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Marx S Theory Of Crisis In The Context Of Financialization Analytical Insights On The Current Crisis

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  • Nikos STRAVELAKIS

Abstract

Lain by the fact that the present crisis was not preceded by a sharp decline in the rate of profit Marxist and heterodox economists investigate its causes in structural and institutional factors emerging in a new phase of capitalism dominated by financialization of capital In this paper we argue that in Marx a sharp decline in the rate of profit is not a prerequisite for a crisis to emerge if the rate of profit is already low We argue further that financialization of capital resulted following the great stagflation of the 70s from a strategy to battle low profitability by suppressing interest rates in order to increase the rate of profit of enterprise We show that this policy is in the end limited by the rate of profit and when the limit is reached the system collapses as it did in 2007 These analytical conclusions suggest that bank recapitalization will have restricted impact on output and employment because debts are already too high and profits too low for these funds to end up supporting corporate investment Alternative policies should be applied otherwise a long period of capital impairment and high unemployment lies ahead of us

Suggested Citation

  • 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.
    • Handle: RePEc:srs:jasf00:v:3:y:2012:i:2:p:171-183
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    Cited by:

    1. Stravelakis, Nikos, 2014. "Financial Crisis and Economic Depression: 'Post Hoc Ego Propter Hoc'? Implications for Financial Asset Valuation and Financial Regulation," MPRA Paper 55944, University Library of Munich, Germany.
    2. Stravelakis, Nikos, 2013. "Hilferding over Marx: A Political Economy Viewpoint of Struggles in the Left 1900-1933 and the Modern Revival," MPRA Paper 50064, University Library of Munich, Germany.
    3. 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.

    More about this item

    JEL classification:

    • B51 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Socialist; Marxian; Sraffian
    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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