Costas Lapavitsas

SOAS, University of London | SOAS

The ratio of financial to nonfinancial profits in the U.S. economy has risen greatly during the last four decades, a period often called the financialization of capitalism, but the reasons for the increase are not well understood. This article tackles the issue by developing a model that incorporates the relationships between financial and nonfinan...

This article considers the evolution of financialization in the U.S. economy by examining the profitability and the volume of profits of the financial sector relative to general profitability and total profits in the economy. It is shown that financial profitability rose strongly from the early 1980s to the early 2000s. Similarly, the volume of fin...

In the period following the Great Recession of 2007–2009 the financialization of the US economy reached a watershed characterized by stagnant financial profits, falling proportions of financial sector and mortgage debt, and rising proportion of public debt. The main macroeconomic indicators of financialization in the USA show structural breaks that...

The article charts the growth of the unstable, unequal and slow-growing system of financialized capitalism that has taken root in mature economies over the past 40 years, and outlines initial steps to disentangling businesses, services, workers and households from its grasp. There is no comparison with the gains in productivity that occurred at sim...

Financialization is a systemic transformation of capitalism that has occurred during the last four decades. This paper shows that the concept of financialization originates in Marxist theory, though its meaning remains unclear. It then proposes a theory of financialization as rooted in the altered behaviour of the fundamental agents of capitalist a...

Financialisation remains an unclear term in social science. We deploy a Marxist framework to establish that financialisation represents a structural transformation of advanced capitalist economies with three characteristic tendencies: non-financial enterprises have acquired capacity to engage in financial activities independently; banks have turned...

La financiarización de las economías capitalistas avanzadas durante las últimas tres décadas representa la expansión en la esfera de la circulación, mientras la esfera de la producción ha continuado enfrentándose a dificultades en el crecimiento de la rentabilidad y la productividad. En el transcurso de la financiarización las relaciones entre el c...

The crisis of 2007-9 has cast fresh light on the ascendancy of finance in recent years, a process that is often described as financialization. The concept of financialisation has emerged within Marxist political economy in an effort to relate booming finance to poorly performing production. Yet, there is no general agreement on what it means, as is...

In social science gifts are frequently contrasted with commodities. Commodities are assumed to stand for rationality and commercial gain, in short the economic realm. Gifts are presumed to be bearers of moral obligation and social concerns, that is, to represent the non-economic realm. However, it is shown in this article that commodities also rest...

El endeudamiento de España, Portugal y Grecia ha crecido en los últimos años debido principalmente a un sector privado que, incapaz de competir con éxito dentro de la zona euro, ha acumulado deuda tanto interna como externa. La deuda total - tanto pública como privada - plantea problemas graves para los bancos de los países del centro de la zona eu...

Financial regulation could be usefully differentiated into two approaches, first, regulating finance as a system and, second, regulating individual financial institutions. Both contain an aspect of market negation, thus directly influencing the returns to enterprises employed in the sphere of finance. However, the deployment of market negation vari...

The sovereign debt crisis that broke out in Greece at the end of 2009 is fundamentally due to the precarious integration of peripheral countries in the eurozone. Its immediate causes, however, lie with the crisis of 2007–2009. Speculative mortgage lending by US financial institutions and trading of resultant derivative securities by international b...

The crisis of 2007-9 resulted from a financial bubble marked by weak production, expanding bank assets, and growing household indebtedness. For these reasons the crisis casts light on the financialisation of capitalist economies. The literature on financialisation generally links weak production with booming finance; according to some, causation ru...

The crisis of 2007–9 represents a systemic failure of private banking. The private nature of banks has created opacity, and exacerbated problems of liquidity, bad assets and capital shortage. Furthermore, private banks have failed in information gathering and risk management, as well as in mediating the acquisition of vital goods by households. It...

Costas Lapavitsas considers the political economy of bloated finance and makes a case for establishing democratically-run public banks, which, he asserts, could strengthen the social and the collective in modern economies Copyright (c) 2009 The Author. Journal compilation (c) 2009 ippr.

The current crisis is one outcome of the financialisation of contemporary capitalism. It arose in the USA because of the enormous expansion of mortgage-lending, including to the poorest layers of the working class. It became general because of the trading of debt by financial institutions. These phenomena are integral to financialisation. During th...

Financialisation of advanced capitalist economies during the last three decades represents expansion of the sphere of circulation, while the sphere of production has continued to face difficulties of profitability and productivity growth. In the course of financialisation, relations between industrial/commercial capital, banks and workers have been...

Technological innovation has contributed to recent changes in the conduct and character of banking, but its impact has been contradictory. First, money-dealing transactions have become cheaper, but investment costs have increased and a broader range of services had to be provided. The cost efficiency of banks has not improved. Second, banks have de...

