Over two decades ago, the financialization of capitalism joined the list of topics most hotly discussed by intellectuals and economists who follow Marxist theory. François Chesnais was one of the first authors among them to address the topic directly. A closing chapter of his 1994 book La mondialisation du capital, which studied the reorganization of productive capital during the ongoing global wave of liberalization, was devoted entirely to the subject of financialization. That chapter would be expanded into two in the book’s second edition, published three years later.
Also in 1997, in Monthly Review, Paul Sweezy published the article “More (or Less) on Globalization,” in which he pointed to the links between the stagnation of the world’s major economies, the growth of multinational corporate production, and “the financialization of the capital accumulation process.” Given the succession of financial crises wracking the world, and conventional economic theory’s flailing before them, the term would soon be popularized, inspiring a growing range of studies and research projects, many along Marxist lines.
Chesnais’s latest book, Finance Capital Today, emerges as the most polished attempt yet to clarify a number of lingering questions around the matter. Chesnais is well-equipped to confront these problems: he provides an exhaustive review of the debate over financialization, drawing on a vast institutional and non-institutional financial literature and tackling conceptual issues head-on. His book takes the discussion to a new level entirely.
Chesnais’s main thesis is that financialization is the profound, widespread dissemination of the characteristics of interest-bearing capital (as identified by Marx in volume 3 of Capital) throughout the capitalist system as a whole, through which its activity becomes “organically embedded in the fabric of social life.” The omnipresence of interest-bearing capital—the most flagrant form of the mystification of capital, in Marx’s view—thus cannot be dissociated from a consideration of the extreme degree of the concentration and centralization of capital that now characterizes the accumulation process.
Chesnais treats these concepts with clarifying precision, arguing that we must distinguish “finance capital” from “financial capital.” The former, in the definition made famous by Rudolf Hilferding—though its meaning may have since shifted—refers to the simultaneous, interconnected processes of the concentration and centralization of capital. Through the intensification of mergers and acquisitions, this phenomenon has produced today’s internationalized global banks, major transnational industrial and service corporations, and global commerce giants, all of them closely intertwined. Financial capital, meanwhile, denotes finance stricto sensu—or, as Chesnais puts it, “finance qua finance”: the process associated with the spectacular growth, over the last forty years, of the assets (bonds, stocks, derivatives) held and traded by financial corporations (major banks and funds) and by the financial departments of major corporations and transnational businesses.
According to Chesnais, finance capital and financial capital refer to distinct but related dimensions of contemporary capitalism. The most important result of their combined influence is that a general vision of capital as property has come to permeate that of capital as function. From the perspective of the substance of value, this means that the appropriation of surplus value grows increasingly distant from its source—whether because highly concentrated industrial capital holds outsized market power and the capacity for monopsony, because the predatory appropriation of the surplus value of weaker businesses comes to prevail over the direct exploitation of labor, or because the search for valorization has come to rest on fictitious assets whose connection to the production of surplus value is increasingly remote.
The swelling of financial markets, in parallel with their growing complexity and interdependence, has only deepened the immanent tendency of capital to become autonomous from its material supports—or, as Marx put it, “the autonomization of the form of surplus-value, the ossification of its form as against its substance, its essence.” For Chesnais, this push toward autonomy by financial capital has reached heights never before seen in the history of capitalism, bolstered by the support of central banks and governments. But we are left with the question: how did we get here? What led financial capital to this degree of autonomization?
The answer is complex, because it is directly related to the nature of the crisis the capitalist system has been experiencing for more than four decades—that of very low or even negative GDP growth. This in turn prompts another, equally crucial question: whether financialization is here to stay, inaugurating a new stage in the history of the system, or is instead a passing (perhaps cyclical) phenomenon, meaning that we might see a resumption of relatively sustained accumulation rooted in the production and direct extraction of surplus value.
Chesnais answers firmly that financialization is a new stage in the history of the capitalist system. His argument, however, does not merely rubberstamp circulationist interpretations, much less those which allege that theories of financialization affirm the full autonomization of the accumulation of capital in relation to the exploitation of labor and the appropriation of surplus value—quite the contrary.
As Chesnais sees it, the crisis of the last forty years is one of overaccumulation and overproduction, aggravated by a declining rate of profit. He views overaccumulation as an excess of production capacity in relation to its valorization, indicating problems of realization and the overproduction of goods; this comes alongside the persistent and growing plethora of capital seeking interest and to transform itself into “fictitious capital.”
In his retrospective, Chesnais recalls that the crisis of the 1970s may be explained by the rise in the organic composition of capital and the emergence of overproduction among national economies that, while interdependent, remained self-centered and autonomous. The system responded to this crisis in three ways: what Chesnais calls the neoconservative revolution, with the creation and implementation of global policies of liberalization and the deregulation of finance, commerce, and foreign direct investment (in effect, taking autonomy away from national economies); staunch support for China’s entry into the capitalist system; and, after the run of crises in the late 1990s, mass recourse to the creation of credit, with the implementation of a “debt-led growth regime.”
