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A theoretical framework for the analysis of the current global economic crisis: The financial market and the real economy

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  • Özgün Sarımehmet Duman

Abstract

This article argues that the current global economic crisis is an outcome of the excessive growth of the financial market over the real economy, and hence, of fictitious profits over real profits. In investigating the interrelation between the financial market and the real economy, it makes a comparative inquiry into two key assertions regarding economic crisis within Marxism: the tendency for the rate of profit to fall and overaccumulation of capital. Accepting the claim that economic crisis is inherent to capitalism, this article probes the role of countervailing tendencies in battling the tendency for the rate of profit to fall. While crisis is an outcome of both the extensive growth of fictitious profits and the tendency for the rate of profit to fall, the latter is identified as the fundamental reason for the current crisis. Labour market reforms that were implemented following the emergence of the economic crisis represent the resurgence of countervailing tendencies and are the most explicit evidence that the fundamental reason for the crisis resides in the real economy.

Suggested Citation

  • Özgün Sarımehmet Duman, 2014. "A theoretical framework for the analysis of the current global economic crisis: The financial market and the real economy," The Economic and Labour Relations Review, , vol. 25(2), pages 240-252, June.
    • Handle: RePEc:sae:ecolab:v:25:y:2014:i:2:p:240-252
    DOI: 10.1177/1035304614520669
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    References listed on IDEAS

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    1. Werner Bonefeld & John Holloway, 1996. "Conclusion: Money and Class Struggle," Palgrave Macmillan Books, in: Werner Bonefeld & John Holloway (ed.), Global Capital, National State and the Politics of Money, chapter 9, pages 210-227, Palgrave Macmillan.
    2. Werner Bonefeld, 1996. "Monetarism and Crisis," Palgrave Macmillan Books, in: Werner Bonefeld & John Holloway (ed.), Global Capital, National State and the Politics of Money, chapter 3, pages 35-68, Palgrave Macmillan.
    3. José A. Tapia Granados, 2012. "Statistical Evidence of Falling Profits as Cause of Recession," Review of Radical Political Economics, Union for Radical Political Economics, vol. 44(4), pages 484-493, December.
    4. Nikos STRAVELAKIS, 2012. "Marx S Theory Of Crisis In The Context Of Financialization Analytical Insights On The Current Crisis," Journal of Advanced Studies in Finance, ASERS Publishing, vol. 3(2), pages 171-183.
    5. Simon Mohun, 2009. "Aggregate capital productivity in the US economy, 1964--2001," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 33(5), pages 1023-1046, September.
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    7. Pasquale Tridico, 2012. "Financial crisis and global imbalances: its labour market origins and the aftermath," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 36(1), pages 17-42.
    8. John Holloway, 1996. "Global Capital and the National State," Palgrave Macmillan Books, in: Werner Bonefeld & John Holloway (ed.), Global Capital, National State and the Politics of Money, chapter 6, pages 116-140, Palgrave Macmillan.
    9. Vladimiro Giacché, 2011. "Marx, the Falling Rate of Profit, Financialization, and the Current Crisis," International Journal of Political Economy, Taylor & Francis Journals, vol. 40(3), pages 18-32.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Current global economic crisis; fictitious profit; financial market; labour market reform; Marxist theories of crisis; overaccumulation; rate of profit; real economy; real profit;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • J40 - Labor and Demographic Economics - - Particular Labor Markets - - - General

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