financialization and the crises of capitalism

Petra Dünhaupt | 2016


Abstract: Since the 1980s, the financial sector and its role have increased significantly. This development is often referred to as financialization. Authors working in the heterodox tradition have raised the question whether the changing role of finance manifests a new era in the history of capitalism. The present article first provides some general discussion on the term financialization and presents some stylized facts which highlight the rise of finance. Then, it proceeds by briefly reviewing the main arguments in the Marxian framework that proposedly lead to crisis. Next, two schools of thought in the Marxian tradition are reviewed which consider financialization as the latest stage of capitalism. They highlight the contradictions imposed by financialization that disrupt the growth process and also stress the fragilities imposed by the new growth regime. The two approaches introduced here are the Social Structure of Accumulation Theory and Monthly Review School. The subsequent part proceeds with the Post-Keynesian theory, first introducing potential destabilizing factors before discussing financialization and the finance-led growth regime. The last section provides a comparative summary. While the basic narrative in all approaches considered here is quite similar, major differences stem from the relationship between neoliberalism and financialization and, moreover, from the question of whether financialization can be considered cause or effect.

Key words: Financialization, Crisis, Periods of Capitalism, Heterodox Economics

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