The latter two measures seemed to have prolonged the life of the system somewhat, until the international financial crisis of 2007–08 set in. Unlike the depression of the 1930s, however, this period did not clear the way for a new phase of accumulation. Chesnais recalls that at the first G20 meeting after the peak of the crisis and the drastic interventions of the U.S. Federal Reserve, world elites and their governments were unanimous in their belief that they would not survive the political consequences of a large-scale purging of overaccumulation. That is why he sees the current crisis as one of capitalism tout court, marked above all by the completion of the world market (with the integration of China) and the deepening of financialization.
Turning to the tendency of the rate of profit to fall, and its importance in diagnosing the current crisis, Chesnais observes that ample attention has been paid to the rate itself, but hardly any to the mass of profit. However slowly it may rise, as long as overaccumulation persists, that mass must go somewhere in its attempt to grow. The expansion of capital looking to be transformed into fictitious capital—which the resolution of the 2007–08 crisis only accelerated—thus appears as the fuel that continues to drive the financialization process and to strengthen the financial corporations at the reins of these immense masses of money capital.
The power of this process can be seen today in two elements discussed at length and illustrated with a profusion of examples in Chesnais’s book. The first is that major transnational corporations that produce goods and services have expanded their financial operations so spectacularly that in some cases they have created their own banks; meanwhile, financial corporations have been venturing into commerce, with some even turning out key goods in the production process, such as aluminum. All these entangled operations, often involving derivatives, can make it quite difficult to distinguish financial and non-financial operations. Furthermore, we might recall here that, as Chesnais shows, it is the financial sphere which provides the instruments used to speed up the centralization of capital. The mergers and acquisitions that make this process possible—especially through the annexation of small capital companies by large transnational corporations—have benefited enormously from the work of private equity funds, whose leveraged buyout operations are among the most predatory forms of capital.
The second element showing the strength of “financial capital’s pretension to autonomy” is what Chesnais, in a deliberate pleonasm, dubs the “financialization of financial capital.” This is the exacerbation of the disintermediation of the credit system, a process ongoing since the mid-1980s, alongside the ascent of hedge funds, mutual funds, and even pension funds—and the simultaneous transformation of traditional banks into universal banks authorized to carry out all sorts of operations. Chesnais writes that the prevalence of direct finance and the consequent deterioration of the credit system, along with the massive spread of securitization processes, are at the root of the so-called shadow banking system, which played such a key role in the crisis sparked in 2007–08 by the U.S. housing market.
The completion of the world market with the full integration of China and the persistence and deepening of the process of the financialization of capital are together reproducing the overaccumulation crisis that has defined the system for several decades. According to Chesnais, this explains the disparity between the dynamism of financial markets and the lethargy of GDP growth, and for the stark contrast between this lethargy and the intensity of the exploitation of labor. The latter has been increasingly facilitated by the vertical structuring of major transnational corporations, the global oligopolies that now predominate in international markets, and the growth of the global industrial reserve army, thanks to the incorporation of the massive Chinese labor force. Capital’s greatest acquisition in the last forty years, Chesnais observes, was the creation of a global labor force.
The persistence of financialization in all its dimensions suggests that capitalism is increasingly running up against the limits created by its own development. In his conclusion, Chesnais wonders where a new surge of capitalist accumulation might arise. After investigating several possibilities, such as the complete commodification of public services, the growth of the middle classes in developing countries, and the technological changes wrought by the relentless growth of information and communication technology, his conclusion is less than sanguine: there seems to be no adjustment process capable of restoring capital accumulation and its necessary conditions.
Nevertheless, as Chesnais observes, capitalism comes out just fine. Its expiration date is nowhere in sight. In other words, the current situation may persist for a long time, in an increasingly unstable system that produces little growth and ever deeper inequality, brutally accelerating the exploitation of labor and the expropriation of surplus value. What is at stake, Chesnais concludes, is not the future of capitalism, but that of civilization itself.
It is increasingly clear that human society today is facing the consequences of capitalism’s historical limits. In Chesnais’s vision, the social and political effects of low growth and endemic financial instability, along with the political chaos already unleashed in certain regions and which may spread to others, will combine with the social and political fallout from climate change and the exhaustion of natural resources, making a descent into barbarism a real possibility. Desperate attempts to boost profitability, headed up by global oligopolies, will lead to increasingly destructive forms of agriculture, mining, and oil extraction. Ecological collapse, the signs of which have become impossible to ignore, and which may be accompanied by wars as well as ideological and cultural breakdown, stands here as the absolute limit of the system—one nonetheless produced by capital itself. Chesnais concedes that this is not a very encouraging way to end a book. But he concludes with Gramsci: “telling the truth is a revolutionary act.”