The Impact of Financialization on the Rate of Profit: A Discussion

CSWP 36 (May 2019)

Author Stefano Di Bucchianico

Keywords falling profitability; financialization; financial crisis; rate of profit.

JEL B51; B14; P12.

The present work, by making use of the ‘integrated wage-goods sector’ methodology proposed by Garegnani, investigates some channels through which financialization may impact the normal rate of profit. We analyze the effect of a higher profit share in the financial sector, the technical innovations in the financial sector and rising household indebtedness. We find that none of them influences normal profitability, with the exception of one type of technical innovation. We subsequently critically discuss some Marxian strands of analysis that describe financialization as a temporary countertendency to supposed falling general profitability. We argue in favor of a separate analysis between growth caused by private borrowing and the study of a normal distribution. Finally, a recent attempt to read the ‘sixth’ countertendency to the falling rate of profit listed by Marx as an anticipation of the phenomenon of financialization is criticized, proposing an alternative interpretation.

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