Volume 43, Number 168,
January-March 2012

The Financialization Crisis, Costas Lapavitsas (coordinator), Carlos Morera (compiler), iiec-unam
and clacso, 1st ed., 2011.

This book is a collection of articles that analyze the global financial crisis with a Marxist economic approach. The text addresses specific characteristics of neoliberalism in the face of profitability and real accumulation crises. The articles cite the financialization of the world economy as a main element in their characterization of neoliberalism and the 2008-2009 crisis. To a lesser extent, the book analyzes other fundamental themes, such as the transformation of work processes and income distribution, as well as the globalization of capital.

Contributions from Lapavitsas, Morera and Rojas cover the structural context of financialization, but only the latter links the process of financialization with the reworking of capital evaluation, which came about as a consequence of the structural profitability crisis of the 1960s. This concept is essential to understanding financialization. Concretely, Morera and Rojas situate financialization in the context of the profound structural transformation of the world economy characterized by the end of the structural crisis, the fall of real socialism and changes in the Chinese economy. Two chapters emphasize three aspects of real capital accumulation related to financialization: (i) work process transformations associated with new technologies, the deregulation of labor relations and the attack on salaries and working conditions, which led to an increase in working intensity and output; (ii) the weak process of real capital accumulation, as evidenced in paltry productivity growth and weak industrial dynamics, with the exception of the surge of new technologies during the 1990s in the United States, and (iii) the dominance of multinational corporations as a result of the concentration and centralization of capital.

Throughout this collection, financialization is defined as a systemic transformation of the structural relationship between the spheres of production and circulation, between productive capital and financial capital or between the sources of productive and financial earnings and investments, always in favor of the latter. The authors analyze the financial system and its connection to the basic needs of capital accumulation and financing for industrial and commercial capital. Three contributors have written interesting, theoretical reflections from a Marxist political-economic standpoint. Lapavitsas analyzes the relationship between "finances" and "industry," rejecting an approach based on the idea of the lazy capitalist profiteer. He argues that Hilferding´s concept of financial capital has no place in the current process of financialization. Dos Santos takes on the determination of prices and earnings in financial markets and their implicit social relationships. Finally, Panceira analyzes the monetary and financial dimensions of the crisis, making clear the distinction between crises with real causes and those with financial roots. The current crisis is of the latter category. He also covers the international dimension of financialization based on the concept of global money.

Contributions from Lapavitsas, Dos Santos, Dimsky (whose work is oriented towards racial discrimination) and Itoh (he makes a comparison with the Japanese economy) underline the new structure of the financial system in the context of financialization. The initial factor is found in the financing of large capitalist companies by withholding profits and directly issuing stocks and bonds. In the search for new profit sources, commercial banks set their sights on home loans and financial market intermediation, which was spurred on by financial liberalization and new information technologies. A home-oriented approach was buoyed by the privatization of home expenses both in the present (housing, education, health, etc.) and future (retirement funds). Market intermediation was incentivized by the new role of the stock market and capital market, as well as the rise of new, fundamentally derived players and financial instruments, such as the securitization and insuring of assets and risk management mechanisms. The resulting possibility of earning profits by speculation increased the systemic instability of capitalism. A fundamental concept that was born from this new structure is financial expropriation, or "exploitation" at the circulation level by extracting earnings from home incomes, mainly salaries, related to consumer credit and pension fund management. The authors make a special point to emphasize the classist nature of this expropriation, which is based on an asymmetric power relationship between workers and financial sector managers.

The book makes an important contribution in analyzing the international dimension of financialization. Morera and Rojas analyze capital flows, especially foreign direct investment, associated with the dominance of multinational corporations, productive relocation and the deregulation of the movement of productive capital and merchandise. They cite the global decrease in savings and investment rates and the directional change in savings-investment flows, especially portfolio investment, in both peripheral and central economies during the following time periods: 1978-1982, 1994-1998 and 2000-2007. The United States has been a net debtor since 1985, financed in large part by foreign public capital. Panceira also highlights the new international finance structure. Peripheral economies went from being dependent on external flows that cause financial crises to being a "stronghold" by accumulating reserves, and in many cases, foreign private debt, which provoked a surplus of capital in international financial markets. As a result, currency markets began to depend more on capital-money flows than capital-merchandise flows. Panceira, together with Lapavitsas and Dimsky, points to this situation as a cause behind the Federal Reserve's failure to control credit through setting interest rates beginning in 2004. This global financial framework, based on the dollar in its role as a global currency, implies new forms of expropriation and imperialistic relationships on a world level, with the United States as the principal beneficiary. Finally, Erguens writes about the entrance of Turkey into the process of financialization, illustrating the disastrous effects that befell peripheral economies.

Papadatos covers financialized monetary policy. Independent central banks have established themselves as an agent to safeguard the value of money-capital through inflation control policies, with historical roots in the high inflation of the 1970s. In the same vein, the role of these banks in the crisis has consisted of nationalizing losses and protecting private earnings by granting loans and acting as a market of last resort.

The mortgage bubble is set forth as the catalyst and fundamental cause of the global crisis. Lapavitsas, Dimsky and Itoh analyze the growth and burst of the bubble with respect to the process of financialization. They highlight the incentives for credit expansion, such as the financialization of salaries, including mortgage refinancing for purchasing, mechanisms to hide risk, such as securitization and insurance, and the surplus of capital in international markets, etc. All of these dynamics led to the mortgage spiral and the increase in housing prices.

In conclusion, this book is an excellent contribution to Spanish language texts analyzing the crisis from the point of view of financialization. This text is a must-read for academics, students and others interested in the topic.

Sergio Cámara
Autonomous Metropolitan University

Published in Mexico, 2012-2017 © D.R. Universidad Nacional Autónoma de México (UNAM).
PROBLEMAS DEL DESARROLLO. REVISTA LATINOAMERICANA DE ECONOMÍA, Volume 48, Number 191, October-December 2017 is a quarterly publication by the Universidad Nacional Autónoma de México, Ciudad Universitaria, Coyoacán, CP 04510, México, D.F. by Instituto de Investigaciones Económicas, Circuito Mario de la Cueva, Ciudad Universitaria, Coyoacán,
CP 04510, México, D.F. Tel (52 55) 56 23 01 05 and (52 55) 56 24 23 39, fax (52 55) 56 23 00 97, www.probdes.iiec.unam.mx, revprode@unam.mx. Journal Editor: Alicia Girón González. Reservation of rights to exclusive use of the title: 04-2012-070613560300-203, ISSN: pending. Person responsible for the latest update of this issue: Minerva García, Circuito Maestro Mario de la Cueva s/n, Ciudad Universitaria, Coyoacán, CP 04510, México D.F., latest update: Nov 13th, 2017.
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