According to mainstream economic theory the contractual relationship between borrower and lender is characterized by asymmetry of information regarding the project to be financed. It is assumed that trust among credit participants is constructed individually as they collect and assess requisite information. In contrast, this paper argues that trust...

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During the last decades of Ottoman rule substantial textile industrialisation occurred in Macedonia, most prominently in the region of the town of Naoussa. Focusing on the town, this paper demonstrates the economic processes through which trade liberalisation in the 1830s eventually led to industrialisation. The emergence of industrial capitalism r...

In a recent debate in Economy and Society, Ingham criticized Marxist theory of money on the grounds that it relates money to commodities through the labour theory of value, while ignoring credit money. Ingham suggested instead that money is constituted by social relations characteristic of credit, namely relations of ‘promise to pay’. Drawing on Ma...

Money's emergence in commodity exchange remains an unresolved issue within economic theory. Current general equilibrium models offer an explanation that rests on the economic advantages of a universally accepted means of exchange that is partly established through social custom. These models neither fully explain money's unique ability to buy, nor...

The theoretical analysis of money as the universal equivalent in the opening chapters of Capital is a highly distinctive aspect of Marx’s theory of value. Neither classical political economy nor neoclassical economics offers a comparable analysis of the relationship between value and money. In Capital (and elsewhere, selectively cited below) Marx d...

In Finance Capital Hilferding suggests that, in the early stages of capitalist development, banks engage in short-term lending for “circulation” purposes, while concerning themselves with their liquidity. As capitalist development proceeds, banks lend longer-term for “investment” purposes, and their concern shifts to securing their solvency. Conseq...

The new interpretation (NI) offers a particular understanding of important problems in value theory, especially the value of money and labor power and the structure and dynamics of capitalist accumulation. The NI is to be welcomed for raising these issues but not for the way in which it has dealt with them. Above all, the NI falsely assumes that va...

Where does the power of money come from? Why is trust so important in financial operations? How does the swapping of gifts differ from the exchange of commodities? Where does self-interest stop and communal solidarity start in capitalist economies? These issues and many more are discussed in a rigorous, yet readable, manner in Social Foundations of...

In February 2001, Turkey experienced her third and deepest economic crisis in fifteen months. The importance of the event far exceeds its Turkish confines for the following two reasons. First, the crisis is closely linked to changes in class relations in Turkey due to internationalisation of production and finance. Second, more generally, the crisi...

This chapter critically examines the Post Keynesian horizontalist theory of money from a Marxian perspective. Horizontalist analyses are criticised from three angles. First, monetary theory should be historically specific. Second, credit money is an advanced form of money, created mostly as liabilities of financial institutions, and its supply is e...

Monetary theory based on commodity money possesses sound foundations for analysis of capitalist monetary phenomena. “Valueless” forms of money (fiat and credit) have their roots in the nature and functions of commodity money. The evolution of the form of money is explained by the adequacy of each particular form for the functions which money is cal...

This article addresses the issue of how the market and the non-market are to be understood especially by concentrating on the theory of money. For mainstream economics, the market is simply an institution facilitating exchange, money being the key instrument for alleviating the inefficiencies of barter. In contrast, recent work in other social scie...

The formation of money hoards, which underpins the demand for money, is typically treated by mainstream monetary theory as originating in the motives of the rational individual. In contrast, Marx’s discussion of money hoarding treats hoard formation as a necessary tendency of capitalist production and circulation rather than as a result of the indi...

This article reviews Robert Brenner's ‘The Economics of Global Turbulence’, New Left Review, May/June, 1998. Several decisive weaknesses of Brenner's contribution are identified. First, Brenner's theoretical treatment of capitalist competition and accumulation is in the spirit of Adam Smith and mainstream economics rather than Marx. Second, Brenner...

This paper presents the Marxist theory of the financial system and the capital markets. First, it surveys the orthodox literature on the relationship between finance and the economy. Then, the function of the capital markets is analysed. Finally the differences between the orthodox and the Marxist perspective are being explained.

RESUMO Este artigo discute, sistematicamente, a teoria pós-keynesiana da moeda e do crédito, usando-a como base para o desenvolvimento de uma teoria monetária pós-clássica. Os fundamentos desta última são apresentados com base numa crítica marxista das teorias pós-keynesianas horizontalistas. A alternativa aqui proposta parte das relações entre a m...

This paper provides an overall view of the recent development of the Japanese financial system. The profound crisis of the 1990s indicates that financial deregulation has met obstacles created by the fundamental underlying structure of Japanese industrial capitalism. The movement toward a market-based Anglo-Saxon financial system, at arms-length fr...

Karl Marx's opposition to the quantity theory of money, the distinction he drew between fiat and credit money, and the emphasis he laid on money hoard formation all reveal the influence of the Banking School. His own monetary work, however, provided important theoretical foundations, which the anti-quantity theory tradition lacked. First, Marx elab...