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Finance Is Not the Economy: Reviving the Conceptual Distinction

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  • Dirk Bezemer
  • Michael Hudson

Abstract

Conflation of real capital with finance capital is at the heart of current misunderstandings of economic crisis and recession. We ground this distinction in the classical analysis of rent and the difference between productive and unproductive credit. We then apply it to current conditions, in which household credit — especially mortgage credit — is the premier form of unproductive credit.This is supported by an institutional analysis of postwar U.S. development and a review of quantitative empirical research across many countries. Finally, we discuss contemporary consequences of the financial sector’s malformation and overdevelopment.

Suggested Citation

  • Dirk Bezemer & Michael Hudson, 2016. "Finance Is Not the Economy: Reviving the Conceptual Distinction," Journal of Economic Issues, Taylor & Francis Journals, vol. 50(3), pages 745-768, July.
    • Handle: RePEc:mes:jeciss:v:50:y:2016:i:3:p:745-768
    DOI: 10.1080/00213624.2016.1210384
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    Cited by:

    1. Rohwer, Götz & Behr*, Andreas, 2020. "Revenues from Financial Capital. A Formal Framework," MPRA Paper 99306, University Library of Munich, Germany.
    2. Yashin, Pete, 2020. "Финансиалиация Усиливает Неравенство И Заводит Экономику В Тупик [Financialization increases inequality and leads economy to a dead end]," MPRA Paper 101063, University Library of Munich, Germany.
    3. Yashin, Pete, 2020. "Law of conservation of real wealth and rising inequality," MPRA Paper 99308, University Library of Munich, Germany.
    4. Yashin, Pete, 2020. "Financialization increases inequality and leads economy to a dead end," MPRA Paper 101061, University Library of Munich, Germany.
    5. Avner Offer, 2017. "The market turn: from social democracy to market liberalism," Economic History Review, Economic History Society, vol. 70(4), pages 1051-1071, November.
    6. Yashin, Pete, 2020. "Закон Сохранения Реального Богатства И Рост Неравенства [Law of conservation of real wealth and rising inequality]," MPRA Paper 99274, University Library of Munich, Germany.
    7. Philipp Roderweis & Jamel Saadaoui & Francisco Serranito, 2023. "Is Quantitative Easing Productive? The Role of Bank Lending in the Monetary Transmission Process," Working Papers hal-04159825, HAL.
    8. Reuben Soto, Sergio, 2021. "Capitalist racionality and economic principle," Revista de Ciencias Económicas, Instituto de Investigaciones en Ciencias Económicas, Universidad de Costa Rica, vol. 39(1), January.
    9. Clavero, Borja, 2017. "A contribution to the Quantity Theory of Disaggregated Credit," MPRA Paper 76657, University Library of Munich, Germany.
    10. Ken Webster, 2021. "A Circular Economy Is About the Economy," Circular Economy and Sustainability, Springer, vol. 1(1), pages 115-126, June.
    11. Yashin, Pete, 2020. "Virtual wealth is growing," MPRA Paper 99610, University Library of Munich, Germany.
    12. van Egmond, N.D. & de Vries, B.J.M., 2024. "Reforming the Eurozone financial system: A system-dynamics approach," International Review of Financial Analysis, Elsevier, vol. 93(C).
    13. Muhammad A Ingratubun & Akhmad Fauzi, 2021. "Opening the Black Box: Disbursement Delays Impacts on Growth in Asian Development Bank Loan Projects in Indonesia," ConScienS Conference Proceedings 029mi, Research Association for Interdisciplinary Studies.
    14. Fatouh, Mahmoud & Markose, Sheri & Giansante, Simone, 2021. "The impact of quantitative easing on UK bank lending: Why banks do not lend to businesses?," Journal of Economic Behavior & Organization, Elsevier, vol. 183(C), pages 928-953.
    15. Røpke, Inge, 2020. "Econ 101—In need of a sustainability transition," Ecological Economics, Elsevier, vol. 169(C).
    16. Andréa Castelo Branco Brasileiro-Assing & Jini Kades & Paulo Antônio de Almeida Sinisgalli & Joshua Farley & Abdon Schmitt-Filho, 2022. "Performance Analysis of Dairy Farms Transitioning to Environmentally Friendly Grazing Practices: The Case Study of Santa Catarina, Brazil," Land, MDPI, vol. 11(2), pages 1-18, February.
    17. Aguiari, Sabrina & Nkwake, Apollo & Mentz, Melody, 2017. "Beyond the double gender gap in science and agriculture: Is there space for feminist-inspired transformation within AWARD?," Journal of Gender, Agriculture and Food Security (Agri-Gender), Africa Centre for Gender, Social Research and Impact Assessment, vol. 2(1), April.
    18. Manuel BELO MOREIRA, 2018. "Understanding financialization and its impacts on Social Economy," CIRIEC Studies Series, in: Philippe BANCE & CIRIEC (ed.), Providing public goods and commons. Towards coproduction and new forms of governance for a revival of public action, volume 1, chapter 6, pages 113-133, CIRIEC - Université de Liège.
    19. Yashin, Pete, 2020. "Виртуальное Богатство Растет [Virtual wealth is growing]," MPRA Paper 99611, University Library of Munich, Germany.
    20. Spielberger, Lukas & Voss, Dustin, 2022. "Financial adjustment as a driver of growth model change: a balance-sheet approach to comparative political economy," LSE Research Online Documents on Economics 116034, London School of Economics and Political Science, LSE Library.

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