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The Profit Rate in the Presence of Financial Markets: a Necessary Correction

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  • Freeman, Alan

Abstract

This is a prepublication version of the article by the same name in the Journal of Australian Political Economy. It should be cited as “Freeman, A. 2012 'The Profit Rate in the Presence of Financial Markets: a Necessary Correction'. Journal of Australian Political Economy, Number 70, Summer 2012, pp 167-192” In the past two decades the number, variety, and monetary value of marketable financial instruments have grown by orders of magnitude. While traditional equities have certainly grown in number and value, the greatest growth has taken place in securities since the turn to securitized lending in the 1970s. This is probably the single most significant development in what many writers term ‘financialisation’. This article argues that these assets, when they function as money-capital, enter into the equalization of the rate of profit. They constitute part of the capital advanced by the capitalist class as a whole and should therefore be included in the denominator of the rate of profit. In the two main world financial markets at least – the UK and the US - The resulting measures of the rate of profit reveal a general, systematic and virtually uninterrupted decline in the rate of profit in these countries since the late 1960s. The paper then re-examines the definition of the rate of profit found in Marx’s writings on the subject and argues that it confirms the inclusion of financial instruments in both the concept and measure of the general rate of profit as defined by Marx.

Suggested Citation

  • Freeman, Alan, 2012. "The Profit Rate in the Presence of Financial Markets: a Necessary Correction," MPRA Paper 52625, University Library of Munich, Germany, revised 01 Jul 2012.
    • Handle: RePEc:pra:mprapa:52625
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    References listed on IDEAS

    as
    1. Simon Mohun, 1996. "Productive and Unproductive Labor in the Labor Theory of Value," Review of Radical Political Economics, Union for Radical Political Economics, vol. 28(4), pages 30-54, December.
    2. Freeman, Alan, 2009. "How much is enough?," MPRA Paper 13262, University Library of Munich, Germany.
    3. Alan Freeman & Andrew Kliman & Julian Wells (ed.), 2004. "The New Value Controversy and the Foundations of Economics," Books, Edward Elgar Publishing, number 2274, March.
    4. Alan Freeman & Guglielmo Carchedi (ed.), 1996. "Marx and Non-equilibrium Economics," Books, Edward Elgar Publishing, number 737, March.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Adalmir Antonio Marquetti & Henrique Morrone & Alessandro Miebach & Luiz Eduardo Ourique, 2019. "Measuring the Profit Rate in an Inflationary Context: The Case of Brazil, 1955–2008," Review of Radical Political Economics, Union for Radical Political Economics, vol. 51(1), pages 52-74, March.
    2. Freeman, Alan, 2015. "Social Structures of disaccumulation: a 101 on the rate of profit and the cause of crisis," MPRA Paper 69649, University Library of Munich, Germany, revised 21 Feb 2016.
    3. Michael Keaney, 2017. "Book Review: From Financial Crisis to Stagnation: The Destruction of Shared Prosperity and the Role of Economics," Review of Radical Political Economics, Union for Radical Political Economics, vol. 49(4), pages 676-679, December.
    4. Pelin Akçagün-Narin & Adem Yavuz Elveren, 2024. "Financialization and Militarization: An Empirical Investigation," Review of Radical Political Economics, Union for Radical Political Economics, vol. 56(1), pages 70-100, March.
    5. Freeman, Alan, 2016. "The Whole of the Storm: Money, debt and crisis in the current Long Depression," MPRA Paper 84394, University Library of Munich, Germany.

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    More about this item

    Keywords

    theory of value; Marxian economics; TSSI; New Solution; temporalism;
    All these keywords.

    JEL classification:

    • B24 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Socialist; Marxist; Scraffian
    • B3 - Schools of Economic Thought and Methodology - - History of Economic Thought: Individuals
    • B5 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches
    • B50 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - General

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