Sotiropolous and Milios on Crisis and Fincialization

Whilst Re-reading Sotiropolous, Milios and Lapatsioras’s work on financialization, I was struck by their intriguing and counter intuitive analysis of financialization. In essence, in contrast to accounts that argue that financialization developed as a parasitic attempt to resuscitate profits in tandem with the wage squeeze  in the aftermath of the crisis of Keynesianism in the 1970s that failed, ultimately triggered the crisis and was thus unable to overcome this inexorable post-70s decline, they make the argument that financialization has always been a necessary aspect of capitalism and that its emergence attests to the victory of capital which nonetheless comes at the price of its inherent tendency to break out in periodic crises.

As they put it in outline in the first part of the book:

‘Given the social correlations of power, technical change and financial innovation should be viewed as emerging from the tendencies determining the capitalist system as a whole, that is, from the trends regulating the expanded reproduction of capital.

For instance, with regard to the process of relative surplus-value production, Marx argued that technological innovation reduces the value of subsistence goods and therefore the value of a given wage basket (which itself is the result of class struggle). Thus, the same ‘real’ wage costs less to the capitalist and aguments the surplus-value produced. This is , indeed, a general analytical schema, which must be extended to finance as well. Innovation permits finance to reach different categories of households (even those which are struggling with precarious jobs) and reduces the amount of money that the capitalist has to pay for real wages, which secures the reproduction of labour-power.

….

 

In fact, this is exactly what we have particularly experience as one of the aspects of the so-called financialization. A much discussed development concerns the higher risk transfer to the household sector. This means that both household debt and assets have been increased in relation to family incomes. In the light of the above analysis it is evident that financial innovation (in which subprime loans were just a minor moment) made room for relative money wage reductions. Recent trends in capitalism show that high indebtedness runs parallel to squeezed wages, declining income share, and increasing inequality. Nevertheless, in the spirit of Marx’s analysis we argue fro a different causality nexus than the one dominant in heterodox discussions. Increased indebtedness, based on competition-driven financial innovation, makes room for lower wages and not vice versa. From a Marxian point of view, it is absolutely misleading to associate the contemporary rise of debt with workers’ underconsumption or poor economic capitalist performance in Western societies. As will become evident in the rest of the book, the rise of finance does not imply a weak but a strong and deeply established capitalism , when the latter is seen as a system of class exploitation and capital valorization in the context of Marx’s analysis’. (pp. 56-6)

 

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About HR

Deep in the adjunct crackhole.
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